Retail Warehousing Will be Year's Top Performing Investment
Retail warehousing will be commercial property's best performing sector of the year - that is the confident forecast of development specialist Gareth Williams, a partner in the Birmingham office of international property consultants King Sturge.
Mr Williams, speaking after King Sturge's annual Property Predictions Conference, said: "However, that's not exactly a ground-breaking prediction, for retail warehousing was the best performing sector of 2003 and 2002. And even though it is still early days in 2004, it certainly looks like a hat-trick is on the way."
Mr Williams, who with considerable experience of retail warehousing and has day-to-day responsibility for King Sturge's Development Agency & Consultancy department, added: "As it was in 2003 and the year before, we are predicting an overall performance of 11.9 percent. Low interest rates have created yield compression and we would expect a softening of secondary yields as interest rates move out but prime yield to be relatively static."
King Sturge also predicted that there would be a continuation of the trend of consolidation of retail park ownership - a situation that currently sees 15 retailers occupying over 50 percent of all retail park floor space. With the advent of large branded retail parks resulting in strong landlord and tenant relationships, the tenant line up is becoming even more predictable.
Many retailers are currently being put under pressure as the impact of the Internet, everyday low prices and the "never knowingly undersold" ethos of some traders impact upon profit margins.
"Almost all retailers are affected by the continued expansion by foodstore retailers of their non-food offer, which they are able to adjust to seasonal and calendar events. Out of town retailers therefore continue to seek efficient sized stores, relocating to smaller stores particularly by traditional out of centre retailers under the pressure of the higher rentals paid by high street retailers who are up-sizing. These movements create occupational demand," commented Mr Williams.
Factory outlets, he said, would also retain their important role in the retail chain by creating price differentiation and flushing through unpopular stock from the high street.
Mr Williams added that the commercial leisure sector, which had been on its knees for some time, was now seeing the first signs of renewed activity through proactive management and marketing. There was also a desire by venture capitalists, in buying the likes of Warners, to shake out the complacency that appeared to have dogged an industry protected by good film products for so long.
All in all, I think we can expect another very interesting year - with the retail warehousing sector again providing an enormous contribution to the economy and at the heart of a stimulating debate as it remains out of favour with the planners? concluded Mr Williams.