Why retailers like retail parks – and so should you as an investor
The last two years have taught us many things, among them the popularity of retail parks. Why are they so popular with customers and, therefore, with retailers and investors? Let’s take a closer look.
When the Covid-19 pandemic forced shopping centres to close in order to help prevent the spread of the novel coronavirus, operations at retail parks fared much better because many retailers were able to continue trading either fully or partly from their retail park shop unit.
The typical outdoor / open design layout of retail parks, with direct shop front access, helped to limit the risk of close contact between shoppers and staff manning the stores, making it easier to implement social-distancing rules.
Better access for customers
Spacious parking, good locations and the ideal layout make retail parks attractive for customers. If they need anything specific, they can comfortably drive to the selected shop, park a few steps in front of it, and enter separately from other customers. This makes retail parks more desirable for people who are seeking convenience and prefer not to drive to a shopping mall with multi-level parking, or those who simply don’t want to spend time finding the correct shop among dozens of others.
Click & collect
With e-commerce on the (continuous) rise, the spacious nature of the shops within retail parks provides strong synergies with online shopping – whether it is a click & collect shop or the possibility of servicing customers via omnichannel retailing. Retailers are benefiting from how retail parks are easily adaptable to this type of shopping experience.
Lower and stable rental costs
Compared to high street retail units or shopping centres, occupational costs (rent and service charges) in retail parks are significantly lower. The rental rates also tend to fluctuate less and, therefore, are considered more predictable and stable Thanks to this and the other trends mentioned above, retail parks are becoming more popular with big brand retailers, developers and investors.
Investment in retail parks
Given the shifts in shopping habits, despite some of these being the result of unexpected public health issues, it is no surprise that more investors are directing their attention to retail parks.
Over the last year we have seen the likes of Immofinanz, Patria and Generali all purchase retail parks in the Czech Republic. Prime yields for retail parks stand around 5.75% in the Czech Republic and 6.5% in Slovakia.
Given the CEE region currently represents about 11.5% of total European retail park stock, it leads us to believe there is room for further growth for this type of shopping format. It will also be interesting to see how retailer demand for this shopping format shapes future supply, given the rise of online sales and the fact retail parks lend themselves well towards omnichannel and click & collect shopping.