Sector distribution 2013 to 2015
Retail investments represented a much larger proportion of sales over the period, at 75% of the volume (2014 – 68%) with 366 lots selling, raising £188m (£186m for the same period in 2014). This accounted for nearly 70% of the total sales by value for the period, against 58% for 2014 and 59% in 2013. Confidence in our High Streets remains firm.
Both the office and leisure sectors by comparison saw a reduction in volume and value, accounting jointly for £49m worth of sales (2014 – £95m) representing 11% by volume (2014 – 14%).
One particular issue for the office sector was the perception in 2014 that the window for taking advantage of Permitted Development Rights could be closing. This led both to an increase in supply and the market’s appetite for the sector. Coupled with the Election effect, this had a strong influence on the total sales in 2014. A number of the assets in this sector are now being sold by our residential auction division.
Regional distribution 2013 to 2015
The most significant change from the previous year’s results was the tight supply in the London market. It was very clear that vendors were adopting a “hold” strategy rather than going to market with assets in this area. This led to the volume of Greater London assets being sold easing to 46 lots from 82 in 2014, an adjustment of 46%. Given the keen competition for assets in the capital it is hardly surprising therefore that the total value of investments sold in the Home Counties benefited by an increase of 10% to £85m (30% of the total sales).
A number of other regional markets also benefitted from the lack of supply in London and as confidence improved the hunt for better returns led investors to look more closely at the regions.
It is interesting to observe the influence of political uncertainty on market activity. Sales in the Scottish market had all but evaporated in 2013/14 due to the impending referendum. The first 4 sales of 2015 saw almost 100% increase in the total value of lots sold north of the Border once the devolution question had been resolved – for the time being…
Yield analysis 2013 to 2015
Having seen the yield differential between the low-risk and the high-risk investments grow to as much as 12 percentage points in 2011/12, the gap has been significantly reduced over recent months. The best of the low-risk investments have for some years traded in the range 4%-5%, while the high-risk assets have moved in over the last 18 months from 15% to around 12.5%.
As identified in our previous report, this is a clear signal that investors are more confident to compete for riskier situations; the combination of a reduction in tenant failures and an improvement in tenant demand both indicate a return of rental stability to the High Street, and an increased confidence in the strength of the UK plc.
Overall Retail Investment Yield
hi/lo range with 5-year swap rate (monthly average) 2009 to date