Pick up your prescription at the chemist, pop into the bakers and drop your child off at the day-care centre in between – where would we be without local amenities? Real estate investors are also starting to look at their potential, but how do they fit among traditional asset classes?

When real estate investors discuss asset classes, they tend to focus on office, retail or logistics as traditionally the dividing line between the sectors runs along usage types. A ‘local amenities’ asset class, which is defined by customer requirements rather than a usage type, does not fit seamlessly into this concept.

This is made all the more difficult if local amenities are understood holistically. Retail is merely part of a symbiosis comprising various other uses that cover the entire spectrum of local amenities. Only when the discounter and the chemist share a property, or at least a location, with public and private services, such as a bank, a post office, a hairdressers or a shoe repairers, can this be considered a genuine provision of local amenities.

The advantages of such a combination are obvious. The customer benefits from both the varied offering and short distances between providers, thereby saving valuable time. And the real estate investor obtains a product that cannot easily be digitised, potentially making it an extremely attractive prospect as it’s more likely to be future-proofed.

There is still a long way to go, however, before ‘local amenities’ can be considered a recognised asset class in themselves. Nevertheless, the boundaries between the different uses are already becoming blurred. This can be understood further by observing the development landscape for office buildings. Typically, a fifth of the total floor area of current office developments in the UK, and between a fifth and a third of the floor area of current developments in the top seven cities in Germany, is not office space. This high proportion of ‘other’ space suggests that single-use office buildings may be a thing of the past. Rather, the future belongs to buildings in which the office space is combined with complementary uses, such as restaurants or accommodation.

The same can be observed with other property types. Former department stores, for example, are often converted into mixed-use buildings and some existing department stores are even relinquishing areas of retail space in favour of other uses, such as the co-operation between Galeria Kaufhof and WeWork in Frankfurt, Germany and the planned co-operation between WeWork and Debenhams’ flagship store on Oxford Street, London.

Should such trends continue, then sooner or later the question will arise as to whether the customary distinction of asset classes by usage type is still contemporary. Then, perhaps the time will have come for a local amenities asset class that extends beyond usage type boundaries. 

Further information

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