Retail warehousing ‘robust’ as market matures – Savills
The market for retail warehouse property is robust, dynamic and recovering well, says Savills. The firm has analysed Trevor Wood’s national retail warehousing tenancy database and concludes that vacancy rates are falling in all but the most oversupplied and poorly located schemes.
The national vacancy rate for retail warehouses was 8.6% of floorspace in September, which is a return to pre-2007 levels, the firm notes, “and suggests that the market has reacted well to the economic downturn despite a large number of retailer administrations”. By unit, retail warehouse vacancy was 10.2% – compared with an in-town retail vacancy rate of 14.5%, which is a tripling since 2008 (according to LDC figures).
Savills says only a tiny proportion of retail warehousing schemes are ‘problem sites’ – just 25 of the 3,000 schemes analysed have five or more vacant units, or over 50% vacancy by area. The firm says that removing such anomalies as sites undergoing redevelopment (e.g. conversion to food store), those that are ‘artificially vacant’ as landlords hold out for a better deal or planning designation changes, and the cases of genuinely poor stock, would actually lower the average retail warehousing vacancy rate to 7.9%.
It is interesting to note that 74% of the schemes analysed have no vacancies – this means that 26% of stock accounts for all the vacant units. This demonstrates why there is strong demand for vacancies on the best schemes, with competition among retailers often in evidence when a unit becomes available.
Savills notes that the vacancy rate expressed as a proportion of units is higher in all regions than the rate as a proportion of floorspace – it says this shows that it is generally the smaller units on retail parks that suffer the worst from vacancy. While there is a limited number of retailers that require large units, there is also a relative shortage of these units and when they do become available, “they tend to get snapped up by aggressive retailers, or sub-divided by the landlord,” the firm adds.
So, what to do with these ‘problem sites’? Savills says retail warehousing is now much more mature than during the last major downturn in the 1990s, when the sector was in its infancy. Many of the first schemes were in affordable areas that have subsequently become increasingly tertiary and are likely to remain vacant after the economic recovery without planning intervention – including changes of use to employment or residential, in the most extreme cases. “While this seems at odds with what was happening pre-recession, there are signs that some landlords are already moving in this direction,” Savills adds.
