Pears Property is selling the Wellington Circle retail park in Aberdeen for £21.5m – a 6.33% yield.
Tenants include Ikea, Makro, PureGym and Starbucks and the asset generates £1.4m pa.
The apparent value in Scotland’s retail warehousing has attracted interest from UK institutions and overseas buyers, with £52.6m transacted to year date and a further £259.4m under offer.
According to Savills, this is because retail warehousing offers a prime yield spread of 150 basis points (bps) more than pre-GFC peak levels, which offers significant value particularly when compared with industrial assets, which have a spread of -35 bps for the same timeframe.
In comparison, Savills research shows offices have a current spread of 50 bps to pre-GFC levels and regional hotels at -125 bbp.
The generous spread that exists in retail warehousing suggests room for further compression. Key deals include Columbia Threadneedle Investments acquiring Gala Water Retail Park in Galashiels from M&G Investments for £10.2m – 7% yield; 90North paying £57 million – a 6.21% yield for Glasgow’s Great Western Retail Park from KKR; Simon Aurora acquiring Linlithgow Retail Park from Lothbury Investment Management for £9.4m – a 7.35% yield; and Henry Boot selling Livingston Retail Park at £7.3m.
Rod Leslie, director in the investment team at Savills Scotland, said: “A widespread desire for industrial investments has seen the market somewhat overlook retail warehousing which is currently trading at c.150 bps cheaper than it was 10 years ago. As a result this spread of yields is attracting investors looking to buy well let assets, in key locations where rents have been re-based. Appetite for such investments has significantly increased in 2017 and we are now seeing assets and increased volume in trade as investors look to snap up retail warehousing at a relative discount while they still can.”
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