Shopping centre owners will have to become better asset managers to maintain the investment performance to which they have become accustomed.
According to Donaldsons’ latest Retail Spotlight report, investors will be forced to work harder to deliver the returns that have been typical of the past few years.
Total returns from shopping centres currently stand at 21% – the highest for 17 years but Donaldsons says the levels will only be sustained by investors working harder.
For most of last year the weight of money flooding into the shopping centre market applied pressure to initial yields, typically achieving about 6%-6.5%.
Investors have been able to achieve healthy returns without the need for significant capital investments in their assets, but as total returns begin to slow there will be less scope for further yield compression.
Head of retail Bryan Duncan said: “As the shopping centre market changes, investors will be required to adopt a more innovative approach to secure best returns.
“Those who adapt by implementing sophisticated asset management plans, or looking towards Europe will continue to reap the rewards that the market can offer.”
Europe has been made a more attractive option for many property investors because of opportunities offered by many of the EU accession states.
The European Central Bank’s maintenance of borrowing rates at 2%, which has resulted in initial yields of 8% and above, has also worked as an added incentive.
References: EGi News 06/04/05
