With housing and Industrial property sectors seemingly holding strong throughout the last 12 months, retail investors may feel hard done by. The sector has felt the force of government enforced lockdowns more than any other, with top brands such as Debenhams and the Arcadia group, which housed brands like Top Shop and Miss Selfridges, all closing doors for good.
Then, just this week, Hammerson which owns stakes in several high profile sites including Dundrum Town Centre, the Pavilions shopping centre in Swords, the Ilac Centre in Dublin city centre and the Kildare Village mall, have announced a cut of €2.3bn in the valuation of its properties. This is mainly due to a reduction in rental income of 30% for the year.
Investment Opportunities
As a current retail property owner, the last 12 months and indeed possibly the next 12 look to be uncertain times. However, as an investor looking to expand their portfolio, now may certainly be the time to invest. But be prepared to be in it for the long haul. You may snap up a great bargain or 5 in the next few months, but most in the industry are expecting prime rents to be between 10% and 20% below the rental values of 12 months ago when figures for the year are released.
One would hope that with vaccination programmes around the world picking up pace – despite the latest Astrazeneca fiasco – that we can see light at the end of the tunnel finally and rentals are sure to return to their former glory. But as to when, that’s anyone’s guess at this stage. Some certainty from government would be a great help to many of us but we are unlikely to get that any time soon.
Threat of Ecommerce
Ecommerce isn’t going anywhere and it certainly isn’t getting smaller. But it has been there for years and although the last 12 months have forced many retailers and their customers online, from a personal point of view, I can’t see that replacing the high street any time soon. When given the choice, the experience of being in the store and physically touching the product you want is irreplaceable.
Much like the work-from-home movement which saw most of us who were lucky enough to avail of the option only happy to stay home every day, has now started to shift, to where people actually – and unsurprisingly – miss the social interaction of the office. For god’s sake, I’m even starting to miss the commute!
The same I feel will happen with retail, in that as soon as it is permitted people will flock to their favourite stores again. Provided we can stay out of these repressive lockdowns we should see a sharp and relatively speedy recovery in rental yields for the sector. I suppose it’s just a question of who owns what by that stage.
As always if you need any advice or help with your property portfolio, please don’t hesitate to contact us here at KPM Group and we’ll be happy to help in any way we can.
