Strong investment demand for retail warehouses continues

by Alexander Beard, on Aug 19, 2015 10:08:20 AM

FTHotelsInternational real estate advisor Savills has reported that total transaction volumes in the UK retail warehouse investment market totalled £1.264 billion in the first half of 2015, marking a 28% increase on the £981.95 million transacted in the same period last year.

The firm highlighted a significant increase in deals over £50 million, with nine completing in the first half of the year compared to five in the same period in 2014. These included New Mersey Shopping Park in Liverpool and Drakehouse Retail Park in Sheffield.

Investor appetite for assets up to £50 million also improved, with 62 deals transacting in the first half of 2015 compared to 55 deals for the same period last year. With £600 million worth of retail warehouse assets currently under offer and a further £1 billion available, Savills forecasts that total transaction volumes for 2015 are likely to reach £3 billion, which is significantly above the long term average of £2.5 billion.

Savills reports that investor appetite for the sector is led by strong retailer demand and performance together with a weighted average unexpired lease term of approximately 11 years. This compares to lease terms of 6.4 years for offices and 9.3 years for industrial, according to the Investment Property Databank (IPD).

James Gulliford, joint head of UK investment at Savills, commented:

“Strong activity in the sector will continue going forward led by good rental growth prospects, further improvements in both tenant demand and performance and the completion of the first new retail warehouse developments in this cycle.”

Sources: (News article: 2015/0713)