LaSalle Investment Management ("LaSalle"), the global real estate investment manager with US $37.5 bln. in funds under management, is leading a countercyclical investment in the UK out-of-town retail market. The company has invested heavily in the sector, based on its analysis that retail should out-perform the overall market over the next five years.
LaSalle has acquired 29% of all out-of-town retail acquisitions made over the last 12 months including Borehamwood Shopping Park, Silverlink Retail Park in Newcastle and The Eastgate Centre in Bristol. It believes retail assets in stronger towns and those let with good covenants, will significantly out-perform the market in the medium-term. Good quality warehouses will attract retailers seeking well-configured space in desirable locations and on a more affordable basis than the high street. However, LaSalle warns that tenant covenants need to be examined closely.
Alan Tripp, Managing Director of UK Business, LaSalle Investment Management said, "Our strategy to invest heavily in the retail sector has already been vindicated with yields improving substantially since the start of the year a trend we expect to continue with the weight of money wishing to come back into the sector. Indeed, since October last year we have bought £660 million worth of retail assets overall and sold £140 million.
"The investment market at the end of 2008 and into early 2009 was characterized by a range of distressed sellers, with open-ended funds, in particular, seeking to meet redemptions. We were able to take advantage of vendors who had liquidity problems and to pick out the stock we wanted. They dealt with us because we were equity buyers and they knew we would perform.
"We have bought in parks ranked by their tenants in the mid to upper quartile in terms of the profitability of their national store portfolios. Where we have taken on vacant premises, we have already successfully let the units. This is down to us having sector specialists in our retail asset management team, who liaise regularly with the operators across our parks, and who confirm our stock picking selections."
Tim Vallance, Head of Out-of-Town Retail, Jones Lang LaSalle said, "LaSalle Investment Management's purchase of Airport Retail Park in Southend-on-Sea in September was the latest in a remarkable countercyclical run on the out of town retail market. Following the collapse of Lehman Brothers in September 2008, values in the retail warehouse market collapsed faster than most other markets, but fund managers at LaSalle Investment Management saw this as an opportunity to make specific stock selections, buying prime parks, such as Borehamwood Shopping Park, Silverlink Retail Park in Newcastle and The Eastgate Centre in Bristol at discount yields.
"Over the course of 12 months funds managed by LaSalle Investment have cornered 29% of the market, spending just over £360 million. During the same period, prime yields have strengthened by as much as 200 basis points and the value of the assets bought has grown exponentially."
Source: Citigate Dewe Rogerson