UK shopping centre sales will increase by more than a 50% in 2018, according to JLL.
The firm said it anticipates at least £3bn of investment in the sector following a year of political and economic uncertainty in 2017, which slowed volumes to just under £2bn across 29 transactions – the lowest since 2008.
Downward pressure on valuations and capital gains tax changes alongside increased restrictions on refinancing will likely close the gap between buyer and seller pricing expectations in the secondary market.
Meanwhile, the merger of Hammerson and intu will drive activity at the prime end of the market as the combined company consolidates its portfolio.
JLL said it expects REITs to spend the year reshaping their portfolios while institutions continue to dispose of smaller assets and focus on large prime centres.
Led by Hermes’ sale of its 7.5% stake in Bluewater in Kent for £155m and its Factory Outlet Centres in Braintree, Castleford and Street, institutions were the most active sellers in 2017, accounting for 53.6% of total volume.
Nick Hart, head of JLL UK shopping centre investment, said: “We expect to see much greater market activity in 2018 right across the piste, with a number of secondary centres and portfolios marketed. There is a great deal of raised domestic capital seeking high quality assets and we believe that as we move through to March 2018 valuations, pricing will move to unlock the yield gap which has persisted for much of 2017.”
He pointed to Brookfield’s acquisition of GGP in the US as evidence for investor appetite for the secondary shopping centre sector – appetite which will flow into the UK in the first part of the year.
Hart added: “Our sentiment is more positive this year. In 2017, the political and economic uncertainty which surrounded Brexit impacted investor decision making, depressing activity across the UK sector. As a result, we experienced the lowest volume of UK shopping centres traded since 2008, but this year things are looking brighter.”
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