BNP Paribas: ‘Prime retail stock polarised from secondary markets’

Whilst prime retail rents are on the increase, secondary stock rates will continue to fall, according to a recent report released by real estate fund BNP Paribas.

The report bases its prediction on recent UK retail property transactions, speculating the polarisation between the two property markets will continue to grow as financiers target niche super-prime retail assets to the detriment of the secondary market.

There is also likely to be a large depreciation on tertiary (third-rate) properties in secondary towns, even though there is no shortage of funding available from investors.

The impact of technology on the retail sector has affected the physical floor space requirements of merchants, with the boom in online sales driving what some people see as the end of high-street shopping.

The retail requirements of store sizes are changing, with recent property acquisitions trending towards larger stores, causing an oversupply of smaller units below 2,000sq ft.

Large e-commerce businesses are expected to downsize their store portfolios, meaning vacancy rates are expected to rise. The report says it is likely that rents in northern towns and cities will decline as a result of this.

The report identifies properties with a ‘critical mass’ of over 500,000 sq ft of retail space in southern eastern towns, as the main benefactor of the niche market interest, with major cities continuing to attract national companies.

Rates in central London are forecast to rise, with continual overseas investment fuelling strong growth in the cities retail and commercial property markets.