2024-12-04-莱坊-Retail_Warehousing_Dashboard_Q3_2024_2页_719kb

Retail Warehouse Dashboard Summary - Q3 2024

Core Content

This document provides a concise overview of the UK retail warehousing market activity for Q3 2024. It highlights investment trends, rental and capital value changes, vacancy rates, footfall data, and retail sales performance, offering insights into the sector's current state and future outlook.

Key Takeaways

• Investment Volumes:

  • Retail Warehousing investment reached £549m in Q3 2024, the highest of the year.
  • Year-to-Date (YTD) investment volumes total £1.3bn, still below the same period in 2023 ( £1.5bn) and 2022 ( £1.9bn).
  • REITs and Listed PropCos accounted for 81% of purchases, with the Brookfield portfolio deal playing a significant role.

• Yields:

  • Prime yields (Open A1 and Bulky Goods Parks) compressed by -25bps to 5.50%.
  • Secondary Open A1 and Bulky Goods yields also improved by -25bps to 7.00%.

• Capital & Rental Values:

  • Capital values increased by +1.3% quarter-on-quarter.
  • Rental values strengthened by +0.6% compared to Q2.

• Vacancy Rates:

  • Unit vacancy rates improved by -30bps to 6.8%, marking the 15th consecutive quarter of improvement.
  • Vacancy rates are 150bps lower than pre-pandemic levels.
  • Only 2.9% of units are classified as 'problematic' (vacant over three years), which is significantly lower than Shopping Centres (7.6%) and High Streets (5.5%).

• Footfall Trends:

  • Footfall in August and September increased by +2.6% and +7.3%, respectively, outperforming the broader retail sector.
  • The broader retail sector saw a -0.4% and +3.3% change in the same months.

• Retail Sales Performance:

  • Retail sales strengthened in Q3, rising by +2.8% compared to Q2, which had a weak performance (+0.1%).
  • Sales volumes returned to positive territory for the first time since 2022, indicating stronger consumer spending.
  • Non-Food sales increased by +3.7%, while Food sales rose by +1.0%, reversing Q2 declines.
  • However, much of the Non-Food growth was discount-driven, and deflation was observed in several categories, including Electricals (-16.2%), Pets & Garden (-2.5%), Carpets (-2.0%), Household Goods (-1.6%), DIY (-1.5%), and Furniture (-0.6%).

• Market Outlook:

  • The retail warehouse sector is currently one of the most in-demand commercial sub-sectors.
  • Annual total returns are forecast at 12.4% for 2024, surpassing the 2.1% return in 2023 and outperforming the Industrial sector (7.4%) and All Property (5.1%).
  • A more balanced buyer-seller dynamic is emerging, with new entrants such as French SCPI funds contributing to the sector's diversity.

Key Deals YTD (Year to Date)

Contact Information

• Dominic Walton
  Partner, Capital Markets
  +44 20 7861 1591
  dominic.walton@knightfrank.com

• Daniel Serfontein
  Partner, Capital Markets
  +44 20 3640 7037
  daniel.serfontein@knightfrank.com

• Volkan Denli
  Surveyor, Capital Markets
  +44 20 7861 1051
  volkan.denli@knightfrank.com

• Freddie MacColl
  Partner, Capital Markets
  +44 2039 677 133
  freddie.maccoll@knightfrank.com

• Josh Roberts
  Senior Surveyor, Cap Mkts
  +44 20 8187 8694
  josh.roberts@knightfrank.com

• Stephen Springham
  Partner, Head of Retail Research
  +44 20 7861 1236
  stephen.springham@knightfrank.com

• Emma Barnstable
  Associate, Commercial Research
  +44 20 8106 1385
  emma.barnstable@knightfrank.com

Additional Information

• Footfall (BRC) showed a positive YoY change in recent months, indicating improved foot traffic in retail parks.
• Vacancy Rate (BRC-LDC) continues to trend downward, reflecting strong demand and limited supply.
• The retail warehouse sector is expected to maintain its strong performance, with annual returns forecast at 12.4%, making it a top-performing asset class.
• Investors face a dilemma: hold assets for returns or sell to capitalize on pricing.

Disclaimer

This report is for general information only and not to be relied upon in any way. Knight Frank LLP does not accept any responsibility or liability for any loss or damage resulting from its use. Reproduction of this report is not allowed without prior written approval.