Midsummer Retail Report

The cheap cost of borrowing is driving demand for retail investments, and yields are continuing to harden, CCRE's head of investment Andre James forecasts prime high street yields will move in from 4.75% to 4.5% in the next 12 months; prime shopping centres will firm from 6.0% to 5.75% and prime retail park yields will become even hotter, moving from 5.5% to 5.25%.

Rental performance is more mixed, however, with in-town rental growth slowing from 4.1% last year to 3.0% now. High Street shop rents are now barely keeping pace with inflation but the figures mask some wide regional variations. Central London has been hit by the slump in tourist, with rents growing by just 1.2%. The capital's suburbs, by contrast, are now the UK's retail hotspot with 6.9% growth in the year to May 2003.

Out of town, the picture is much brighter for investors, with an average 7.3% rental growth this year. Some locations have seen spectacular rental uplifts, with The Junction in Hull seeing a 59% rent hike and the Orbital shopping park in Swindon a 52% increase. Colin Dunkerley, head of out-of-town retail at CCRE said: "What they have in common is that they are elite schemes in their region. The best schemes will continue to show healthy growth but weaker schemes may struggle."