Little trade in retail warehouse property, but plenty of interest – Savills
Are investors losing interest in the UK market for retail warehouse property? Savills says this doesn’t appear to be the case from the low levels of stock being marketed – it’s more that many investors are just unwilling to trade in the current environment. The lack of development is exacerbating this trend, “as the traditional flow from developer to investor has ceased in line with the cessation of new development completions,” it adds.
While institutional and REIT owners are in no hurry to sell and in most instances are sitting on cash, there are a number of buyers with significant amounts of cash but stymied in their attempts to purchase, “as the risk profile for secondary assets doesn’t suit, or possibly not at the current pricing, and the bid/offer spread sought by current owners makes agreement on pricing extremely difficult,” Savills notes. With covenant concerns, a lack of development pipeline, and a fear that assets may be cheaper in the second half of the year, buyers are very cautious “unless it is for the unattainable prime open A1 stock”. However, good deals are being done on good parks: “The cash is cautious for good reason, but not afraid to pay the right price for the right asset.”
It’s time for out-of-town retailers to make their push on available retail property, the firm says. There are still many retailers seeking space out of town as some traditional retail parks have reached saturation point, it argues, which “leaves the door open to fringe occupiers to steal a march on the competition now”. Retailers are also seeking out-of-town space as there is so little town-centre development taking place. Anchor retailers have realised there are good deals to be done when they are in effect kickstarting new out-of-town schemes; discount operators are also continuing to acquire aggressively.
