Retail Parks: Addressing the evolving consumer needs
Nowadays, consumers are gravitating towards destinations where they can shop in large open-air facilities with broad product offering and access to free parking space. Retail Parks are becoming increasingly demanded among consumers and investors. Although footfall and sales naturally declined as a result of Covid-19 (which badly hit the retail sector), Retail Parks suffered to a much lesser degree in comparison to the distress experienced by shopping centres. This probably explains why, for the first time in Europe, yields for Retail Parks stand at the same level as the average for shopping centres, both within the 5.0% to 5.50% range. Retail Parks are no longer viewed as a risky investment, but rather the opposite.
The Retail Park segment registered c. €300 million of investment FY20, (+120 % vs.2019) with investment funds acting as main players, representing c. 70% of total transaction volume. In 2021 things evolved, when Real Estate firms and private investors took their share of the cake adding up to 55% of transaction volume (with 55% and 10% respectively). Throughout Europe, c.€6.0 Bn were invested in nine European countries in FY21.
75 retail parks are currently operating in Spain, representing a gross lettable area (GLA) of c.2 million square metres (sq.m.). The largest retail parks in Spain in terms of size are “Megapark Barakaldo” (Vizcaya, c. 130,000 sq.m.), “Luz Shopping” (Cádiz, c. 125,000 sq.m.) and “Megapark San Sebastián de los Reyes” (Madrid, c. 110,000 sq.m.).
The average ‘prime’ rent for Retail Park space in Madrid has held steady around €13 per sqm/month, compared with €50 per sqm/month for shopping centres. These figures shows there is still plenty of room to push up rent prices which will further enhance investor appetite.
Retail parks will remain relevant, as long as they address the evolving consumer needs. These consist mainly of free parking, easy access, value and convenience which can be complemented with F&B and entertainment offerings so that customers can spend the day.
From CG Capital Europe, we also expect retail parks to become a host of last-mile logistic assets, especially in the case of large-park units with comparatively low rents and good transport accessibility. Retail parks are optimal for servicing click-and-collect orders, customer returns and home deliveries and because of this many multinational companies are exploring expansion plans within the segment.