There has been a shift in prime yields among real estate assets in the UK leisure market, according to the latest commercial leisure bulletin from Savills. The firm noted that yields have hardened during the first half of this year, contracting by 50 basis points from 6.75 per cent in the final quarter of 2010 to 6.25 per cent in the three months from April to June in 2011. A "sharp increase in investor demand" was cited as one of the main driving forces behind the movement.
Investment director at Savills Andrew McGregor commented: "There are exceptions, but overall cinemas, restaurants and cafe bars have continued to trade well throughout the recession and investors are now recognising this." He added that a greater variety of buyers have now entered the leisure market compared to 2010, with asset managers, real estate investment trusts and "risk-motivated buyers" taking advantage of banks' increased willingness to lend.
The organisation's research into the restaurant sector revealed that several well-known chains are stepping up their expansion efforts, although leisure director David Bell cautions that established players are likely to leave weaker brands behind, thereby creating a more polarised market. He added: "Strong chains which provide value for time and money will continue to do well for the remainder of 2011."
Meanwhile, there has been a change in the type of assets being targeted by investors in the retail sector, with the focus very much on prime locations, as opposed to the secondary market, a recent report from the British Property Federation and Local Data Company found. The research noted that large retail companies are closing poor-performing outlets and turning their attention to the "bigger and better" shopping centres where vacancy rates are lower. It also noted that occupancy is generally higher in the south, south-east, London, south-west and eastern regions of the UK, with centres in the Midlands and north of the country suffering as retailers streamline their portfolios.