Retail and Leisure spotlight
Autumn Edition 2021
OCCUPIER MARKET
Activity picking up pace
Acquisitive fashion retailers remain limited, however the bigger operators such as Frasers, JD Sports, M&S and Primark remain active.
Large cities and towns with significant office occupiers are missing out on daytime visits during the week as office workers are still working from home or only visiting the office 2-3 days a week.
The recent opening of Amazon 4-Star at Bluewater is a positive move. There will be questions from industry leaders, but ultimately improving customer experience and generating footfall
is essential to all retail destinations.
High levels of NDAs are being signed, a positive sign that new brands are looking to enter the market.
Record supply of available floorspace following Debenhams and Topshop closures.
New international retailers are exploring the UK market as they see the economy as secure in the medium/long term.
Franchising continues to be a growth area in Leisure and F&B.
Increased occupier focus on sustainable occupational costs and flexibility.
Limited CapEx available from both landlords and occupiers.
Athleisure, jewellery and premium retail seeing strong sales performance.
Polarisation – primary
vs secondary/tertiary.
F&B operators continue
to focus on sites with ‘alfresco dining’ options.
Footfall growth vs average weekly instore retail spend (including food)
Investment MARKET
Sentiment Improving
The shopping centre sector is the last mainstream category yet to see a yield recovery post-Covid.
Those traditional shopping centre investors who flirted with Out of Town Retail during 2020 have largely been priced out and as a result are returning to the shopping centre market.
Food store-anchored convenience schemes or redevelopment opportunities were the cautious focus for investors throughout 2020 and H1 2021.
We are now seeing greater demand for non-food shopping centres, with a number of schemes that were considered unsaleable last year transacting in Q3.
Reluctant Sellers of Prime
Virtually all prime transactions in the past 18 months were the result of a pre-determined fund strategy or corporate failure, including Touchwood, Solihull (LendLease Retail Partnership), Centre Court Wimbledon (abrdn) and Barton Square Trafford
(intu in admin).
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Although several prime schemes are expected to come to the market in early 2022, the rationale for selling may be challenged by the growing perception that the worst of the valuation falls are now over.
•
The market for passive stakes in prime shopping centres remains challenging,
with the marketing of Lendlease Retail Partnership’s 25% stake in Bluewater likely to be a useful indicator.
•
Debt is (selectively) available
LTVs typically remain sub-50% but we have seen a spread between 40-65% LTV. Margins are typically 5%+.
•
Providers of debt to the sector remain
the ‘alternative’ lenders rather than mainstream banks.
•
Shopping centre opportunities, previously ruled out by traditional lenders, are now being discussed ‘in principle’ for a cautious return to the market in 2022.
•
Some centres will still fail
The improvement in investor sentiment shouldn’t distract from the reality that many ‘middle market’ shopping centres without a clear identity or purpose will still fail.
•
Where shopping centres are failing, demand is frequently led by local investors / developers banking on their local expertise to deliver an alternative use vision for their town centres that others can’t.
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Volumes are increasing
Investment into the sector in Q1-Q3 totalled in excess of £800 million and is likely to exceed £1 billion by the end of 2021 (2020 £342m; 2019 £902m; 2018 £1,330m).
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Average lot size has increased to £16.4 million (2020 £15.5 million).
•
The analysis of pricing / values on a rate per sq ft continues to be an interesting and relevant benchmark, combined with yields currently being achieved.
•
Investment volumes
What’s Next
With yields at historically high levels, investors are starting to view parts of the market as looking cheap, particularly where occupational demand is provable.
•
As expectations build of a recovery in 2022 and beyond, there may be a period of 6-12 months for savvy investors to ride the bottom of the market before yield compression starts to return to the shopping centre market.
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Approx.
