Total returns from retail property hit a five-year peak of 4.7% in Q2 as consumer spending drove a rebound in the sector’s performance, according to IPD.
This compares with 2.6% growth in Q1.
Retail capital values increased by 2.9% in during Q2, more than double the 1.2% rate of growth seen in the first three months of the year.
Values of shopping centres and retail warehouses performed particularly well during the quarter, growing by 3.7% and 3%, respectively. This compares with 0.3% capital growth for shopping centres in Q1 and a 1% rise for retail warehouses.
However, some doubts remain about the sustainability of the retail recovery: retail values are still 29% below their 2007 peak, compared with 20.8% for offices.
UK consumer sentiment also remains fragile. The GfK Consumer Sentiment Index moved into positive territory for the first time since 2005 in June this year, before slipping back into the negative in July.
Retail property continues to lag offices and industrials, returning 5.3% and 5.4% respectively during Q1.
Phil Tily, IPD’s executive director & head of UK and Ireland, said: “The latest results confirm that the recovery is taking hold throughout the UK property market, and that investors’ appetite for real estate across the country is continuing to strengthen.
“Coming alongside the latest good news about GDP, rising returns in the retail sector are of particular importance – finally showing rising performance in a sector where good news has been limited since the recession. While occupier demand remains cautious, investors looking for assets with value add opportunities will hope this quarter’s results are the beginning of a sustained recovery period for the sector.”
sophia.furber@estatesgazette.com
