Hundreds of millions of pounds of UK retail parks are set to change hands in the coming weeks as as institutional investors increasingly target the sector because of its perceived safe haven status and the lack of capital expenditure the parks require.
Aviva has bought two retail assets in the south of England, Hedge End Retail Park in Southampton, and an Asda superstore in Hayes, Middlesex. The price paid has not been disclosed for the retail park but it is understood to be around £30 million.
Comprising 100,000 square feet and split between four retail warehouse units on an eight-acre site, Hedge End Retail Park houses Currys, Lidl, and Pets At Home. It has been bought from clients of CBRE Global Investors.
The Asda superstore comprises more than 85,000 square feet let to Asda Stores on a 25-year term which expires in 2040 and is subject to a five-yearly review.
James Stevens, head of real estate investments at Aviva Investors, said the deals showed non-discretionary retail such as food and groceries is a strong defensive asset class against the macroeconomic backdrop. "We believe both of these investments can offer strong growth performance, particularly given the current discount in pricing.”
Savills and Hampson Wall acted on behalf of Aviva Investors for its acquisition of Hedge End Retail Park and Asda, Hayes, respectively.
Elsewhere, Aviva Investors is understood to be among bidders including CBRE Global Investors looking to buy the Tandem Centre, a retail park in Colliers Wood, south west London from LaSalle Investment Management on behalf of Santander, for around £65 million. Market sources this week said LaSalle is reviewing whether it will retain the park or sell, given improving investment conditions.
The 117,100-square-foot park is located in south west London at the junction of the A24 Merantum Way and the A236 Christchurch Road. Tenants include Next, New Look, Boots, WH Smith, Clarks, Sports Direct, JD Sports, TK Maxx, Lidl, HomeSense, Starbucks, Nando’s, Moss Bros and Holland & Barrett. Avison Young is advising LaSalle IM.
Other parks are changing hands at keen yields despite economic headwinds slowing activity in other areas of the retail sector and real estate.
Earlier this month, DTZ Investors completed the purchase of Purley Cross Retail Park in Croydon for £59 million, or a circa 5.35% net initial yield, from Oval Real Estate. Green & Partners and DTRE acted jointly for the vendor with HampsonWall representing DTZ Investors. That property comprises 126,410 square feet of lettable floorspace across five units which occupy an 8.6-acre site.
In addition, Capreon, advised by CBRE, is understood to be in talks to sell Parkgate Shopping Park in Rotherham to Columbia Threadneedle for £65 million, with Columbia Threadneedle reportedly having raised funds on behalf of a client for a major investment drive into the sector.
Separately, Capreon, advised again by CBRE, is understood to be in talks to sell Westwood and Westwood Gateway Retail Parks, Thanet, for around £55 million, with a strong bidding pool. The retail parks covering a total of 259,000 square feet are located in Kent in the South East of England with tenants including Homebase, Wren, Tapi, SCS and Dunelm.
Comfort is being taken from the depth of large-scale institutional investors and REITs targeting the sector, including the US's Realty Income Corporation, British Land, Columbia Threadneedle, CBRE Global Investors and Aviva Investors.
British Land has been particularly busy recently completing the acquisition of three retail parks for a total of £94 million and selling its 50% stake in a retail park in Preston for £30 million.
BL said the deals are in line with its strategy to actively recycle capital and consolidate its position as the UK’s largest owner and operator of retail parks. The real estate investment trust said this would increase its ability to sign portfolio leasing deals and enhance returns.
The biggest is its acquisition of the Capitol Retail and Leisure Park in Preston for £51.5 million, representing a net initial yield of 8.43%. The 300,000-square-foot park is let to retailers including Next, Home Bargains and Boots. It is the most prominent retail park in the area and has direct access to Preston city centre and the M6 and M65 motorways.
Speaking to CoStar News, James Gulliford, joint UK head of investment at Savills, said the retail park market stood out at present for various clear reasons. "In volatile markets investors can see the attractions of a sub sector which offers a relatively high initial yield, limited capital expenditure and a national vacancy rate of less than 5%."
Kelly Cleveland, head of strategy and investment at British Land, said there are continuing strong structural reasons to invest in retail parks such as omnichannel trading. "These are long-term trends that have been intensifying every year and that we identified a long time ago. Retailers such as B&Q and Wickes, M&S and the discounters are all seeing parks as preferred formats for them. In terms of the healthy investment market for parks, we can't see a lot of that capital leaving any time soon as investors take a long-term view. It should stay a liquid market."