The marked increase in activity experienced earlier this year has begun to plateau in many cases, but the position is far more positive than this time last year.
There is growing caution from several retailers who, despite encouraging store acquisition targets and reasonably buoyant trading, are still choosing not to compete with rival offers or to pay premium rents because of the government’s austerity measures, a perceived squeeze on disposable incomes, limited availability of credit and job security.
Yet there are reasons to be optimistic.
On the better retail parks and stronger locations there has been a reduction in landlords’ incentives. This had led to improved net effective rents.
Among the new entrants to the retail warehouse market are Wren Kitchens. It has opened 19 stores and HomeSense, the TK Maxx homewares fascia, has committed itself to 25 stores and wants 10 to 15 more over the next 12 months. It has 75 target locations.
The established contenders that want to expand include John Lewis, Next Home and Liverpool-based Home Bargains, which has opened between 20 and 30 stores this year – no mean feat, because it sells branded food items and needs a planning consent that allows it to sell 30% food – and now wants to expand into the south of England Two other value retailers, Dunelm and the Range, are also acquiring stores. Dunelm is expanding by between 10 and 15 stores a year and the Range is trying to open in larger UK catchments and has six deals in lawyers’ hands at present.
Go Outdoors has opened six stores in the last year, to give it a chain of 23 camping and outdoor shops.
It hopes to open another six in the next 12 months.
The electrical sector is active, too, as traditional brands such as Currys, PC World and Comet combat the threat of Best Buy.
Acquisitions by these and other retailers mean that voids have reduced on better schemes in the last six months. Vacant space on weaker locations are likely to remain available for some time and may even revert to alternative higher-value use.
We are seeing the first signs of the development pipeline returning, because of improved yield profile over the past year and more stable retailer demand.
Nick Howe, Property Week (October 2010)