Northern Retail Market

Sally Beech
Senior Associate, Commercial Valuation

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Retail, Retail, Retail..

The retail market has always been the sector that was approached with caution by investors and banks, even before the pandemic, and we can see some of the reasons why.

The sector’s issues started well before the pandemic with the growth of e-commerce, rising business rates liabilities for most and even the 2017 and 2021 revaluation didn’t bring the desired stress release on the purse strings of most of retailers which have been a big disappointment. 

The pandemic and the resultant forced closures caused a hammer blow to those businesses who were not deemed as being ‘essential’ retailers and inevitably, it led to a number of high-profile business collapses. It was estimated that nearly 110,000 employees lost their jobs in the retail sector in 2020 alone. Even after the lockdowns, the damage had been done and it led to further falls from grace for even the most established names (Wilko, Debenhams, Topshop) which effectively decimated a large number of schemes that have been traditional anchored by some of these brands. 

In today’s market, the main high street locations from an investor’s perspective offers a mixed picture. Lease terms have become more flexible, rents rebased, and no tenant is now ‘bullet proof’, although the biggest issue for the high street is the prospect of re-letting even for the most prime units which has led to outward pricing and lack of appetite from across the investment market.

Neighbourhood / Convenience Retail

We are still seeing from investor appetite for convenience / service led retail assets and can often be preferred over the traditional prime high street investment. 

In such schemes, where the most likely tenant would be ’Joe Blogs Limited’ who offer relatively limited covenant strength and future security of income. BUT the rent is affordable and the prospect of getting a new tenant within a short period of time is high. These are the kind of attributes that are attracting a wide variety of the investors, especially in the smaller private / property company sector. 

At Allsop, this is a particular market are well versed in through our auction teams which provides us an excellent cache of market evidence and insight. Within the wider valuation team, we have valued countless neighbourhood parades up and down the country, and we continue to see rents gradually increasing at each review or renewal, may only be £500 - £1,000 per unit, but spread that across a larger parade and the impact on the rental income and subsequently capital value can be significant. 

The asset management opportunities for those investors who are able to spend the time and carry out these initiatives, makes these types of assets attractive as they can often be acquired at appropriate discounts with the prospect to add value in the short to medium term but they are not for the faint hearted.

Out of Town Winners

Another winner from the pandemic turmoil is the retail warehousing market. When people were looking to avoid others on busy highstreets, the out-of-town retail parks offered the perfect remedy in providing a range of complimenting retailers, leisure and food & beverage. All under one roof, with the ability to park, shop and leave. 

In a time where rental growth has been sparse, retail warehousing has been one of the retail sectors where growth has been the primary driver of the investor demand. Out of town retail parks happens to be another sector that Allsop are well versed in, having been active in the transactional markets and providing annual valuations for two major UK based retail funds.

Due to the lot sizes on retail parks, we’re actively seeing large propco’s, institutional funds and foreign investors seizing the opportunity to get back involved within the sector and there has been a definite inward yield movement on the better positioned and trading schemes.  

Park owners have to be on the lookout for value-add opportunities to improve income and marketability so they are increasingly look to improve commercialisation of schemes by adapting parking areas to create drive thru pods and the installation of postal lockers and EV charging bays to further complement the parks’ offering and create more of a destination for customers to increase dwell time. 

As a brief overview, we outline our opinion of prime yields within the retail sector:

About Sally

Sally deals with commercial valuations for loan security, sale/purchase reports, year-end accounts and annual portfolio purposes. 

She has extensive coverage of dealing with property across the North of England including Yorkshire and Humberside, the North West, North East, North Wales and the Midlands and has over 35-years of experience.

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