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UK retail investment up 80% in H1 – full year £6bn in prospect

[Image: Viki Mohamad/Unsplash]

Investment in UK retail property is beginning to rebound according to broker Knight Frank. Investment volume into the sector totalled £2.76 billion in the first half of 2021, which was up 80% on the same period in 2020.

Knight Frank estimates that transaction volumes could exceed £6 billion in 2021, the highest level since 2017, with significant stock set to come to the market in Q4 along with a stabilising occupier market.

First-half activity was driven by increased investor demand for retail warehousing with transactions exceeding £1 billion. This total includes Brookfield Properties’ £330 million acquisition of a portfolio from Hammerson.
Knight Frank said there is also strong competition for foodstores, which saw £780 million of investment in the period.

REITs and institutions in particular were attracted by the longer leases and stronger covenants compared to other retail sub-sectors.

Some investors are taking counter-cyclical approach

Investors are making counter cyclical acquisitions of shopping centres with deals totalling £511 million in this segment. The firm said activity will increase further as yields stabilise.

Meanwhile, high street retail accounted for £429 million of capital. Buyers are focused on unlocking alternative use potential, particularly in the South East.

Knight Frank partner, retail capital markets, Will Lund said that many buyers feel there has been an over-correction in the shopping centres sub sector. “Some centres are either well-priced, or have significant alternative use underwrite. Similarly, on the high street, activity is largely driven by those with the expertise and capital to reposition or repurpose assets.”