Charlie Powter looks at the growing appeal to investors of retail parades and the asset management opportunities they provide.
On the face of it, parades of local shops in secondary locations might not seem attractive investments but they are becoming increasingly attractive to buyers in the auction room.
This is primarily because of the asset management opportunities they offer. Many of these parades which were built in the 1960s and 70s have a relatively large in-town footprint and often have residential accommodation above the shops. This combination of uses can give an opportunity for extension, refurbishment or redevelopment.
A good recent example from our last auction in October was a retail parade in Ware, Hertfordshire. Comprising eight shops and seven residential flats, it sold for £3.05m at a yield of 1.3% – which reflected a consented planning permission for redevelopment to create 32 residential units and seven shops.
The same sale also saw buyers for a retail parade in Liverpool and four adjoining assets on Kennington Lane in London SE11.
Sometimes the attraction of parades is simply to establish a substantial presence in a town centre which can provide income from the outset and may offer future asset management opportunities. In this category, you would probably include the freehold retail parade in St Ives, Cambridgeshire, which we sold in July. Producing annual income of £173,200, it sold for £1.85m at a yield of 8.8%.
Parades are also popular because with investors because they also feel they are not putting ‘all their eggs in a one-tenant basket’, and therefore are diversifying their risk. In fact, the same sort of investors who are keen on retail parades, also tend to look at open-air suburban shopping schemes like the Kingstanding lot that features in our December auction. Located in a busy north Birmingham suburb, the 48,000 sq ft property is what would once have been called a shopping precinct. It is essentially a group of retail parades comprising 23 units and parking for 70 cars on a total site area of two acres, and its occupiers include Domino’s, Farmfoods, Card Factory and YMCA. The asset produces current annual rental income of £200,000 and is being offered with a guide price of £1.5m.
Of course, these investments are not for the passive investor as they will invariably require active management over time. However, they do provide angles for improvement, and it’s also worth factoring in the possible impact of the Government’s £1bn Future Towns fund. This will distribute financial support to 100 towns across the UK from Dudley to Dover and Scarborough to Stockport.
So, it is possible that some of these – often rather tired – retail parades may get a new lease of life through conducive planning attitudes and central Government grants.