Parklife! There’s plenty of life in retail parks
The internet has transformed our shopping habits. Today, with almost anything deliverable to our doors, convenience is king – writes Calum Bruce of Ediston Property Investment Company
Increasingly, shoppers are demanding an ‘omnichannel’ experience; while they want to order from home or from the office, they often prefer to pick up those orders in store, so that, for example, they can try clothes on before taking them home. And they expect the same convenience in returning goods.
According to property agent Savills, by 2022, when the growth of online shopping is expected to level out, more than 80% of sales will still involve physical stores; but our changing habits mean that many of those stores will not be located in city centres.
‘shoppers are demanding an ‘omnichannel’ experience’
Meanwhile, retailers have to consider not only how best to balance their online and offline businesses, but also the costs of storage, distribution and returns; for shoppers and shop-owners alike, out-of-town retail parks provide a solution.
We’ve all seen the gloomy headlines about high-profile closures on the high street, but it’s important to realise that people aren’t shopping less in the online era.
In fact, they’re shopping more than ever before – they’re just doing it differently. So, while the overall volume of retail sales has been steadily rising, the number of sales made at traditional department stores has been falling fast.
And as sales at high-street stores and shopping centres decline, out-of-town retail parks are emerging as winners.
These retail parks offer retailers a wealth of attractions for owners and tenants alike. Their lease lengths tend to be good, and the flexibility of their units allows for easy upsizing and downsizing as business conditions changes.
As a result, vacancy rates tend to be low, and retail parks are well placed to benefit from the shift to online shopping.
‘they’re shopping more than ever before – they’re just doing it differently’
That’s because retail parks are perfectly placed to provide the joined-up, omnichannel experience that customers want. Out-of-town locations allow commuters to collect or drop off items on their way home, and attractive retail parks with cafés, restaurants and other diversions offer a full ‘experience’ for families at the weekend.
From the retailer’s perspective, both ‘click and collect’ and returns bring customers off the internet and into the stores, where they can be tempted to make additional purchases. Out-of-town locations are ideal for ‘last-mile’ delivery and the storage of goods bought online, so many retailers are taking advantage of retail parks’ strategic locations to maximise the efficiency of their deliveries.
‘out-of-town retail parks are emerging as winners’
It’s this combination of online and offline that makes retail parks such an attractive investment. We foresee a future in which the major chains have fewer stores on the high street and much better out-of-town representation in retail parks.
‘Bricks’ and ‘clicks’ will work together to deliver the consumer’s preferred experience – and retail parks will be pivotal in facilitating that.
Not all retail parks are equal, however; at Ediston, our investment approach is highly selective. We avoid more than 60% of the retail-park subsector because we’re only interested in parks that dominate their local area.
Nor are we interested in ‘over-rented’ properties – where rents are too high and are will be difficult to sustain when leases expire. Instead, we favour parks with affordable rents and the potential for us to improve returns through intensive asset management.
‘Our conviction in the right retail parks is so strong that we intend to build one of our own’
We aim to get under the skin of each property we own so that we can secure and improve the income streams for our investors.
Our conviction in the right retail parks is so strong that we intend to build one of our own at our site in Haddington, outside Edinburgh. We’ve had abundant interest from potential tenants, and we expect most of the units to be let well before construction starts.
Retail isn’t dying – far from it. But it is evolving. We aim to harness that evolution on our investors’ behalf. As e-commerce evolves into omnichannel, we’re confident that the best retail parks have the locations, facilities and flexibility to prosper in the online age.
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Ediston Property Investment Company (‘Ediston’) is a UK-listed Real Estate Investment Trust (REIT) investing in commercial Property throughout the UK www.epic-reit.com
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