2017 mall transactions lowest this century but return to form expected in 2018

By Paul Norman - Friday, January 12, 2018 12:31

Transaction volumes for 2017 were the lowest this century with only 31 deals completed, compared with average deal flow of 64, according to the latest Shopping Centre Snapshot from Knight Frank.

The £1.6bn volumes for last year were half the 10-year average, due to a lack of demand and vendor’s reluctance to reprice stock.

There were only four shopping centre acquisitions made by institutions in 2017 compared to six in 2016. This is in contrast to strong institutional activity in other sectors. However, the end of the year saw encouraging signs with two of these deals completing in this period and a further two under offer.

Q4 saw local authorities buy three schemes and another two going under offer with the trend of councils acquiring schemes within their areas of jurisdiction set to continue in 2018.

The number of overseas investors has fallen and going forward there are concerns the change to capital gains tax rules for overseas buyers may impact their pricing of assets, Knight Frank said.

There has been a ‘failure to sell’ stance which has epitomised the constrained market, with 18 schemes withdrawn from formal marketing during 2017 with further schemes quietly offered and then refinanced.

Mark Smith, Partner, Knight Frank, said: “With the agreed £18.5bn Unibail-Rodamco deal for Westfield and £3.4bn Hammerson acquisition of Intu, 2017 ended with a bang. Away from the mega corporate deals however, the ‘real’ market was far more subdued and a more appropriate headline may be ‘the least’ active.

“2017 saw only £1.6bn of shopping centre transactions, around half the 10-year average. If we include outlets, which enjoyed a buoyant 2017, this still only rises to £2bn, the lowest in 9 years.

“A flurry of institutional activity for the end of 2017 showed signs of the relative value in shopping centres. As valuations fall and catch-up to true market pricing we anticipate a much more active 2018 and volumes closer to the £3bn plus average.

“Investors will, however, remain more discerning between shopping centres with a purpose and those in more permanent decline. We believe that 2018 will be the year that the sector replaces the obsolete valuation definitions of prime and secondary with more appropriate distinctions between the winners and losers.”

pnorman@costar.co.uk

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