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Shopping Centre Pipeline
Mark Disney
Executive Director
Shopping Centres, Retail Parks, Factory Outlets
14 October 2014
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CBRE | Page 2
Shopping Centre Pipeline
§ The recent supply of new space
§ Recession or structural change?
§ Living with the internet
§ The retailers’ view
§ The developers’ response
§ The pipeline
§ Summary
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CBRE | Page 3
Shopping Centre Openings
0
1
2
3
4
5
6
7
2007 2008 2009 2010 2011 2012 2013 2014
Floo
rspa
ce (m
illio
n sq
ft)
Year
High Wycombe Bristol Liverpool WF London Leicester Belfast
Bury St Edmunds Cardiff Aberdeen
Bury
Newbury Stratford
Wembley Whiteley Leeds
Hereford West Brom
Exeter Derby Silverburn
Source CBRE
CBRE | Page 4
Recession or Structural Change?
§ Internet
§ Supermarkets
§ Category Killers – ‘Black holes’ • Primark, JLP, Apple, Topshop, H&M, Zara, Sports Direct, Next
§ Lost Fascias – (competition and consolidation) • La Senza, JJB, Phones 4 U, Principles, Allsports, Virgin Megastores,
Birthdays, Barratts, Republic, Comet, Ottakars, Henleys, Canterbury, Full Circle, Schoon, Adams, Suits You, Blooming Marvellous, Gamestation, Lombok, Ravel, First Sport, Active Venture, Internacionale.
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CBRE | Page 5
Market Consolidation
0
10
20
30
40
50
60
70
80
90
0 20 40 60 80 100 120 140 160 180 200
% D
istr
ibut
ion
Trading Locations
Market Share 2012 Market Share 1971
1971: 50% market share from 200
trading locations
Source: NSLSP 2012
2012: 50% market share from 80
trading locations
CBRE | Page 6
Living with the internet
Convenience:
- Compared to the ‘final mile’
- Click and collect
- Easy access/ good car parking
- Instantly available!
Experience:
- “You can’t get this online”
- Quality and variety of F&B
- Public Places
- Retail Theatre
- A day out – a leisure activity
CBRE | Page 7
The Retailers’ View Comparison, mainly fashion, international, ‘brands’
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§ Omni - channel strategy - Brand showcases
- Click and collect
- Returns
§ Need ‘brand positive’ locations.
§ International Context - Hurdle rates
- Lease Terms
- Alternative markets
§ 25 – 75 Stores
CBRE | Page 8
The Retailers’ View Convenience – value, family, services, health + beauty, value fashion
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§ More frequent purchases
§ Focus on service/added value
§ 200+ stores
§ Experience within store - Smiggle
CBRE | Page 9
The developers’ response – New Space/Better space
Where?
§ Biggest Cities – oldest stock. (Glasgow, Bradford, Nottingham)
§ Historic Cities – the ‘magic key’ (Oxford, Edinburgh, Chester, Guildford)
§ Greatest Affluence – London, Bracknell, Beverley.
§ Extensions to major centres – Westfield London, Brent Cross, Lakeside.
§ Stations/Transport Hubs – Birmingham, Waterloo, St Pancras.
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CBRE | Page 10
The developers’ response – New Space/Better space
What?
§ Retail with Leisure – Glasgow/Oxford/Newport
§ Repositioning Mix and refurbishment – Meadowhall, Park Lane
§ Retail Park Upgrades – Broughton Park
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CBRE | Page 11
The developers’ response – New Space/Better space
How?
§ The challenge of pre – let thresholds (40%). 2-3 year builds…
§ “You want it… help us to deliver it…”
§ Mixed use drives viability– especially residential in London
§ The role of Local Authorities.
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CBRE | Page 12
The Role of Local Authorities
§ Increasingly Important Role
§ Different Perspective - No longer a ‘windfall’
- Now a catalyst for regeneration
§ Assisting Viability - TIF’s
- Deferred infrastructure commitments
- Upgraded transport links
- Reviewing development agreements
- Promoting whole city rebrands
§ Glasgow, Edinburgh, Stoke, Bracknell, Newport, Leeds.
