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As inflation eases, consumer confidence grows, and the festive season approaches, the UK real estate sector is abuzz with excitement, especially surrounding retail parks. Considered the hidden gems of the real estate market, these out-of-town complexes, often referred to as ‘retail warehousing,’ are gaining favour among real estate investment trusts (Reits), private equity firms, and institutional investors. Major players like British Land, Landsec, and NewRiver are singing the praises of this asset class, highlighting the potential for a lucrative investment. Inspire Legal Group, a leading solicitor in North Yorkshire, can assist you with commercial property.

The logic driving the enthusiasm is straightforward. The significant shift to online shopping has led to the decline of traditional high streets and shopping centres, impacting the value of retail parks. Opportunistic investors view this as a temporary undervaluation, presenting a unique chance to acquire these assets at a discounted price. Rising occupancy and rents further boost their confidence.

Retail Park Resilience: Defying Expectations

What’s surprising is the resilience exhibited by retail parks, many of which date back decades. While shopping centres and high streets from the 1980s and 1990s feel dated, retail parks from the same era continue to thrive. This resilience can be attributed to two key factors:

Versatility for Different Shopping Habits: Retail parks cater to various shopping preferences – in-person shoppers, click-and-collect users benefitting from ample parking, and even online shoppers whose orders are fulfilled from these locations. Some warehouse developers are acquiring retail parks to repurpose them into warehouses for online shopping orders.

Affordability and Cost-Efficiency: Retail parks offer cost advantages for institutional buyers, Reits, retailers, and shoppers alike. Lower valuations make them attractive to investors, resulting in low rents and business rates for retailers. Tenants often include discount stores, appealing to cost-conscious shoppers.

Recent Success Factors

The recent success of retail parks was further accentuated during the pandemic. As outdoor spaces within walking distance of suburbs and equipped with ample parking, retail parks remained open and performed well. Their accessibility and omnichannel offerings positioned them favourably during lockdowns, with some becoming unexpected leisure destinations.

Management teams believe that shifts in shoppers’ habits, influenced by affordability, accessibility, and adaptability, are permanent. British Land and NewRiver are actively investing in retail parks, evident in British Land’s £410 million acquisitions since 2021.

However, not all market participants share the same level of enthusiasm. LondonMetric has transitioned away from retail parks, selling most of its portfolio in favour of warehouses and other long-leased assets. 

While the current trend suggests a promising future for retail parks, investors must remain vigilant, considering the ever-changing landscape of consumer behaviour. As the sector experiences renewed interest, it remains to be seen whether this investment surge will yield sustained returns or pose potential risks in the future. Inspire Legal Group enables proportionate costs and supports positive changes to benefit clients. 

Natalie Foster – Owner

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