Is there money in retail property assets?

The last few years have seen a massive increase in the number of retail purchases carried out online. There are few areas of the business arena that the Internet has shaken as much as the retail sector with concerns about high street shopping and local communities. This has led to a significant revaluation of retail assets although a recent deal to sell an Eastbourne shopping centre would seem to suggest that retail assets are still a consideration for investors.

Eastbourne shopping centre

The Eastbourne shopping centre in question was owned by Schroders Columbus Fund and London and Associated Properties. Having been acquired for around £16 million in an off-market deal in 2011 it has since been sold on for £19 million. The shopping centre boasts 130,000 ft² has 31 units and an 11 acre site which has been earmarked for expansion. While no more financials have been released with regards to rental income it is interesting to see renewed interest in shopping centres across the UK.

UK retail market

While there are serious concerns about the make-up of the UK high street in years to come it seems as though shopping centres are still performing satisfactorily. It is the ability to bring together an array of well-known retail brands under one roof which seems to attract the masses although whether the new owners of the Eastbourne shopping centre will be able to increase rents remains to be seen. Even though the Internet has taken a significant chunk of UK retail business in recent years there will always be a core number of shoppers who prefer traditional retail trips.

UK economy

When you bear in mind that 2011 was close to the depths of the UK recession in light of the 2008 worldwide economic crash, a paper profit of £3 million would seem to be acceptable (although we have no idea how much was invested after the initial acquisition). There will come a point when the value of retail assets falls enough to tip the risk/reward ratio in favour of acquiring retail assets because of their rental yield. Cash flow is king in any investment market but especially important in the real estate sector.

Even though the UK economy has performed admirably in light of the 2008 recession, one of the strongest in the G8, there are still many challenges ahead. It will be interesting to see how the value of retail assets changes in the years ahead and indeed whether landlords will eventually be able to push through significant rental upgrades.

Real estate trends

There is no doubt that the retail real estate trend at the moment is away from the high street and back toward shopping centres. While many are concerned this could rip the heart out of many local communities it seems that shoppers are more interested in online sales and shopping centres which offer top brand names under one roof. It will be interesting to see whether we have an oversold position in the UK retail property market which could prompt plenty of action in the short to medium term?

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