Shopping centres are essential focal points in the urban landscape. The main objective is to attract a constant flow of customers. To achieve this, they often opt for a strategic location and focus on a plurality of services. This type of asset attracts both user-operators and investors, with more than 1/3 coming from international sources.
From small neighborhood shops to large stores, mini-markets and restaurants, local businesses offer a variety of assets. For these properties, location is of paramount importance in the evaluation of the walls and the leasehold rights. They arouse keen interest among investors looking for diversification.
The retail park is a group of open-air shops, with a common parking lot giving it a structure similar to that of a small town. Its architecture is constantly evolving, tending towards a modernization that includes the integration of green spaces. They target the same market of users and investors as shopping centers often included in the same portfolio.
Outlet Centers offer unsold items at reduced prices, often at least 30% off. Once located in industrial areas, these centers are increasingly popping up near high-potential tourist sites. This high-yield niche market offers significant growth potential for investors.
Retail Parks...!
The Retail Park is a group of open-air shops, bringing together various commercial units of varying sizes, and having a common parking lot. It is arranged in such a way as to facilitate the circulation of vehicles and customers, thus adopting a structure similar to that of a small town.
Usually located on the outskirts of an urban area, the retail park shares many characteristics with shopping centers, but it is generally larger in scale. Its architecture is constantly evolving, tending towards a modernization that includes the integration of green spaces. In the same way as shopping centers, retail parks must arouse the interest of customers by offering attractive entertainment.
As an asset, their main asset is their attractive prices, thus making them low-cost products. They target the same market of users and investors as shopping centers and are often included in the same portfolios. However, the supply of retail parks is currently more dynamic, reflecting a growing demand for this type of commercial space.
What are the attributes that characterize the “Retail Parks” asset ?
The peripheral retail market is based on an economic model where retailers seek large, easily accessible spaces with maximum visibility to display their entire product range. These locations are often characterized by significantly lower rents than those of shopping centers and central areas of cities.
Traditionally less popular with retailers in city centers and shopping centers, these peripheral areas are attracting increasing interest, particularly for new-generation retail parks. The success of retail parks lies in their moderate occupancy costs and their ability to offer new concepts in line with consumer expectations. The architectural aspect and the quality of the outdoor spaces play a crucial role in the appeal of these shopping centers.
On the other hand, older retail parks, which do not benefit from a particular strategic positioning, are showing signs of aging. Many sites, particularly in the regions, face challenges such as vacancies, transfers of brands to more attractive locations, ageing premises and car parks, as well as the lack of quality outdoor spaces.
What are investors' expectations ?
Investors’ expectations for retail parks have followed a similar evolution to that observed for shopping centres over the last ten years. This asset class, still relatively unknown in the early 2000s and 2010s, with the exception of specialist players such as real estate companies, has gained in popularity. In addition to geographical considerations, investors are now paying increasing attention to key economic indicators revealing the health of a given shopping area.
These indicators include the catchment area, the level of competition, the footfall rate, the overall occupancy rate, the presence of renowned national and international brands, as well as the transformation rate, reflecting the turnover achieved. However, as with shopping centres, in times of crisis, the importance of geographical location remains preponderant, because the question of reconversion becomes crucial
What are the main evaluation criteria for retail parks ?
In Retail Parks, rents are generally indexed to the Commercial Rent Index (CRI), a key indicator of the commercial real estate market. After a period of decline in 2016, we are currently seeing an upward trend, which is favorable to improving returns for investors.
However, even with this positive development, the location and attractiveness of Retail Parks remain fundamental criteria for assessing their value. Indeed, these factors continue to significantly influence tenant demand and footfall, which directly impacts the profitability of investments in this sector.
To assess a retail park, the methods used are mainly discounted cash flow (DCF) and capitalization. These methods take into account the differences between actual rents and calculated market rental values (MRVs), by applying a specific analysis to vacant premises. In addition, the analysis includes the study of portfolio premiums and the sensitivity of financial indicators such as the rate of return, the discount rate and the occupancy rate.
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- See also !
Shops...!
Shopping centers
Shopping centers are focal points in the urban landscape. The main aim is to attract a constant flow of customers...
Local shops
From local shops to superstores, location plays a vital role in the valuation of premises and leasehold rights...
Outlet Centers
More numerous, close to tourist sites, they offer growth potential for investors...
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