Investor Demand for Bricks and Mortar

30th June 2020

Investor Demand for Bricks and Mortar

In KLM’s 30 years’ experience, whether in the downturns of the early 1990’s, 2000’s or post 2008, bricks and mortar have always been seen as a safe haven for investors in times of uncertainty. Whilst a combination of CVAs and the more recent COVID-19 negotiations between landlord and tenant has driven a coach and horses through the traditional investor lease structures and the relationship shared between the landlord and tenant, there are still opportunities in the High Street for which investors are today taking advantage in contrast to the alternatives of interest rates at 0.1% and 5 Y gilts at 0.17%.

Pension funds, property companies and REITS are reeling from the sentiment of investors and the perception of what lies ahead, with many negotiations being played out in the press. But as in previous more cautious markets, it is the private investor, well-funded, quite often with strong local knowledge with an appetite for risk but in the knowledge of underlying residual values for whom the current market offers opportunities.

KLM have been busy over the last 3 months, identifying opportunities and liquidity on behalf of clients with over £80M of deals over lockdown as follows:

Sold Wycombe Retail Park £38.7M

Sold M&S, Berkhamsted £9.1M

Sold Wilko Portfolio £12.1M

Sold Lush, Leeds £2.4M

Sold Boots, Marlow £3.5M

Sold Ann Summers, Brighton £1.9M

Bought Booths, Lytham St Anne’s £9.1M

Bought East St, Chichester £3M

The considerations upon which we have traditionally based retail property values have now all been fully exposed over the last five years. The risks that the retail sector now offers investors may not suit everyone. It does however open opportunities to those with a close, detailed knowledge of the towns, locations and in particular turnovers of the occupational tenant, backed by residual values that present opportunities with vacant possession.

For any retail advice please contact the KLM team.

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