Retail Warehousing Depth of Demand Coming Through

Looking back, it’s even clearer that Homebase’s fall into administration in November last year was the moment that released the pressure valve on large units in the retail warehouse sector.

• Sainsbury’s took 10 sites in a significant £100 million investment move before the administration was finalised, unconditional on planning;
• The Range acquired a portfolio of approximately 70 stores;
• Wickes has taken four stores, in Dunfermline, Northampton, Bury St Edmunds and Leeds Moor Allerton. Montagu Evans advised the landlords (KFIM and CTI) on the latter two;
• M&S, B&Q, B&M, Aldi and Home Bargains have also been active in acquiring former Homebase units.

This amplified a trend we saw in Q3 last year when the collapse of Carpetright released over 200 stores to the market, many of which have been re-let at rents better than those being paid previously.

Operators, having seen a dearth of out-of-town development and limited pipeline of supply for so long, have been quick to react and capitalise on the opportunity. From our perspective, there has never been a greater demand for large out-of-town retail units.

Landlords are increasingly active in response, with the Homebase administration continuing to free up additional options on parks, helping tenants to expand and moving others around to accommodate.

As a result, the combination of restricted supply and increased demand is driving rental growth in certain conditions, particularly in locations with strong consumer footfalls and diversified retail mixes.

Looking further ahead, there remains appetite and opportunity to add further value. Foodstore operators, including Aldi, Sainsbury’s and M&S, are taking existing out-of-town stores to bypass planning challenges and development delays and to secure faster portfolio growth.

Our planning colleagues are actively engaged in facilitating changes of use, particularly for supermarket and discount retailers. We have also encouraged our landlord clients to look carefully at their existing planning consents, where unexpected opportunities for change of use and other asset management plays may be found.

As a result, we are seeing many more opportunities to deliver improved retail accommodation to satisfy operators’ expansion plans and increase value for investors in locations where customers want to shop.