The "allshop" barometer
Throughout the past 2 years Allsop has sold 648 High Street Shops at Auction throughout the United Kingdom. By focussing on these sales, which make up a unique and sizeable dataset, we get a good picture of investment activity across the regions, the yields achieved for similar assets in each region and any changes that may have occurred over the past 24 months. With a key element of investment being the measurement of risk we can also see the variations across the regions for differing income streams, this, we have called The allshop Barometer.
When analysing the The allshop Barometer on an annual basis we can see that in each of the three bands (length of lease), the general trend that regional yields hardened in 2017 compared to 2016. This suggests the prices secured for assets are being competed to higher levels, as buyers look further afield for yield, as competition in the South East is forcing yields down.
If we look a little closer and focus on individual regions we can see how the prices achieved differ between the regions for varying lengths of income. Scotland for example, shows the biggest difference between long income (10 – 15 years) and short income (3-5 years) with 43% ‘premium’ being paid for the ‘less risky’ longer tranche. This improvement could be due to the recent General Election result and an increasing perception that another referendum is becoming less likely.
Moving South of the border and into the Northern regions, blended retail yields have come in to 8.9% from 9.2%, a slight improvement. Prices achieved for long income appears to have softened in the North East.
Moving towards the Midlands, yields have come in over the past year, possibly on the back of high profile government and industrial investment in the region, with retail yields hardening to 7.1% from 7.8% a year before, a 10% shift. The premium paid for longer income within this sub-market has increased to a remarkable 19% from 9% a year before.
Wales out of all the regions has seen the least movement on the preceding year with average blended retail yields remaining relatively stable, the biggest change being for long income assets which have seen yields harden by 10% on the preceding year to 6.7%. Investors would appear to be searching far and wide for income certainty.
Closer to home, the South West has seen yields soften for shorter income whilst 5+ year income has hardened to the similar levels seen in the South East. This is perhaps a natural movement as investors look further away from the perceived safety of London and the Home Counties. The South East has been popular for some time, with investors already paying a premium in this region; as such we’ve only seen a marginal hardening of yield being reported for long income (10-15 years) to 5.9% from 6.2% in 2016.