The retail parks industry was hit hard by the dramatic shift to home delivery and other ways of shopping when the pandemic struck. Valuations have drawn some investors back in, however.
An Asia-based family office and real estate group are backing a strategy tapping into the UK retail parks sector that is seen as oversold and due to recover post-pandemic.
Savills Investment Management, the international real estate investment manager, has launched the strategy, aiming to raise $360 million (around $500 million). Straits Real Estate, the real estate investment subsidiary of The Straits Trading Company, and The Land Managers, the property investment arm of the JL Family Office, are cornerstone investors in the fund.
STC is a Singapore-based conglomerate-investment company with diversified stakes in resources, property and hospitality. JLFO manages the private investments of Asia Pacific real estate veteran John Lim.
The fund will be managed by Harry de Ferry Foster, head of UK at Savills Investment Management, who also manages the Charities Property Fund, supported by director Danny Al Dilmi and team.
“The UK retail sector has had a torrid time over the last five years, particularly the high street and shopping centre sub sectors. This new fund is targeting assets in a sub sector which has been overlooked and oversold, but has proven its resilience to the headwinds facing the sector,” de Ferry Foster said. “This is a good opportunity to secure assets with a high and secure income yield and we believe it will be very attractive to investors.”
Andy Lim, group CEO of JLFO and founder of TLM, added: "The country [UK] is experiencing a rapid recovery and its growth is set to be the fastest in Europe. By investing in a defensive retail asset class, we hope to capitalise on the pent-up demand from the COVID-19 restrictions over the last couple of years.”
In a report written in May this year, as lockdowns began to ease, Savills said: "Despite a pandemic-driven shift toward e-commerce, the retail warehouse market has demonstrated strong retailer performance and subsequently displays comparatively strong occupational statistics, compared to other parts of the UK retail market."
In July, Knight Frank, the property consultancy and estate agency, said of retail centres: "a number of investors are beginning to capitalise on counter cyclical buying opportunities for shopping centres, with £511 million ($695.2 million) transacted in the period [first half of 2021], and activity expected to increase further as yields stabilise. High street retail accounted for £429 million of capital invested in the period, with buyers focused on unlocking the alternative use potential that exists in some locations, in particular the South East."