2024-02-09-莱坊-Retail_Warehousing_Dashboard_Q4_23_2页_813kb

Retail Warehouse Dashboard Q4 2023 Summary

Core Content

This report provides a quarterly synopsis of activity in the UK retail warehousing market for Q4 2023. It highlights trends in investment, occupancy, rental values, and sales performance, offering insights into the current market dynamics and future outlook.

Key Takeaways

• Investment Activity:
  Retail warehousing investment volumes fell for a fourth consecutive quarter to £335 million, below the rolling 5-quarter average of £494 million.

  • Listed Propcos were the largest purchasers, acquiring 51.0% of assets by deal volume, followed by Institutions (32.8%) and Private Propcos (6.3%).

• Yield Trends:

  • Prime yields (Open A1 and Bulky Goods Parks) remained stable at 6.00%.
  • Secondary Open A1 and Bulky yields softened by +25 bps to 8.00%.

• Capital & Rental Values:

  • Capital values declined by -3.2% quarter-on-quarter.
  • Rental values increased by +0.4% quarter-on-quarter.

• Vacancy Rates:

  • Unit vacancy rates improved by -20 bps, reaching 7.6%, the lowest since Q2 2019.
  • Vacancy rates are now well below the pandemic peak of 11.5% in Q2 2021.

• Footfall Performance:

  • Footfall fluctuated in October (-4.3%), November (-1.0%), and December (-4.8%), but showed greater resilience compared to Shopping Centres and High Streets.

• Sales Growth:

  • Q4 retail sales were robust, growing by +3.9% YoY, though this marked a slowdown from Q3's +5.4%.
  • Volume growth improved to -1.4% (vs. Q3's -2.1%).
  • Performance by category was mixed:
    • Food sales increased by +6.4%.
    • Non-Food sales grew by +0.9%.
    • Carpets, Furniture, and DIY saw softening demand (-0.4%, -0.9%, -3.9%, respectively).

• Key Deals YTD (Year to Date):

  Asset	Price (£M)	Yield (%)	Vendor	Purchaser
  SPRINGVALE RETAIL PARK, ORPINGTON*	£44.8M	7.33%	BLACKROCK	NFU
  B&Q, CHORLEY	£5.8M	6.90%	FIRST PROPERTY GROUP	ABRDN
  PART HARRIER PORTFOLIO*	£34.7M	9.88%	BAE SYSTEMS PENSION FUND	LCP
  PARKGATE, ROTHERHAM	£55M	11.25%	RECEIVERSHIP	COLUMBIA THREADNEEDLE
  TWO RIVERS SHOPPING PARK, STAINES (50% SHARE)	£155M	7.25%	ABRDN	M&G

Market Outlook

• The sector concluded 2023 with a stable Q4, indicating a steady end to the year.
• Consumer markets are supported by a strong labour market, low unemployment (3.9%), and robust wage growth (+6.5%), although inflation has improved (5.2%).
• Retail sales growth is expected to remain stable in 2024, with a forecast of +3.0% for FY24 and a return to positive volume growth at +0.5%.

Occupier Landscape

• Physical retailer distress reached a record low in 2023, with only 971 stores affected, the lowest since 2015.
• Vacancy rates improved by 20 bps due to the reduced number of distressed retailers.
• Competition for expansion space is intense, with occupiers such as Greggs, Taco Bell, JD Sports Gyms, and Popeyes actively seeking space.
• High street brands like Lush and Mango are entering the retail warehouse market, further intensifying competition and driving rental growth.

Capital Market Trends

• Despite a strong occupier base, capital market activity remained subdued, with Q4 transaction volumes at £335 million, bringing the 2023 total to £1.84 billion.
• Institutional investors continue to show strong demand for premium assets, but face a shortage of stock, which may lead to a sharp increase in prime yields by -50-75 bps in 2024.
• Limited development and declining vacancy rates are expected to further pressure rental values upward.
• 2024 transaction volumes are projected to match 2023's, assuming interest rates stabilize and decrease, aiding a debt market recovery.

Investor Demand

• Investor demand for retail warehouse holdings is strong, but transaction volumes remain low due to the ongoing gap between vendor valuations and market pricing.
• It is anticipated that one or both sides will adjust in 2024 to close this gap.

Research Commentary

• The report underscores the resilience of the retail warehouse market, despite the broader economic challenges.
• The occupier landscape is improving, with fewer distressed retailers and increased competition for space.
• Capital markets are still under pressure, but the outlook for 2024 is cautiously optimistic.

Contact Information

• Dominic Walton
  Partner, Capital Markets
  +442078611591
  dominic.walton@knightfrank.com

• Daniel Serfontein
  Associate, Capital Markets
  +442036407037
  daniel.serfontein@knightfrank.com

• Josh Roberts
  Surveyor, 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
  Associate, Commercial Research
  +442081061385
  emma.barnstable@knightfrank.com

Additional Resources

• Knight Frank Research provides strategic advice, consultancy services, and forecasting for a wide range of clients.
• Reports are available at: knightfrank.com/research

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