2010 set to be best year of cycle to sell
Savills states that the leisure sector has previously been regarded as relatively illiquid and dominated by a handful of specialist investors. However, the increasing recognition from discerning investors such as Scottish Widows and Hermes of the growing attractions of leisure assets, has led to the broadest base of potential investors in this sector for many years.
Andrew McGregor, leisure investment director at Savills, comments: “Leisure investments have proved to be less volatile throughout this downturn with rents in particular remaining more resilient than in other asset classes. With this trend expected to hold strong throughout 2010 it will be a very opportunistic year for the raft of new risk averse investors to the sector in search of a stable income return, at a yield discount of up to 200 basis points over the equivalent retail assets.”
For those investors looking to enter the leisure market in 2010, Savills outlines two distinct options. The first is to focus on prime with leases in excess of 15 years (which are common place in this sector), index linked rents, strong covenants and in a retail micro environment. The other option is to seek asset management intensive opportunities where the prospects for rental growth could be significant. This option is aimed at the investors seeking more exciting levels of growth.
When assessing yields in the leisure market, Savills research confirms that current levels for absolute prime stock stand between 7.0% and 7.25%, while prime pure leisure levels are approximately 7.5%. This is broadly in line with yield compression in other sectors, but still a significant premium risk to other more mainstream investment classes.
Mat Oakley, head of commercial research at Savills, comments: “Looking forward, the inevitable conclusion on pricing is that we will see further falls in yields and rises in capital values during 2010. However, we do not expect these shifts to be as significant as they were in 2009.”
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