During 2014 the dramatic increase in levels of investment into the shopping centre and out of town sectors, left the high street trailing behind. With investors eager to deploy large amounts of cash we put this primarily down to lot size issues. This could lead to opportunities on the high street this year with yields looking more attractive and some investors are already taking advantage of this. With this in mind we also anticipate a greater supply of institutional product coming to the market in H1 2015.
High street rental growth is no longer confined to London and the South East.
"One area we would anticipate some downward yield movement would be the dominant regional towns and cities"
We witnessed further downward yield movement last year for the very best high street assets, principally in London. This was perhaps best illustrated by the competitive bidding for two adjoining parades of shops on St John’s Road in Clapham which eventually sold for £41.5m (3.5% NIY) and the NatWest bank on High Street Kensington selling for £19.5m (2.8% NIY). It is difficult to see these prime yields hardening further.
Looking ahead into 2015, one area we would anticipate some downward yield movement would be the dominant regional towns and cities. Rental growth is now not just confined to London and the South East with retailer demand now spreading into the secondary markets where rents have been rebased sufficiently to make new store openings viable.
With green shoots of occupational demand now coming through and a reduced number of administrations in early 2015 we would anticipate investors taking advantage of perceived value in the regions. There should be a narrowing of the yield gap between prime and secondary stock which has been at an all time high. For the moment, with the right occupational advice, this is where there is value to be had in the sector.
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