BCSC: Retail Property: Where to find investment performance? (UK)

At the BCSC conference in Manchester, which took place September 19 -21, Henderson Global Investors hosted a panel entitled 'Retail Property: Where to find investment performance?'

BCSC panel_Sept 2011

FLTR: Andrew Rich, Mark Faithful, Charlie Barke, Angela Keane, Greg Mansell.

The panel was chaired by Andrew Rich, Retail Fund Manager for Henderson Property, who was joined by Angela Keane, Associate Director of Research for Henderson Property; Charlie Barke, Partner & Head of Town Center Retail Investment at Cushman & Wakefield; Greg Mansell, Research Manager at IPD; and Mark Faithfull, Editor of Retail Property Analyst.

This session focused on where investors can best find optimal performance within the shopping center market, analyzing current trends and demand with a forecast of opportunities for future growth.

Angela Keane discussed Henderson's work with IPD to disaggregate the UK retail market to reflect different performance characteristics of differing Shopping Center types. The panel coincided with the launch of Henderson's 'Think' research paper on retail typologies which can be found attached.

"At Henderson, we forecast that prime retail centers will continue to outperform. However, towards the end of 2014, we expect to witness a recovery within selective secondary assets."

Angela pointed out that asset selection remains critical with a comprehensive analysis of any secondary asset being essential in order to determine the right opportunity. She listed a number of factors to be considered which include both the physical attributes of the center, as well as its catchment area, taking into account factors such as local supply and demand levels, and ultimate rental efficiency, determined by factors such as lease length and covenant strength.

On behalf of Cushman & Wakefield, Charlie Barke investigated where current investor demand is focused. Charlie commented: "We are certainly witnessing the strongest investment demand at the prime end of the market, led largely by overseas investors and UK institutions. Having said that, transactions levels, once the £1.6 billion Trafford deal is stripped out of the data, remain fairly modest and a significant way off 2007 levels.

"Good secondary assets should not be discounted. These assets offer a relatively high income return, a diverse income profile, opportunities to add value through active management and also perhaps the potential for rental and yield recovery. With careful stock selection, these well-chosen secondary assets could be the ones to outperform in the medium term. In line with these forecasts, secondary market transaction has indeed experienced a recent increase of late. We expect this to remain steady throughout the remainder of the year."

Greg Mansell explored the conflict that a landlord faces in balancing consumer appeal with secure income, pointing out that in order to achieve the ultimate tenant mix, compromise might need to be taken on rental packages.

Meanwhile, Mark Faithful assessed the changing retail market and how this will play into future demand. He contributed an analysis of occupatio

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