Despite a backdrop of a general slowdown in retail investment transactions in 2017, UK supermarket investment rallied in the first half with a total of £727m of transactions so far, representing a 20% increase year-on-year.
This is according to data from Colliers International, whose Head of Retail Capital Markets, James Watson, commented: “Despite subdued retail investment activity generally, the food store market has recovered a large amount of ground and is proving increasingly popular with investors. Confidence has returned to the sector; retailers are beginning to take new stores again and we expect transactional volumes to be well ahead of last year. The grocery market is proving particularly resilient to the general uncertainty of digital retailing, with the Amazon/Whole Foods tie up being seen as a positive indicator that disruption by online operators is potentially more limited.”
Watson added: “There is still no sign of rental growth outside London, but we are starting to see some signs of stability in the occupational markets. Average lot sizes are lower and institutions in particular are acting with caution and being selective on income and assets. However, we anticipate more institutional activity in H2, with some larger lot sizes changing hands although lack of prime stock will continue to be an issue.
“Recent deals we have transacted have seen a significant depth of interest and pricing closing ahead of quoting terms, all of which point to a decent second half in 2017. Investors are continuing to seek out the stability that long-dated income from sound covenants offers, which is symptomatic of the wider political and economic picture in the UK at present.”