Retail warehousing in Europe is expected to be an outperformer in 2010 versus other core market sectors, according to the latest 'Think' report published by Henderson Property Investors.
Retail warehousing in Europe is expected to be an outperformer in 2010 versus other core market sectors, according to the latest 'Think' report published by Henderson Property Investors.
Angela Keane, senior research analyst at Henderson said: 'European retail warehousing should satisfy bargain hunters looking for short-term ''cyclical style'' appreciation, as well as those seeking longer term stability of performance.'
'For investors that fear they have missed the boat in the UK, or in other core sectors, there is still a cyclical recovery story for those who can access good quality retail warehousing today. This is, however, not just a recovery play - this is a product for investors looking for defensive, long term performance. Once the current economic crisis is truly behind us, this sector should continue its journey up the maturity curve, becoming more attractive to retailers and investors, supporting rental growth and lowering equilibrium yields respectively,' Keane said.
The 'Think' report outlines a number of positive factors at play in the retail warehousing sector in Europe. For example, medium-term rental growth looks attractive, with forecasted rents returning to pre-recession levels and supply scarce in several areas while demand continues to grow. Covenant qualities are generally high, Henderson said, and as a consequence of the recession, better retailers are capturing a larger market share.
In addition, the sector is expected to prove increasingly attractive to both shoppers and retailers and early signs suggest retail sales are steadily improving. 'Overall the sector is expected to offer lower than average volatility to performance over the medium to long term,' according to the report.
Negative factors are that the concept is still relatively immature and suffered a sharp outward yield correction early in the downturn. The report adds that the sector has so far been throughout the initial stages of recovery, and its occupier base is more susceptible to risk than in more mature markets. Lastly, restrictive planning legislation may curtail future development, Henderson said.