Retail warehouse investment volumes down 73%
25 April 2016
Retail warehouse investment volumes were subdued in the first quarter of 2016 totalling around £196m with 10 assets exchanging or completing, according to Cushman & Wakefield.
Chart: UK retail warehouse transaction value (£bn) and volume by quarter
This is a notable decrease on the same period in 2015 which saw 28 transactions, totalling £730.9m, reflecting a decrease of 73%. However, there is currently around £380m worth of retail warehouse stock under offer and a further £300m on the open market, figures broadly in line with the end of Q1 2015.
The acquisition of Templars Shopping Park in Oxford by Pramerica for £75.69m was the headline deal of the quarter accounting for 39% of the total volume transacted. Other notable deals include the sale of Gallagher Retail Park in Bristol by Savills IM for £32.33m, reflecting a Net Initial Yield (NIY) of 5.90% and Portman Estate’s purchase of Wickes in Bracknell for £14.93m (5.73% NIY). Cushman & Wakefield acted for Next PLC on the sale of Next, Kingswood Hull for £12.35m reflecting a 5.25% NIY.
The most active purchasers during the first quarter were Funds, which accounted for £176.40m of all acquisitions, with Pramerica being the most significant player. REITs came in a distant second accounting for £11.83m with Custodian and Drum Income Plus both having appetite in the market. Private Equity were the largest sellers, disposing of £76.69m worth of retail warehousing stock. Funds made up £60.08m of disposals with the sale of Gallagher Retail Park in Bristol accounting for more than half of this.
· Ten assets transacted for £196m in Q1 compared to 28 totalling £731m during same period last year.
· Currently around £380m of stock under offer and a further £300m being marketed.
· Valuation levels are likely to have an impact on liquidity while demand remains subdued.
Patrick Knapman, Head of Retail Investment at Cushman & Wakefield, said: “Volumes in the first quarter of the year have been significantly down against 2015 which were exceptional, indeed the highest annual turnover since 2006. With investors exercising caution until the outcome of the EU referendum is known, we expect volumes up to the half-year mark to be materially down against last year.
“Despite this we have seen good liquidity and strong prices paid for prime retail warehouse stock, such as Purley Way, Croydon, which recently went under offer. Investors continue to be selective on secondary stock and current valuation levels are likely to be a factor influencing liquidity whilst demand remains subdued.”
Yields remained static across all sub-sectors of the retail warehouse market in the first quarter and this is expected to continue in the near future.