Investor demands shifts leisure yields

UK commercial leisure property has hardened by 50 base points over the past two quarters, according to research from Savills. Prime yields have shifted from 6.75 percent in Q4 of 2010 to 6.25 percent by the end of Q2 in response to the continued demand for leisure property.

In spite of reduced spending by consumers, leisure property has remained fairly unscathed by the downturn. Investors are now choosing properties such as restaurants, cinemas and theatres over residential as safer buying path for returns.

Commenting on the findings Andrew McGregor, investment director at Savills, noted the renewed interest in leisure by funds: “Throughout 2010 buyers in this sector were restricted to UK funds or equity rich PropCos, but we are now seeing new buyers emerge such as the REITS and asset managers or risk motivated buyers as banks become more willing to lend. “

He went on to note a couple of recent examples: “Land Securities has recently acquired Kingsmead, Bath whilst British Land took the opportunity to secure Virgin Active’s sale and leaseback deal.”

Savills have pointed to banks as instrumental in bringing leisure property to market as they return property from administrators to market. Savills do not believe though that these is a risk  of the market becoming flooded given these good results.