Investor Demand For Shopping Centres Slows

LONDON-Investor demand for shopping centres in quarter two has fallen by 64% on the previous quarter but is expected to bounce back strongly in the third quarter of 2003 says a new survey from DTZ.

DTZ calculates that only £376.95 million ($600 million) of deals were completed in the second quarter of 2003, down 64% on the previous quarter. But already deals worth £670.5 million ($1.07 billion) have exchanged contracts and are due to complete in the third quarter.

Deals in the pipeline include Catalyst Capital’s purchase of the Reit Shopping Centre portfolio for £310 million ($500 million); Standard Life’s sale of Blackburn Shopping Centre for £100 million ($160 million) and Standard Life’s purchase of the Marlowes, Hemel Hempstead, from IM Properties for £68.5 million ($110 million).

The largest transaction completed in the second quarter was the formation of the Bracknell Partnership where Legal & General acquired Allied London’s interest in the Princess Square Shopping Centre, Charles Square Shopping Centre and the Broadway and sold 50% of its holdings in the town to Schroders to create a 50/50 joint venture with £160 million ($260 million) of assets.

In terms of the types of purchasers, Q2 has seen institutions coming back into the market with Standard Life; Legal & General and Scottish Widows all active. Funds have also increased their shopping centre investment significantly in Q2 accounting for 44.63% of purchasers compared with just 6.69% in Q1.

Mark Williams, Head of Retail Investment at DTZ, said: “Retail, and shopping centres in particular, will continue to be seen as a favourable investment provided asset management opportunities can still be identified or when there is good security of income. The main difficulty facing investors in the short term continues to be the undersupply of stock relative to demand which remains strong.