FOTBW_PPT_Feb_2023

Total Return -2.1% One Month

Income Return 0.5% One Month

Yield Impact -3.2% One Month

Rental Value Change 0.0% One Month 0.2% One Year

RETAIL FLY ON THE BROKERS' WALL

-3.7% One Year

-9.8% One Year

6.3% One Year

Source: MSCI UK Monthly Property Index, December 2022

VIEW ON THE GROUND

DEAL WATCH

PRICING Initial yields (%)

Having seen some positive signs throughout early 2022 the retail sector closed out the year in a subdued manner owing to widespread uncertainty and tough trading conditions. However, the occupier market has seen a number of green shoots emerge throughout the year, and in some cases, rental growth has once again been observed. Although headlines may point to challenging conditions, trading over the Christmas period was largely positive, and some additional market indicators lean in the sectors' favour. The relationship between in-store and online retail has showed signs of volatility throughout the year, highlighting the importance of physical locations as a key pillar of omni-channel. In addition, weekend footfalls are generally above their 2019 pre-pandemic levels, with the majority of footfall impact being observed during the working week. Despite this, corporate distress and the cost-of-living crisis, remains a key concern for investors and fears of insolvency and bankruptcy has seen landlords place greater scrutiny on retailer covenant. Despite these tough conditions carefully considered capital continues to target the sector particularly focussing on opportunistic and value-add opportunities, where hands-on asset management can unlock further potential. The Shopping centre sector saw a total of £1.23bn transact during 2022 over 58 Centres, ahead of the £1.08bn 5 year average. In the Retail Warehouse sector £3.37bn transacted over 152 deals, falling just below the 2021 level, but significantly ahead of the £1.83bn recorded during 2020. Like the majority of property markets, the retail sector is in the midst of a substantial repricing exercise which has been ongoing since the middle of 2022. It is expected that the repricing within the sector will be less severe than other sectors, as a result of the yield decompression already observed during the Covid-19 Pandemic. Smaller lots remain liquid whilst the cost of debt is hampering liquidity for larger lots. Looking forward to 2023 it is expected that economic stability will bring with it renewed interest in the market, and that strong returns available within high quality stock will start to look attractive to investors taking a longer-term view once again. .

Supermarket: Tesco, Melton Mowbray Lot Size: £13.75m Yield: 5.40% NIY Status: Completed (November 2022) Comments: 15 years UXT, 5 yearly RPI-reviews (0 4% c&c). Acquired by Tesco. Retail Park: Solartron Retail Park, Farnborough Lot Size: £34.825m Yield: 7.65% NIY Status: Completed (December 2022) Comments: Prime Bulky park, acquired by British Land Shopping Centre: Churchill Square, Brighton Lot Size: £220m Yield: 7.00% NIY Status: Marketing Comments: Core Plus retail with Value-Add development site Shopping Centre: Golden Square, Warrington Lot Size: £22.5m Yield: 12.00% NIY Status Completed (December 2022) Comments: Dominant local centre, receivership sale

Outlook

Jan 2023 Oct 2022

Supermarkets

5.00% 5.00%

Stable

Retail Parks (Open)

6.25% 6.25%

Stable

Retail Parks (Bulky)

6.75% 6.25%

Stable

Shopping Centre (Regional)

8.00% 7.75%

Stable

Shopping Centre (Sub-regional)

11.00% 11.00%

Stable

Shopping Centre (Local)

12.00% 12.00%

Stable

Source: Cushman & Wakefield

Quarterly investment volume (£m)

£6,000

£4,000

£2,000

£0

2010

2015

2020

Source: Real Capital Analytics

Source: Cushman & Wakefield

Source: Cushman & Wakefield