Rising yields and the potential falling cost of borrowing money will result in retail property investment looking more attractive to investors, Savills predicts.
Savills’ latest shopping centre and high street report predicts that investment volumes will pick up in the second half of 2009.
Nick Hart, director at Savills, said: ‘With prime yields prevailing at 7% and Meadowhall now having transacted, we are beginning to see an increase in activity within the shopping centre market following 18 months of falling values. The assets that are attracting the most interest continue to be those which offer longevity and security of income, along with prime assets where yields have moved out from 4.5% to 7%.
‘Equity rich investors will continue to dominate the market for at least the short term, whilst debt leveraged vehicles struggle with loan to value ratios.’
Further polarisation in rental performance is predicted in the report. Centres and high streets with vacant space will suffer rental decline into double figures, possibly as high as 25%, the report suggests. However, Savills believes there are some locations and sub sectors that are forecast to outperform by maintaining rental levels and, in isolated circumstances, are capable of generating growth.
Chris Blair, director at Savills, said: ‘Stock selection will be key moving forward into 2009 as both landlords and tenants need to sustain income flows in order to survive. While consumer spending will undoubtedly shrink this year, falling costs such as interest rates mean that household disposable incomes are forecast to grow by 1.4% this year, which is double last year’s level. This should provide a welcome boost to retailers fortunes.’
For more information on the retail property market don’t miss Property Week’s forthcoming Retail Summit: Lessons from the Crunch conference taking place 22nd May at Le Méridien Piccadilly.
For more details or to register visit www.propertyweekconferences.com/retail