Sector distribution 2015 to 2018
As a proportion of the assets sold, Retail investments (at £371 million) accounted for 73% of the total sum raised through our auction in 2018, an increase over the 65% 4-year average (4YA). The average lot size for the sector also improved slightly, to £570,000 (4YA – £557,000).
Office and Industrial investments accounted for a slightly reduced share of the total sales at 15% (4YA – 18%) raising £72 million. There continues to be tight supply in these two sectors, as investors continue with the holding strategy, as identified last year.
The Alternatives sector (including Ground Rents, Leisure, Medical, Motor trade investments, convenience stores) accounted for the balance at 17% of total sales raising £66.5 million (4YA – 19% and £105 million).
Regional distribution 2015 to 2018
Sale volumes in London and the South East recovered during 2018, returning to the 4YA of 48% (£242 million) having dipped to under 45% in 2017.
The total raised on the sales of assets in London and the South East eased for the first time in a number of years, £273m of assets were sold, accounting for 45% of the total value in 2017 (48% in 2016). The “Hold” strategy identified last year still appears to be the option being adopted by many Vendors.
Increasing levels of activity were seen in the North East as well as the East and West Midlands, where total sales across these three regions showed a marked increase to £168m, 28% of the total, rising from a more modest 23% in 2016. The average Regional lot size saw a significant
increase, up to £551,000 from £499,000 in 2016.
Yield analysis 2013 to 2018
The year delivered some shocks to the retail investment market. CVAs were threatened by a number of operators, together with – and sometimes followed by – corporate failure, affecting over 2,800 units (Centre for Retail Research).
Against this backdrop one might expect the appetite for retail investments to wane, with consequent increases to yields. There is undoubtedly pressure on rental levels, with the number of voids in many towns becoming obvious, but the successful sale of £371 million suggests the market still has the capacity to absorb correctly priced investments.
The overall retail yield did ease out to 8.3% (net) by the end of the year from a 4YA of 7.5%, largely due to a softening in the appetite for the secondary and tertiary assets. A-grade assets stayed steady at 6.0%, underlining the long-term appeal of the sector.