2024-09-10-莱坊-Retail_Warehousing_Dashboard_Q2_2024_2页_868kb

Retail Warehouse Dashboard Summary - Q2 2024

Core Content Overview

This summary presents a concise quarterly synopsis of activity in the UK retail warehousing market for Q2 2024, highlighting key trends, investment volumes, yield changes, and occupier performance.

Key Takeaways

• Global Sentiment: The RICS' Commercial Property Sentiment Index remained broadly unchanged from Q1 at -11pts. The Investment Index showed a marginal improvement, rising from -13pts to -11pts.
• Investment Volumes: Q2 investment volumes totaled £356m, bringing the H1 2024 total to £620m. This is -38% below H1 2023 and -54% below the 10-year average.
• Buyer Breakdown: Institutions and PropCos accounted for 81.1% of purchases, totaling £289m. This indicates strong institutional interest in the sector.
• Yield Changes: Prime yields in Open A1 and Bulky Goods Parks tightened by -25bps to 5.75%. Secondary Open A1 and Secondary Bulky Goods also improved by -25bps to 7.50%.
• Capital & Rental Growth: Capital values rose by +1.4% quarter-on-quarter, while rental values increased by +0.4%.
• Vacancy Rates: Unit vacancy rates improved for the 11th consecutive quarter, decreasing by -40bps to 7.1%. This is approximately -1.2 percentage points lower than pre-pandemic levels.
• Retail Sales: Sales were mixed due to poor weather, with no clear trend between bulky goods and discretionary/essential purchases. Notable performance: Garden Centre & Pets (+4.7% value / +5.4% volume), Carpets (+3.7% / +3.5%), while Food (-0.1% / -2.5%), DIY (-0.5% / 0.0%), Electricals (-3.5% / +1.4%), and Furniture (-12.7% / -11.2%) saw declines.
• Occupier Diversity: The sector is increasingly diversified, with fashion, convenience, discount, and F&B retailing playing a significant role. This contrasts with the previous dominance of bulky-goods and DIY operators.
• Rental Growth: RWH rents grew for a sixth consecutive quarter, with forecasts indicating +1.3% growth for 2024, up from the initial +1.0% prediction.

Key Deals (YTD)

Market Outlook

• The retail warehousing market is still attracting significant capital, with projected total returns of 8.8% p.a. over the next five years.
• A shortage of sellers is limiting transaction volumes and increasing competition among buyers.
• Mid-market activity is driving much of the current transaction volume, with Realty Income, British Land, and Columbia Threadneedle as key players.
• Institutional investors are focusing on core assets in London and the South-East.
• The recent demise of Carpetright highlights the fragility of the occupational market, but its impact is expected to be quickly absorbed by other tenants, supporting further rental growth.

Contact Information

• Dominic Walton
  Partner, Capital Markets
  +442078611591
  dominic.walton@knightfrank.com

• Daniel Serfontein
  Partner, Capital Markets
  +442036407037
  daniel.serfontein@knightfrank.com

• Volkan Denli
  Surveyor, Capital Markets
  +44 20 7861 1051
  volkan.denli@knightfrank.com

• Freddie MacColl
  Partner, Capital Markets
  +44 2039 677 133
  freddie.maccoll@knightfrank.com

• Josh Roberts
  Senior Surveyor, Cap Mkts
  +442081878694
  josh.roberts@knightfrank.com

• Stephen Springham
  Partner, Head of Retail Research
  +44 20 7861 1236
  stephen.springham@knightfrank.com

• Emma Barnstable
  Associate, Commercial Research
  +442081061385
  emma.barnstable@knightfrank.com

Additional Insights

• Footfall Trends: Monthly YoY footfall changes are available, with data from March 2021 to March 2023 compared to 2019 levels.
• Top Performing Categories: Quarterly sales YoY changes are provided by ONS, indicating which categories are performing best.
• Interest Rate Impact: The first interest rate cut is expected to ease pressure on RWH investment markets.

Conclusion

The UK retail warehousing market in Q2 2024 shows resilience and continued investor interest, despite lower transaction volumes and yield pressures. The sector is evolving with a more diverse occupier base, which is helping to stabilize rental growth and capital values. However, challenges remain, particularly in the occupational market, as evidenced by the impact of the Carpetright closure. The market is poised for further growth, supported by the potential easing of interest rate pressures.