Will post-pandemic life herald a new era for retail parks?

More investors are looking to out-of-town retail parks as shifting consumer shopping habits bring them back into favour and new types of tenants snap up empty space.

With social distancing measures remaining in place and shoppers still cautious about malls and high street locations, well-performing retail parks that are accessible by car are becoming increasingly popular shopping destinations.

In the UK, British Land has identified out-of-town retail parks as post-pandemic winners, citing e-commerce as a reason for its confidence. The listed property company has invested £49 million (US$68 million) in a retail park in Bedfordshire, while also investing in a unit trust holding another 10 parks.

Brookfield is paying £330 million for a portfolio of seven assets from UK REIT Hammerson as it exits the retail parks sector. Hammerson also recently sold off its Brent South Shopping Park to Barnet Council, as well as finding buyers for its minority interests in Nicetoile and Espace Saint Quentin in France.

“There’s clearly been a long pause for thought among many investors and developers over the past year,” says Mike Bellhouse, head of EMEA Retail Capital Markets at JLL. “But we are now starting to see movement again, just as shoppers return and retailers adapt.”

With stable, less fluctuating rents – and rents in countries such as Germany capped by indexation hurdles - retail parks have long been a stable product for institutions seeking defensive investments, Bellhouse adds. At around 15 percent, rents at European retail warehouse parks average just a fraction of shopping centre rents, according to JLL data.

E-commerce drives new shopping habits

E-commerce’s continued growth is also supporting retail parks as more consumers opt for services like click-and-collect.

“Click-and-collect services are easier to accommodate in retail park units, which are typically larger and more spacious than in city centres,” says Tjard Martinus, head of retail research for JLL EMEA. “There’s minimal impact on existing operations for retailers with those larger floorplates to work off.

Consumers, too, are seeing the benefits. “Shoppers continue to put convenience high up their priority list,” says Martinus. “With retail parks offering a mix of retailers including supermarkets and big name brands, consumers can pick up goods ordered online along with other everyday items more easily and quickly than visiting bigger shopping destinations. As such, retail parks are well-placed to take advantage of the increased momentum e-commerce is enjoying.”