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Aberdeen Standard Life shops in Harrogate

By Kasmira Jefford - Friday, October 13, 2017 13:31

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Aberdeen Standard Life is poised to buy a retail park in North Yorkshire that counts Aldi and B&Q among its tenants, in a deal understood to have fetched in excess of the £16.2m asking price.

The fund manager is under offer to buy Harrogate Retail Park after a heated bidding process for the 56,149 sq ft out of town site understood to have attracted over 10 bidders. 

The retail park is let to three retailers including a 15,000 sq ft Aldi, which has a 20 year lease expiring in 2036 and 5 yearly RPI linked rent reviews between 1% and 3% per annum. The German value supermarket pays £18.31 per sq ft. 

The B&Q store spans 31,216 sq ft and is let to the retailer until 2033 while Pets and Home rents a 10,000 sq ft store, with a lease expiring in 2024. The retailers pay £15 and £17.6 per sq ft respectively with rent reviews in 2018 and 2019.

Wilkinson Williams is acting for the freeholder, Aviva Pension Trustee Ltd, and Savills is advising Aberdeen.

The anticipated sale is another example of strong institutional demand for dominant retail parks, with several schemes witnessing competitive bidding.  

According to industry sources, yields have moved around 50 basis points over the past three to four months due to a return in demand, with retail warehousing finding favour over other retail asset classes. This is in part driven by investors who would have otherwise chased logistics but are now finding that sector overpriced.

Foods stores have also enjoyed a resurgence in investor demand after several years of muted activity, as the major supermarkets show further signs of recovery. Tesco last week reported a rise in sales for the seventh consecutive quarter and announced it would pay a dividend for the first time in three years. 

Food stores can offer stable and long-dated income, with stores let to Aldi and Lidl -  the two fastest growing supermarket chains - among the most popular with investors.

Supermarket net initial yields currently stand at 5.2%, according to MSCI, but current prime yields for food stores on inflation-linked leases range between 4.25% and 4.75%, ccording to a research note released last week by Savills Investment Management. 

Irfan Younus, Head of Research (Europe), Savills IM, said: “Although margins are still under pressure, the UK’s major supermarkets have shown encouraging recent trading figures. As long-dated income from relatively healthy covenants looks increasingly appealing to investors, we expect 2017-18 to be a more positive year for supermarkets."

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