Retail warehouses outperform
Published: 10 June, 2010
According to new research from Savills, retail warehousing delivered a 20 per cent total return in the year to February 2010. This is a dramatic turnaround from a total annual return of minus 28 per cent just 10 months previously.
The agent notes that investors have returned to the sector in the last 12 months causing average and prime yields to harden by 150-200 bps since January 2009.
Jaime Dunster, investment director at Savills, said: "The investment market over corrected due to the combined concerns in both capital and occupational markets. As both of these have abated the recovery has been strong."
Savills predicts that for the remainder of 2010 the level of demand will remain, but is likely to become more discerning in assessing opportunities, especially for secondary assets, as the significant pressure to invest eases. The core fundamentals of lease length, covenant strength and low obsolescence coupled with the return of rental growth will maintain the sector's attraction to investors.
On the occupational side, Johnny Rowland, director of agency and asset management at Savills, said: "Some DIY, electrical and open A1 non-food retailers have continued to bring requirements to the market, in some cases bringing development back onto the agenda. The homewares sector has also witnessed a mini race for space as Dunelm, Next Home and Homesense are some of the retailers who have continued to acquire units on bulky schemes despite the downturn. As consumer confidence is set to rise we expect more retailers to step up their acquisitions."
