Retail property will outperform all other property sectors this year, with a total return of 13.5 per cent, according to Colliers CRE's Midsummer Retail Report. It is also the only sector to show both capital and rental growth at the moment.
The cheap cost of borrowing is driving demand for retail investments, and yields are continuing to harden. CCRE head of investment Andre James predicts that prime high street yields will move from 4.75 per cent to 4.5 per cent in the next 12 months.
James also believes that prime shopping centres will firm from 6 per cent to 5.75 per cent, and prime retail park yields will become even hotter, moving from 5.5 per cent to 5.25 per cent.
Rental performance is more mixed however, with in-town rental growth slowing from 4.1 per cent last year to 3 per cent at present. High street shop rents are barely keeping pace with inflation, but the figures mask wide regional variations.
Central London has been hit by a slump in tourism, with rents growing by just 1.2 per cent. The capital's suburbs, by contrast, are now the UK's retail hotspot, with 6.9 per cent growth in the year to May 2003.
Out-of-town the picture is much more buoyant, with an average 7.3 per cent rental growth this year. Some locations have seen spectacular rental uplifts, with the Junction at Hull seeing a 59 per cent rent hike, and the Orbital shopping park in Swindon a 52 per cent increase.
Colliers CRE out-of-town retail head Colin Dunkerley said: 'What they (the centres) have in common is that they are elite schemes in their region. The best schemes will continue to show healthy growth, but weaker schemes may struggle.'
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