2022-10-31-莱坊-Retail_Warehousing_Monitor_Q3_2022_2页_533kb

Retail Warehouse Monitor Summary - Q3 2022

Core Content Overview

The Retail Warehouse Monitor for Q3 2022 provides a detailed analysis of investment activity, rental and capital value trends, and market dynamics in the retail warehouse sector. It highlights the resilience of the sector despite broader economic challenges and offers insights into key deals and performance indicators.

Investment Volumes

• Total Investment Volumes: £548.4m in Q3 2022, representing an 11.6% increase from Q2 2022 (£491.3m).
• 2-Year Comparison: Investment volumes rose 13% compared to Q3 2020.
• Dominant Buyers:
  • PropCos and Overseas Capital accounted for 83% of the total investment, collectively acquiring £456.1m.
  • Major deals were secured by Realty, KFIM, and Supermarket Income REIT.
• Deal Highlights:
  • Waddon Retail Park (Croydon): £13.0m, 4.20% yield, purchased by PropCo.
  • Broadbridge Heath Retail Park (Horsham): £27.9m, 4.70% yield, purchased by KFIM.
  • B&Q (Newton Abbot): £4.6m, 5.85% yield, purchased by Private buyer.
  • The Zebra Portfolio (Various): £205m, 6.25% yield, purchased by Realty.
  • Carpetright (Romford): £4.5m, 6.18% yield, purchased by SafeStore.
  • Willow Brook Centre (Bristol): £84.0m, 5.60% yield, purchased by Supermarket Income REIT.

Market Trends

• Yield Movement: Yields increased by 25 bps, driven by political instability following Boris Johnson's resignation in July 2022, as well as rising gilt yields and interest rates.
• Capital Value Performance:
  • Capital values weakened, entering negative territory:
    • July: 0.0%
    • August: -1.0%
    • September: -2.5%
• Rental Growth: Rental growth remained stable at approximately +0.1%, indicating resilience in the sector's income streams.

Commentary on the Sector

• The fundamentals of the retail warehouse sector remain strong, supported by:
  • Robust covenants
  • Rebased rents
  • Low and falling vacancy rates
• These factors contribute to sustainable income with low capital expenditure.
• Global and domestic headwinds, including market volatility and institutional pressure to sell, have affected active capital in CRE markets.
• Institutional landlords are under pressure to sell due to:
  • Redemptions
  • Overweight property positions
  • Maturing funds
• This has led to softer pricing and reduced sentiment, with private and cash buyers becoming more prominent in the market.
• Debt costs have risen, making them less attractive for vendors, further contributing to value declines.
• Despite these challenges, the sector's fundamentals are compelling, and investment volumes are expected to rebound once global and domestic volatility subsides.

Contact Information

• Dominic Walton
  Partner, Capital Markets
  +44 20 78611591
  dominic.walton@knightfrank.com

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

• Josh Roberts
  Graduate, Capital Markets
  +44 20 8187 8694
  josh.roberts@knightfrank.com

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

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

• Emma Barnstable
  Retail Research Analyst
  +44 20 8106 1385
  emma.barnstable@knightfrank.com

Disclaimer

• This report is for general information only and should not be relied upon for decision-making.
• Knight Frank LLP disclaims all liability for any loss or damage resulting from the use of this document.
• Reproduction of this report is not allowed without prior written approval.
• Knight Frank LLP is a limited liability partnership registered in England with number OC305934.

Additional Visuals

• Footfall Trends: Monthly YoY changes in footfall (Springboard data).
• Unit Vacancy Rate: Monthly YoY changes in unit vacancy rates (BRC-LDC data).
• Top Performing Categories: Quarterly sales YoY changes (ONS data).

Key Takeaway

Despite the global and domestic pressures, the fundamental characteristics of the retail warehouse sector remain compelling. With volatility expected to subside, the investment volumes are anticipated to rise rapidly.