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Out of Town: after the storm
Amid the huge disruption that the pandemic has brought, it has been Out of Town retailing which has emerged as perhaps the most resilient shopping environment. Footfall at retail parks is now back to levels last seen in 2019, and the ability of their environment to deliver socially distanced shopping continues to attract shoppers.
Meanwhile there has been concerted buying of the asset type by the likes of British Land and Brookfield while Hammerson has had to exit the sector because of its need for cash to shore up its balance sheet.
The configuration of retail parks and their accommodation of car-borne shoppers put them very much in step with a more socially distanced world and they are also increasingly seen as having the potential for urban logistics use. Given that you can park for free, they are also popular with ‘click and collect’ shoppers – who have a tendency to then also shop at the park or ‘grab-and-go’ with food and drink. Shops like this discretionary spend as it is often unresearched and therefore more profitable.
The increased amount of food-orientated retailing in retail parks is reflected in the strategies of Aldi, Lidl and Food Warehouse which are continuing to take space on parks while fashion and bulky goods operators tend to be on the retreat. We recently sold a site to Aldi in Truro which was formerly occupied by Staples and B&M. In Pontypridd, at Midway Retail Park, Farmfoods has taken an assignment of the Poundstretcher unit and has joined the likes of Food Warehouse, Aldi, Home Bargains and Pets at Home. As a consequence of this line-up, the park was continually busy throughout the year and this was trend was repeated on other parks with a strong food bias. Farmfoods has also expanded its presence in Bridgwater doubling their its size to be on a park with Food Warehouse and next to a Lidl and a large Sainsburys.
As we return to a more normal retailing world, out of town parks would seem better starred than other shopping environments. The pandemic has accelerated change that might have taken 5-10 years but will now happen in 12-18 months. Of course, there are examples of poorer retail parks but, owing to their usual edge-of-town location and large footprint, many are ripe for repurposing for residential, logistics or industrial use.
DIY stores traded well during the pandemic owing to their ‘essential retail’ status and the huge amount of home improvements carried out by a house-bound population. However they will continue to be eyed by residential developers – especially solus stores in major conurbations.
The Out of Town sector will not be immune to the general softening of retail rents, and parks that are overly reliant on fashion or where set RPI-linked uplifts have moved rents to way beyond sustainable levels will be particularly impacted. Rents on the best industrial distribution units will gradually align towards retail warehouse rents, with only those retail parks that can differentiate themselves in terms of the experience and occupier mix or a favourable supply/demand equation being able to justify higher rents.