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CBRE | Page 13
Pipeline – Anticipated Developments > 150,000sq ft
2015 2016 2017 2018 2019/2020 Year
Aberdeen Leeds Brent Cross Guildford Braehead Edinburgh Elephant & Castle Silverburn Sheffield Portsmouth
Bradford Newport Birmingham
Chelmsford Leeds
Eastbourne Bracknell Lakeside Westfield London Oxford Glasgow O2 Winchester
Stoke Wood Wharf Kings Cross Chester Nottingham Croydon Battersea
CBRE | Page 14
Summary
§ Embrace the new normal
§ Add value through experience
§ Add convenience through mix, amenity, click and collect, parking.
§ Or……
§ Consider alternative use value!
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UK Shopping Centre Investment Market Overview
Stewart Colderick
Executive Director
Head of Retail Capital Markets
14 October 2014
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CBRE | Page 16
UK Shopping Centre Investment Market Overview
TRANSACTION LEVELS ARE UP
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§ 2013 - UK shopping centre transactional levels at their highest since 2006 with £4.2 billion transacted versus £2.3 billion in 2012. § 2014 – will exceed 2013 total, CBRE estimate of £5 billion +. § The headline deals:-
– Kent, Bluewater: Land Securities acquired a 30% stake with management rights for £696 million, a NIY of 4.10%. Underbidders - British Land, Hammerson, Australian Super, Ginko Tree and M&G.
– Uxbridge, Intu/The Chimes: KWAP acquired 80% for £175 million, NIY 5.85% with Intu retaining 20%.
– Wakefield, Trinity Walk: Orion acquired this Debenhams anchored scheme for £150 million, NIY 6.20%, vendor was ARES and Sovereign Land.
– Warrington, Golden Square: LIM acquired this Debenhams anchored scheme for £141 million, NIY 6.75% from vendors Lend Lease and L&G.
– Swallowtail (part thereof): New River Retail/Pimco acquired 3 schemes in Hastings, Newtonabbey and Glasgow from RBS for £140 million, reflecting a NIY of 8.00%.
CBRE | Page 17
UK Shopping Centre Investment Market Overview
STRONG DEMAND, WHY?
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§ Increased availability of debt.
§ Improved economic outlook and Eurozone prognosis (cautionary note).
§ Stabilisation of income, the worst of tenant failures is over.
§ Secondary and Best Secondary is viewed as offering ‘good value’.
§ Investment demand from a variety of sources: - REITs – British Land, Intu, F&C, New River Retail and Hammerson. - Global/ Sovereign Wealth Funds, principally focused on prime regionally dominant assets. - Private Equity – Blackstone, Oaktree, KKR – very active in the Best Secondary sector. - Institutions – M&G, LaSalle IM, Legal & General.
§ With the weight of equity seeking placement alongside large quantities of relatively cheap debt, we believe the market will continue to be buoyant in 2014 with yields trending stronger.
§ Limited rental growth in short to medium term (stock selection key).
CBRE | Page 18
UK Shopping Centre Investment Market Overview
SHOPPING CENTRE YIELDS AND RENTAL GROWTH
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Summary (Oct-‐14) Yield Long Term Average
Prime 4.75% 5.69%Best Secondary 6.25% 7.05%Secondary 7.50% 7.58%
-‐10.00%
-‐8.00%
-‐6.00%
-‐4.00%
-‐2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Jan-‐99
Jan-‐00
Jan-‐01
Jan-‐02
Jan-‐03
Jan-‐04
Jan-‐05
Jan-‐06
Jan-‐07
Jan-‐08
Jan-‐09
Jan-‐10
Jan-‐11
Jan-‐12
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Jan-‐14
Jan-‐15
Jan-‐16
Jan-‐17
Jan-‐18
Rental G
rowth
(Ren
tal G
rowth Ac
tual Sou
rce: IP
D)
(Forecast Sou
rce: CBR
E)
Yield (Sou
rce: CBR
E)
PRIME YIELD BEST SECONDARY YIELD SECONDARY YIELD RENTAL GROWTH
Forecast
CBRE | Page 19
UK Shopping Centre Investment Market Overview
SHOPPING CENTRE/RETAIL WAREHOUSE/ALL RETAIL FORECAST RETURNS 2014 - 2018
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CBRE | Page 20
UK Shopping Centre Investment Market Overview
CONCLUSIONS/TRENDS
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§ Polarisation continues – top 100 towns. § Demand continues for 100 – 200. § Tertiary/poor secondary struggles. § Development funding more common place. § Capital appreciation to slow in 2015.
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