Land Securities swoops on Hermes factory outlets

By Kasmira Jefford - Wednesday, March 15, 2017 13:06

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Land Securities has emerged as the frontrunner to buy a major portfolio of factory outlets from Hermes Asset Management, increasing its exposure to one of retail’s most buoyant sectors, CoStar News can reveals.

The FTSE 100 landlord is understood to be under offer to buy the three shopping destinations in Somerset, Braintree and Castleford for around £340m, pipping other interested parties to the post including VIA Outlets and McArthur Glen.

The outlets are Clarks Village, a 195,000 sq ft outlet in Street in Somerset, Freeport Braintree, a 200,000 sq ft Outlet Shopping Village in Essex and Junction 32 Outlet Shopping Village, a 245,715 sq ft outlet in Castleford, West Yorkshire.

The trio of assets will add to the two outlets that Land Securities already owns - Gunwharf Quays, a 425,000 sq ft premium outlet in Portsmouth and The Galleria, a 320,000 sq ft outlet in Hatfield.

News of the sale comes after Hermes recently agreed to sell two smaller outlets, Freeport Talke in Stoke-on-Trent and Freeport Fleetwood, to real estate investment firm Global Mutual for a combined £40m.

Outlet malls, where retailers sell their goods at a discounted price of as much as 70%, have been consistently outperforming other traditional formats over the last 10 years despite a challenging market thanks to a model based on turnover as opposed to relying on rent reviews.

Underperforming stores can be quickly replaced with new retail brands, helping outlet operators maintain vibrancy and higher occupancy levels.

According to recent research from Mintel, UK retail sales through factory outlets reached £2.2bn in 2015 with further growth of around 8.8% forecast in 2016. There are currently around 30 outlets in the UK, with major new openings in recent years including the London Designer Outlet.

CBRE is advising Hermes and Knight Frank is understood to be acting for Land Securities. All parties declined to comment.

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