227: Property investors bet on elusive retail revival
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LONDON (Reuters) – Property Investors bought more retail property in the three months to the end of September, even as enquiries from retailers for new shopfloor space fell for a ninth straight quarter, data showed on Thursday.
According to a quarterly report by the Royal Institute of Chartered Surveyors (RICS), 28 percent more surveyors reported a rise in retail property investment sales than a fall, up from 25 percent in the previous three months, as investors bet the worst was over for the country's retailers and that rents would soon rise.
However, the data also showed that property investor confidence has yet to be matched in the occupier market, with 9 percent more respondents reporting a fall rather than a rise in demand for new retail space, despite hopes for an improvement in the last three months of 2006 even as interest rates rise.
"Buyers of shops are confident that interest rate rises will not dampen consumer spending, with some signs that the fall in retailer demand for shops has bottomed out," RICS economist Oliver Gilmartin said.
Property investment analysts said they drew some encouragement from expansion plans announced by some leading retailers, including J. Sainsbury Plc (SBRY.L: Quote, Profile, Research) and Next Plc (NXT.L: Quote, Profile, Research) and saw retailers fighting back against the Internet by using new store formats in attractive locations.
Next for instance said in September it is testing the feasibility of a separate chain of discount stores.
SOLID RETURNS
So retail property that is actively managed in order to increase its appeal to shoppers is seen generating solid returns and underpinning investment.
"Despite the more subdued period of performance projected for the retail sector, property investor demand is expected to remain relatively strong in the short term," John Danes of fund manager Arlington Securities, said.
"It does highlight the need for active management to seek out these opportunities, but in an era of low interest rates and low inflation and with expected annualised returns of 6.4 percent over the next five years, property as a whole remains an attractive proposition for investors," Danes said.
In a statement, RICS said the UK's overall commercial property investment market -- offices and industrial property, as well as retail -- remained strong and that the balance of power was shifting towards landlords, with the value of inducements given to new tenants posting their first big drop in five years.
It said business demand for new office space was especially strong in the third quarter and had accelerated at its fastest pace in just over two years.
Surveyor expectations for rent rises for the next quarter hit a six-year high, driven by the central London office sector, with optimism not far off the highs achieved during the dot-com boom, RICS said.
RICS represents property professionals and has 120,000 members across 120 countries. Its housing surveys are sometimes cited by the Bank of England's monetary policy committee when it meets to set interest rates.
Source:
Reuters.co.uk