Opportunities in out-of-town retail – Cushman & Wakefield
The market for out-of-town retail property is still showing some resilience, with rental growth visible in some prime retail parks, despite a drop in overall leasing levels from the 2007 peak, says Cushman & Wakefield.
The firm’s latest Out-of-Town Retail Snapshot says that rental growth can be found in locations where supply and demand are evenly matched, but in general occupier activity is subdued. Cushman & Wakefield identifies three key themes in the occupational market – increasing polarisation of trading; more pressure on occupiers to deal with operational inefficiencies; and tenant incentive packages with more flexible lease terms.
The prime open A1 non-food sector is the strongest, C&W says, with many of the higher rented schemes in this sector still generating good levels of trading turnover. Such premises enjoy good access and a quality shopping environment, along with a diverse mix of tenants. Retail occupiers still favour these locations, the firm says, but only when they can take available retail property “on an economically sustainable basis”. Vacancy rates for retail property to let in this sector are lower than for the bulky goods sector, which is facing the challenges of addressing past operational inefficiencies including excess floorspace, reduced consumer spending and a change in shopping patters that has boosted online retailing. The rationalisation programmes that some bulky goods occupiers are carrying out “continue to provide excellent expansion opportunities for others,” C&W says.
As Savills has also recently noted, C&W highlights the new wave of retailers that is pushing for out-of-town retail space – including discount retailers – while the ‘old guard’ retailers have to deal with the issues of maturity.
Looking ahead, C&W expects the occupier market for out-of-town retail to remain “stable if subdued” this year, with demand for prime property sustained but some secondary schemes coming under pressure. Retailers are expected to continue the shift to cheaper, out-of-town locations as their sensitivity to costs persists. Development of new out-of-town retail premises is expected to remain low into 2013.
