Investors continue to bid for all sectors despite tough market conditions. The trend for looking at alternatives to pure retail is now well-established, but there is still good demand for well-let, well-located retail investments. Acuitus chairman Richard Auterac looks at some examples of what has been selling in the room this year.
Location: Sheffield
Sold for: £3.275m
Net initial yield: 5.2%
What’s the attraction?
This is let to Aldi (see main picture, above). Many investors consider the discount supermarket to be one of the most successful retailers. Their locations tend to be in lower-rented areas.
Location: West Wickham
Sold for: £821,000
Net initial yield: 5.4%
What’s the attraction?
Bank let to HSBC with a termination in 2023. Banks remain popular providing the investor believes the bank cannot afford to lose its representation in the town or where the alternative use, such as residential, is higher than investment value.
Location: Kilburn, NW6
Sold for: £1.91m
Net initial yield: 4.68%
Why so popular?
A shop and uppers with the perennial attraction of London. There is a huge buyer base, and not enough stock. This property was coming onto the market for the first time in more than 100 years. It comprises a shop and basesment, plus three floors above which are not currently being used.
Location: Cambridge
Sold for: £1.415m
Net initial yield: 5.2%
What’s the draw?
This is let to Tesco. Convenience stores are still popular, especially when they are the principal store serving the local community. Putting it in one of the UK’s hotspots makes it even more popular. There is still good demand for well-let, well-located retail investments.
Location: Melton Mowbray
Sold for: £1.4m
Net initial yield: 4.3%
Why such high demand?
Let to Travis Perkins. Trade counters are popular as the rents are lower than pure retail properties and closer to warehouse rents. Investors are looking at these assets as a kind of ‘proxy shop’, which – because they are essentially warehouses with a retail kicker – means that their value is underpinned by the kind of long-term potential that is currently fuelling the logistics and fulfilment centre market. They are a clever two-way bet by investors.
Location: Worthing
Sold for: £1.445m
Net initial yield: 7.5%
What’s the appeal?
Unbroken parades of shops and flats have always excited auction buyers. Local tenants usually pay their rent and there is always something to do to add value.
Location: Braintree
Sold for: £1.115m
Net initial yield: 5.0%
Why so popular?
Let to Kwik Fit. These are popular as an alternative to the high street. People always need to have their cars repaired. Historically, the operators have taken long leases with RPI uplifts. Can be large roadside sites suitable for alternative development.
Location: Leamington Spa
Sold for: £1m
Net initial yield: 6.5%
What’s the attraction?
Drive-throughs like this Costa Coffee have been very popular. Investors like the operators because they are well-known brands with good business models. The buildings tend to be new and well located and the leases tend to be new and to be for an attractively long time. This one is next to a Morrisons supermarket and petrol station.
This article appears in the November edition of EG’s Property Auction Buyers’ Guide, out on 24 November
