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Buyers target essential retail
Investors remain very selective in their approach to retail assets. The main targets for buyers in 2020 were assets which were based on ‘essential retailing’ such as foodstores, retail parks and shopping centres with potential for active asset management. Tom Edson reports.
Despite a turbulent 2020, the retail investment market remained relatively robust and saw increased activity in the second half of the year. The main asset targets for buyers were foodstores, discounter-led retail parks and standalone DIY stores – all of which performed well throughout the covid-19 pandemic. The majority of these operators were deemed to be ‘essential retailers’, remaining open to trade, and benefited from formats that are more resilient to social distancing requirements as well as changing consumer demand and the ability to facilitate click-and-collect.
Of the retail sub-sectors – High Street, Shopping Centres, Supermarkets and Out-of-Town, grocery-backed assets - were the clear winners and remained hugely popular with investors. The 2020 volume of deals for these asset types reached £1.83bn – which just surpassed the £1.78bn of transactions that took place in 2019. The next highest volume category was retail warehousing which saw £1.7bn of deals transacted.
From a wider perspective, the volume of deals concluded across all retail capital markets last year was £6.4bn. This was pretty much on par with 2019 and – given the torrid time that retail had in 2020 - may come as a shock to some. Whilst there has been a redistribution of spending, activity across the retail capital markets has held up surprisingly well.
Demand for supermarket assets exceeded expectations last year with the momentum and weight of demand in the market looking likely to be maintained. So far in 2021, we have seen market record yields being achieved, with a number of parties seeking the security these assets offer.
The long-term annual average trading volume for foodstores has been around £1.4bn but we are now seeing investor demand that far outstrips supply which has been driving volumes to a cyclical high.
Against this backdrop, the Colliers Retail Capital Markets Team completed more than £400m of transactions in 2020 across the retail sectors, whilst also maintaining its position as a leading adviser in the foodstore investment market.
Notable transactions completed by the team during 2020 included the £70m acquisition of a 100,000-sq ft Tesco superstore in Enfield for Realty Income Corporation, the acquisition of a B&Q, Stockport and the sale of Abbey Retail Park in Belfast.
tom.edson@colliers.com | +44 (0)20 7344 6554
