Shopping centre investment in the UK is down by 35% year-on-year, from £4.5bn in 2015 to £2.9bn in 2016.
Last year’s total, reflecting the sector’s worst year since 2012, is well behind the five-year average of £4bn, according to EG Retail Research.
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Shopping centre investment in the UK is down by 35% year-on-year, from £4.5bn in 2015 to £2.9bn in 2016.
Last year’s total, reflecting the sector’s worst year since 2012, is well behind the five-year average of £4bn, according to EG Retail Research.
The top five largest deals in 2016 accounted for more than 50% of investment, £1.5bn. Four of these completed before the EU referendum on 23 June. Without these deals for prime malls, total Q1 investment would have totalled only £700m.
Pre-Brexit trepidation impeded investment during the first part of last year. Then the ramifications of the leave vote quashed hopes of investors snapping up any excess supply.
It is not surprising that the market has slowed over the past 12 months in light of the Brexit vote, but it is interesting just how much the market slowed, almost to a standstill in the later stages of last year.
While the number of transactions per quarter dipped and levelled out, the value of those transactions has decreased steadily. This indicates that trophy deals at headline values were pulled from the market.
The winners on the investment front were local authorities, which took advantage of an uncertain economy and access to cheap debt. Council deals accounted for 13% of overall spending, £380m, and nine out of 44 deals completed.
In the latter half of the year value lay in the secondary market, as councils took advantage of economic fragility, which discouraged overseas investors, and exploited tightening price points. This market also offered stable returns, owing to the weak pound and volatile geopolitical atmosphere.
This year looks to continue where 2016 left off as market uncertainty continues. Later in the year vendors may accept lower levels of pricing. And local authority investment may be impeded by government plans to abolish the public works loan board, which may reduce local councils’ ability to borrow.
