Better occupier demand in UK retail warehouses has resulted in the lowest level of vacant space on UK retail parks since 2006, according to a report by Colliers International.
The Heading out of Town report found that investment volumes in retail warehousing surpassed £4bn last year, due to level of transactions returning to pre-recession levels. However, activity in Q1 2016 was down 26% year-on-year.
Head of Retail Capital Markets at Colliers International, James Watson, said that some sub-sectors like homewares and food are improving, adding “these are retailers which have always played an important part in the retail warehouse market, and the expansion of value sector is also having more of an influence.”
He goes on to say that occupier demand in many locations has seen some improvements, which has, in turn, led to moments of rental growth for the first time in a few years.
Elsewhere, investment activity is currently experiencing a significant slowdown, which is due to the pending EU referendum.
Mr Watson continued: “While we expect the next four years to be a period of lower retail property returns generally, retail warehousing is expected to be one of the stronger performers during that period as rental growth becomes more widespread.”
The report noted that retail warehousing is facing the same issues as all shopping environments, which is the increased amount of online spending.
James Watson concludes: “The challenge for owners is converting the low vacancy rates into marked rental growth in the face of understandable cautiousness from retailers who are seeing their margins squeezed by online competition.”
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