Shopping Centre Pipeline

Mark Disney

Executive Director

Shopping Centres, Retail Parks, Factory Outlets

14 October 2014

To insert logos and/or delete the dashed boxes Go to View > Master > Slide Master and insert logo’s and delete the boxes from the SLIDE MASTER and the TITLE PAGE

* Please ensure you have sought permission from the Client for use of their logo as stated in the CBRE BMS Manual – Section 3.1.9

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

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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.

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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’

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

           

§  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

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

           

§  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.

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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.

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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.

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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!

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

UK Shopping Centre Investment Market Overview

Stewart Colderick

Executive Director

Head of Retail Capital Markets

14 October 2014

To insert logos and/or delete the dashed boxes Go to View > Master > Slide Master and insert logo’s and delete the boxes from the SLIDE MASTER and the TITLE PAGE

* Please ensure you have sought permission from the Client for use of their logo as stated in the CBRE BMS Manual – Section 3.1.9

CBRE | Page 16

UK Shopping Centre Investment Market Overview

TRANSACTION LEVELS ARE UP

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

§  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?

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

§  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

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

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

Jan-­‐13

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

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

CBRE | Page 20

UK Shopping Centre Investment Market Overview

CONCLUSIONS/TRENDS

To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button

§  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.