Overall levels of investment in retail real estate remained subdued in the opening six months of this year, with just over £3bn transacted – a 13% drop on H1 2017. Levels of spend across premium shopping centre destinations dropped by 16% from Q1 to Q2 this year, with the out-of-town sector seeing a 30% drop in investment for the same period.
Radius Data Exchange figures suggest there has been a change in the assets that are deemed more attractive. Shopping centre and high street investment fell by 46% and 18% respectively year-on-year, while retail parks and out-of-town assets fared better, seeing a 60% uplift in investment activity from 2016 to 2017.
Hardest-hit investment
Shopping centre investment has proved to be the submarket that has taken the hardest hit from the economic ramifications of the Brexit vote. Since 2015 there has been a considerable year-on-year decrease in spending, and overseas and domestic investors are treading with care ahead of a possible no deal in March 2019.
The buyers’ market has suppressed top-end deals as owners keep hold of what they have got, but has seen a relative flurry of secondary centres come to market and low price points, pushing yields outward. One of the beneficiaries of this lack of interest from traditional REITs has been local authorities, which have invested £1.3bn into retail and leisure assets in the UK since 2015.
There was a massive surge in interest in the retail park submarket in 2017. As well as increased spend, proposed development activity for new schemes rose by 60%, proving that the robust nature of the out-of-town sector with its low vacancy rates and accessibility to consumers meant it was a vessel worth hedging your bets on.
Coming full circle
However, even that sector looks like it is coming full circle. Potential investors are beginning to become wary against a backdrop of a rising number of retailer administrations and CVAs.
There does at least seem to be some reprieve on the high street, however. While the amount invested dropped by 18% from 2016 to 2017, down from £4.3bn to £3.5bn, the number of assets changing hands continues to rise, tripling over the past five years.
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