Cap Val per sq ft range
Approx. yield range
Examples from 2021
Challenged / terminal decline / alternative use
£10 - £40
15% +
(often
irrelevant)
• Brunswick, Scarborough
• White River Place, St Austell
• Grand Arcade, Wigan
• Princess Quay, Hull
• West Orchards, Coventry
• Rugby Central, Rugby
Mid-market
£40 - £90
10.00% -
12.50% (+)
• Friars Square, Aylesbury
• Swan Walk, Horsham
• Ayr Central, Ayr
• St Johns Liverpool
• St Georges, Preston
• Charter Walk, Burnley
Convenience
with direct
food income
£70 - £200
(highly dependent
on % of food)
7.00% - 12.00%
(highly dependent on % of food)
• Tudor Arcade, Dorchester
• Eden Square, Urmston
• Bramley Centre, Leeds
• Halewood District Centre, Halewood • Waterborne Walk, Leighton Buzzard
Convenience
without direct
food income
(incl. food sold-off)
£50 - £100
9.00% - 13.00%
• Parkway, Coulby Newham
• Kings Chase, Bristol
• Erith Riverside, Erith
• Woolshops, Halifax
Greater London Redevelopment
£100 psf +
£4.5-£5.5m
per acre
5.00% -
7.50%
• St Nicholas, Sutton
• Hersham Green, Hersham
• Spires, Barnet
Prime
£125 +
7.50% - 9.50%
• Touchwood, Solihull
• Barton Square, Manchester
• Centre Court, Wimbledon
Contact details
If you would like dedicated shopping centre advice or to discuss potential retail and leisure opportunities, please get in touch with our team.
ukretail@cushwake.com
Cushman & Wakefield
@CushWakeRetailUK
@CushWakeRtailUK
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Dominic Bouvet
International Partner
Head of UK Retail & Leisure
+44 (0) 7970 380 025
dominic.bouvet@cushwake.com
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Thomas Hunter
Partner, Valuation & Advisory
+44 20 7152 5180
+44 (0) 7793 808 180 thomas.hunter@cushwake.com
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Bruno Berretta
Associate Director, Retail, Logistics
& Industrial, Research Lead
+44 20 3296 2682
+44 (0) 7825 932 975 bruno.berretta@cushwake.com
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Click on graph for a closer look
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*from March 21 footfall growth is relative to 2019 levels.
Source: Cushman & Wakefield
Source: Springboard, ONS, C&W
Click on graph for a closer look
7.00% - 12.00%
(highly dependent on % of food)
Approx. Cap Val per sq ft range
• Tudor Arcade, Dorchester
• Eden Square, Urmston
• Bramley Centre, Leeds
• Halewood District Centre, Halewood
• Waterborne Walk, Leighton Buzzard
Convenience with direct
food income
£70 - £200
(highly dependent on % of food)
Approx. yield range
Examples from 2021
10.00% - 12.50% (+)
Approx. Cap Val per sq ft range
Approx. yield range
Examples from 2021
£40 - £90
• Friars Square, Aylesbury
• Swan Walk, Horsham
• Ayr Central, Ayr
• St Johns Liverpool
• St Georges, Preston
• Charter Walk, Burnley
Mid-market
15% + (often irrelevant)
Approx. Cap Val per sq ft range
Approx. yield range
Examples from 2021
£10 - £40
• Brunswick, Scarborough
• White River Place, St Austell
• Grand Arcade, Wigan
• Princess Quay, Hull
• West Orchards, Coventry
• Rugby Central, Rugby
Challenged / terminal decline / alternative use
9.00% - 13.00%
Approx. Cap Val per sq ft range
Approx. yield range
Examples from 2021
£50 - £100
• Parkway, Coulby Newham
• Kings Chase, Bristol
• Erith Riverside, Erith
• Woolshops, Halifax
Convenience without direct food income
(incl. food sold-off)
5.00% - 7.50%
Approx. Cap Val per sq ft range
Approx. yield range
Examples from 2021
£100 psf + £4.5-£5.5m per acre
• St Nicholas, Sutton
• Hersham Green, Hersham
• Spires, Barnet
Greater London Redevelopment
7.50% - 9.50%
Approx. Cap Val per sq ft range
Approx. yield range
Examples from 2021
£125 +
• Touchwood, Solihull
• Barton Square, Manchester
• Centre Court, Wimbledon
Prime