Online retailing is an established yet growing industry and the
property sector has had to adapt to these changes.
the increase in online retailing 2016 saw a significant rise in demand for
what are known as 'big boxes' - recognised by the average person as the huge
storage sheds built close to the UK's motorway network for retailers' stock
to be held. Approximately an extra 15 million square feet of extra space
was taken up by these 'big boxes' during 2016.
“Retail changes have made investors think
differently, and assess their investment choices”
Retail changes have made investors think
differently, and assess their investment choices. Typically attracted to the
glamorous investments of the high street, they have had to face the reality of
our changing approach to retailing and therefore will look elsewhere to
invest. They have shifted their investment area, choosing to focus on a long
term method of investing in real estate.
Indeed, developers are
finding it hard to keep pace with demand and, as a result, rents have
increased considerably, with developments in the Midlands around the M1 and
M6 motorway networks benefiting most. Currently only about 20% of retail
sales occur online, with food retailing experiencing lower figures. However,
advocates of these developments feel that the market is still in its
formative stages, and that it has plenty of growth left in this phase of the
“Advocates of these developments
feel that the market is still in its formative stages, and that it has
plenty of growth left”
The sector is largely
dominated by major institutional investors whilst private investors will
invest either via developers such as SEGRO, or through funds run by the
major institutions like LGIM and Standard Life.
However there is a
downside - the inflexibility of the product. The pure scale of these
products means that if the storage sheds don't match what the
ever-shifting retailer might want, or the development is put in the wrong
place, then they will be redundant. However, one thing that developers
can be sure of is that any major retail tenants will be vying for the
sheds in and around the M1, M4, M5, M6 and M62, as well as on the A1.
Location is of paramount importance.
“Planners also have a
significant challenge - how to disguise the sheds so that the motorway
network does not become a blot on the landscape”
The planners also have a significant challenge -
how to disguise the sheds so that the motorway network does not become
a blot on the landscape. These 'big boxes' are, as the names suggests,
large unsightly buildings, that score zero points for looks and
environmental contribution. However, investors believe that they can boost
capital value and ensure that returns continue to be strong.
“The demand is typically for strong development,
construction and project management staff”
how does this affect recruitment? PSD has been involved with a number of
developers and investors who are active in the sector. The demand is
typically for strong development, construction and project management staff.
On the investment side, asset managers, analysts and transaction
specialists are in demand. We have also seen private equity businesses get
involved in the sector, as they continue to look at options not just in
the UK, but also in Mainland Europe.