Investors acquired £1bn of central London prime retail property in the first half of the year, with the market proving a safe haven before and after the vote to leave the EU, according to CBRE.
The total dwarfs the H1 average of £700m seen in recent years. Total investment for 2016 is set to swell significantly in August, with a further £450m of deals set to complete this month. The market’s reputation as a secure long-term investment has also been bolstered by a third successive quarter of prime yields at record lows.
London shops have proved particularly attractive to overseas investors, which represented 60% of volumes in H1. These investors are benefiting from recent falls in the value of sterling, while also taking reassurance from the boost sterling depreciation will have on retail spending by overseas visitors to the UK.
Key deals include the sale of 169 New Bond Street, W1, for £65m – at a record £18,800 per sq ft, the highest capital value per sq ft paid for any UK retail asset to date. The weeks immediately following the vote on 23 June also saw the sale of Debenhams’ Oxford Street flagship by British Land for £400m.
Phil Cann, head of UK retail at CBRE, said: “London shops have been seen by many as the ultimate safe haven investment, with buyers bucking the ‘wait and see’ trend we have seen in other sectors. The strong H1 investment volumes are even more remarkable when considered against the backdrop of uncertainty created by the EU referendum and what is normally a typically slower first half.
“The rationale for investing in UK real estate has naturally been questioned in the light of the decision to leave the EU, but the fact is the UK retail market is underpinned by strong fundamentals – a mature e-commerce model, a sophisticated logistics network, and diversity in retail locations, and London remains a powerhouse at its heart.”