With retail warehouse transaction volumes for the year to date estimated at £1.27bn, the annual total for 2012 is set to be around 39% below the 2011 total of £2.09bn, says Knight Frank.
The retail warehouse market has seen a number of retailer failures recently, including both well-known and lesser known brands. Anthea To, associate in Knight Frank’s research team said: “Trading conditions remain challenging, notably for the DIY, furniture and consumer electronics sectors. Whilst the UK economy returned to growth in Q3, retail sales growth has slowed and consumer confidence remains at a low ebb and further inflationary pressures may prolong the squeeze on real incomes.”
Nonetheless, according to IPD, total returns for the retail warehouse sector have continued to outperform the other retail sub-sectors on an annual basis, reaching 2.4% over the 12 months to October.
Despite the low transactional volumes recorded in Q3 compared with the same period in 2011, we have witnessed a significant increase in supply in Q4. The majority of new product has been marketed in portfolios in excess of £100m such as Aviva Investors’ Project Saturn, Resolution Property’s trio of retail warehouse assets and Equitable Life’s two assets in Cheshire Oaks and Ipswich. All of these
schemes are reported to be under offer.
Andrew McGregor, Head of Knight Frank’s Out-of-Town Investment said, “The most striking development towards the end of Q4 was the sharp increase in the number of REITs joining the UK institutions and funds chasing stock. The weight of money has been concentrating on the prime Open A1 schemes and the larger mixed portfolios offering asset management opportunities”.
McGregor added, “Recent bidding on the best assets confirms that prime yields are showing signs of stabilising at their current levels, as UK institutions and REITs continue to focus on strong locations and well-let schemes, which are underpinned by sustainable rents and more flexible planning. That said, the secondary bulky goods sector remains under pressure.”