Scotland's retail warehousing is back in flavour with investors, says Savills

28 September 2017

A weight of money is chasing the apparent value in Scotland’s retail warehousing, compared to other asset classes, with £52.6 million transacted to year date and a further £259.4 million under offer,  according to international real estate advisor Savills.

Savills says retail warehousing offers a prime yield spread of 150 basis points (bps) more than pre-GFC peak levels, which offers significant value particularly when compared to industrial assets which have a spread of -35 bps for the same timeframe.  The research shows offices have a current spread of 50 bps to pre-GFC levels and regional hotels at -125 bbp.

The generous spread that exists in retail warehousing suggests room for further compression, which is why, Savills says, the sector is attracting interest from UK institutions and overseas buyers.  Key deals include: Columbia Threadneedle Investments acquiring Gala Water Retail Park in Galashiels from M&G Investments for £10.22 million (NIY 7%) (Savills advising M&G); 90North paying £57 million (NIY 6.21%) for Glasgow’s Great Western Retail Park from KKR; Simon Aurora acquiring Linlithgow Retail Park from Lothbury Investment Management for £9.4m (7.35% NIY); and Henry Boot selling Livingston Retail Park at £7.3m (Savills advising Henry Boot).

Rod Leslie, director in the investment team at Savills Scotland, says: “A widespread desire for industrial investments has seen the market somewhat overlook retail warehousing which is currently trading at c.150 bps cheaper than it was 10 years ago. As a result this spread of yields is attracting investors looking to buy well let assets, in key locations where rents have been re-based. Appetite for such investments has significantly increased in 2017 and we are now seeing assets and increased volume in trade as investors look to snap up retail warehousing at a relative discount while they still can.”

On behalf of Pears Property,  Savills has launched Wellington Circle, a prime retail warehouse investment in Aberdeen where tenants include Ikea, Makro, PureGym and Starbucks. Generating a net income of £1.45 million per annum, offers for the investment are invited in excess of £21.5 million, reflecting a net initial yield of 6.33%.

 

 
 

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Key Contacts

Rod Leslie

Rod Leslie

Director
Investment

Savills Edinburgh

+44 (0) 131 247 3812

 

Nick Penny MRICS

Nick Penny MRICS

Director
UK Investment

Savills Edinburgh

+44 (0) 131 247 3803