Demand for prime retail boosts secondary interest; retail park demand exceptionally strong
The strong competition for prime retail property is driving up investors’ interest in good secondary retail assets, says DTZ. Property Week today reports that the firm found institutional investors accounted for 71% of all retail warehouse deals and 63% of high-street transactions in the final quarter of 2010. DTZ expects the increased demand for prime retail assets to continue to boost the attractiveness of better-quality secondary retail properties in 2011.
CB Richard Ellis recently published research noting that the amount of retail warehouse park floorspace under construction has fallen below 20% of the 2.8m sq ft total recorded at the start of the credit crisis in H2 2007. There is currently less than 500,000 sq ft under construction, CBRE notes, and the development pipeline for this type of asset has been in almost continuous decline since H2 2004 – in contrast to those for the shopping centre and grocery sectors.
CBRE notes that it can be very difficult to find sites that are viable for retail warehouse planning consents – it feels that planning obstructions are the main reason for the decline in retail park pipeline levels. With construction levels now at an all-time low, the level of planning consents on these projects now looks set to decline as well, meaning that retail park pipeline levels probably have further to fall. The firm does not expect a significant upturn in development levels until 2014/2015 at the earliest.
Retail parks are quite quick to build, and most of the schemes currently in progress will be finished next year, CBRE points out. Demand for A1 space out of town remains exceptionally strong, it says, adding that the space necessary to meet the broader long-term requirements of non-food retailers “cannot be satisfied without a major change in planning attitudes”.
