The UK has seen signs of prime yield stabilisation in the retail sector with further hardening forecast, according to international real estate advisor Savills.  The firm reports that prime London shopping centres and retail parks have, between Q209 and Q210, seen 125 bp inward yield shift, whilst Paris has recorded 75 bp in shopping centres and 50 bp in retail parks.  In addition, Madrid, Barcelona and Warsaw have also seen 25 bp yield hardening for shopping centres.

The research, which looks at shopping centre and retail park performance across 27 EU locations, states that this investment appetite is due to a renewed confidence in the sector.  Savills reports that whilst consumer confidence remains negative across Europe, it has improved significantly comparative to the historic lows of March 2009, and retail trade recorded in June 2010 showed an increase of 0.5% year on year.  Furthermore with a limited shopping centre development pipeline moving forward, demand and supply are set to remain balanced, in the prime segment of the market.

Eri Mitsostergiou of Savills research says: “The impact of the negative economic sentiment is easing and retail activity is finding its equilibrium at new levels of demand and supply.  The prime segment is broadly balanced, thus rents are stabilising in most locations.  Prime retail assets are becoming the preferred investor target in the larger markets, and prime yields are hardening once again.”

In terms of rents, Savills reports that in about 75% of locations shopping centre and retail warehousing rents have stabilised compared to last year and in the remaining locations they continue to fall.  Average annual rental growth is -3.2% for good quality shopping centres as retailers focus on network optimisation.

For further information please contact:

Eri Mitsostergiou, Savills Research, +30 (0) 210 6996 311

Victoria Cambridge, Savills Press Office, +44 (0) 20 7409 894