International investors’ interest in UK food stores is likely to increase this year, according to a new Savills report, as the plunge in the value of the pound continues to attract investors despite uncertainties over Brexit.
The international property advisor reports that investment into UK food stores reached £1.23bn in 2016, with operator-led transactions dominating the market, accounting for around £590m; 49% of total volumes. But excluding these operator-led deals, foreign investors were the most active in the sector, accounting for 22% of volumes, equating to about £257m.
Middle Eastern investors have been particularly active in the sector, accounting for £180m of investment, Savills said. This resulted in 2016 being their most active year on record accounting for almost 70% of total overseas investment.
The longer leases associated with the sector and index linked reviews continue to make food stores an attractive asset to overseas investors.
London and the South East continued to be the most liquid markets, accounting for almost half - 47% - of volumes, while there was a 15% rise in investment into the capital as the residential angle offered by some assets intensified investor interest.
Katie Taylor, investment director at Savills, said: “Overseas buyers have been a dominant investor in the market appreciating the longer term strengths of the food store sector.
“The globally recognised brands, ease of management, certainty of income and wealth preservation benefits associated with the sector continues to appeal to international buyers, and has been further boosted by the recent currency play.
“As income security has become a bigger concern following the EU referendum vote, we suspect we’ll start to see the institutional investors start to come back in 2017.”