The property group British Land is looking to acquire more out-of-town retail parks, as it expects consumers will still want to shop at open-air locations that are accessible by car even after pandemic lockdown measures are eased.
The company, which owns shopping malls including Meadowhall in Sheffield and Drake Circus in Plymouth, also intends to buy more warehouses, to rent to retailers trying to service the booming demand for online shopping.
The group said its retail parks were “well connected and affordable to retailers” and facilitated click and collect, returns and shipping direct from store. “We have seen this trend accelerate, as rates of online shopping have increased, with shoppers more confident visiting open-air locations they can access by car and where social distancing can be more easily managed,” it said in a trading update.
British Land expects to submit planning applications for two new rental warehouse sites, at Meadowhall and Teesside, spanning more than 1m sq ft (93,000 sq metres).
The commercial property company, which owns a portfolio worth £10.3bn, is also looking for warehouses inside the M25, close to London, which it believes it will be able to rent out to retailers trying to fulfil growing customer requests for same-day delivery.
British Land has exchanged contracts for the purchase of a site in Enfield that is currently fully let to tenants, including the supermarket Waitrose.
The company said it had received 82% of rents due over the last 12 months, including 99% of office rents and 70% of retail rents. It reported it had received 76% of the rent due at the end of March within 11 days of the end of the quarter.
British Land, which slashed the value of its portfolio by almost £1bn in 2020 after the pandemic led to a sharp fall in the value of its retail assets, said it expected market rents for covered shopping centres to take longer to stabilise than at retail parks, due to higher occupancy costs and lower visitor numbers during the coronavirus pandemic.
After the reopening of non-essential retail in England and Wales on 12 April, 79% of stores in British Land’s properties are trading again. The company expects this to increase when remaining non-essential stores reopen in Scotland, and if the roadmap out of lockdown proceeds as planned.
The company does not yet know whether the pandemic will have a lasting impact on consumer habits and its strategy, said William Ryder, an equity analyst at the investment firm Hargreaves Lansdown. “It’s not yet clear that physical retail will ever fully recover, or that everyone will return to the office,” Ryder said. “The next few quarters will be crucial, as that’s when we’ll find out just how many of our lockdown habits become permanent.”