MONEY
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THE PAST 12 MONTHS HAVE SEEN A TURNAROUND IN FORTUNES FOR THE ESTABLISHED BIG FOUR SUPERMARKET OPERATORS.
Away from the prime multi-let parks or DIY stores, there’s been an uptick in interest from opportunistic buyers of smaller parks where the rents seem affordable and – more importantly – where pricing has softened.
This is perhaps the area we see the greatest current demand. New River and Pimco’s £60m acquisition of a portfolio of four retail parks from Threadneedle at a 9%+ yield is an indicator of a wider intent.
GROCERY In times of market uncertainty, many investors often return to the fundamentals and there is perhaps nothing more fundamental than selling food.
Certainly, the past 12 months have seen a turnaround in fortunes for the established Big Four supermarket operators while the discounters continue to acquire market share largely by opening new stores.
Online grocery sales have plateaued. At 7%, online’s current share of total grocery sales is virtually the same as the past two years.
This is actually good news for the operators who don’t make money out of fulfilling online orders.
And so the focus has come back onto physical stores where 90% of online orders fulfilled.
EXECUTIVE SUMMARY
THE MARKET
RETAIL REIMAGINED
MONEY
IS THIS THE END OF THE GOLDEN AGE OF ONLINE RETAILING?
KNOWLEDGE
SHOPPING WITH A CONSCIENCE
FOOD
Last year saw just over £1bn of grocery asset investment and we expect this to be surpassed this year. Within this activity, the differentiation between prime and secondary assets became even starker.
The long-income funds are prepared to pay prime prices for the best long-let assets with inflation linked reviews while debt-backed propcos will acquire shorter lease length stores which have fallen out of favour from the traditional funds.
These polar opposites were illustrated by two deals. The first was an off-market sale that we advised on which saw the Morrison’s Borehamwood sell for £46.5m at a net initial of 3.5%. This was a rare, prime transaction.
At the other end of the spectrum was the acquisition by Altum Capital of a suburban Manchester Tesco with RPI-linked rents for £28.5m at 7.8%.
However prime store availability is extremely limited and the wider negativity towards the retail sector has led to an increase in supply of secondary stores on shorter leases, leading to a slight softening in yields.
One trend worth highlighting is that there is continued interest from some of the supermarket operators to buy back over-rented, over-performing stores. There has been an increasing number of these transactions this year.
REGIONAL UPDATES
CONTACTS
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