Retail parks are well positioned to withstand closures

TIMES WERE difficult for offline retail before covid-19. Rising costs and weak sales growth had reduced margins; online shopping was stealing market share. According to the Center for Retail Research, an analytics company, at the start of 2020, shopping streets had about 50,000 fewer stores than a decade earlier, a 13% drop.

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Then the pandemic struck. During the first lockdown, the number of customers for all retail outlets fell. The city’s malls were the hardest hit and the slowest to rebound: data from another analytics company, Springboard, shows footfall in the first week of June to be 22% lower than that the same week in 2019. But amid the gloom, there is a bright spot. The number of visitors to business parks outside the city has been much less affected and has fallen to 3% below its pre-pandemic level.

Real estate investors have noticed. According to Savills, a real estate agent, rental yields from shopping malls and department stores were on the rise before the pandemic, but the pace has accelerated during it, meaning the market is demanding a higher return on assets than ‘he considers riskier. Yields from retail warehouses have been declining since September 2020. The acquisitions tell a similar story: Buyers have so far spent £ 900m ($ 1.3bn) to capture fleets of retail in 2021, but just £ 280million for malls.

In part, they believe commercial parks will do better in a world reshaped by the pandemic. Shoppers feel more secure in outlets visited by car rather than on public transport, and where trips between stores are outside. Outlets in shopping parks are larger, which contributes to social distancing and ventilation. Plus, they’re full of the types of stores that exploded during the pandemic: supermarkets, pet stores, and those that sell everything you need for the home, from plants and paint to futons and refrigerators.

But the pandemic isn’t the only reason business parks are outperforming. They are much better placed than their counterparts on the street to survive the boom in internet shopping. People who buy appliances, furniture and furnishings want to see and touch them before they fork out any money. Spacious workshops and good road access mean they can serve as distribution centers. And they’re ideal for “click and collect,” the fastest growing form of online shopping. Expect investor enthusiasm to outlast blockages. â– 

This article appeared in the Great Britain section of the print edition under the headline “Clicks and Mortar”

About Cassondra Durden

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