Following a sustained period of decline, it seems as though the trend of retail sale and leaseback (SLB) is back on the rise in Europe. Figures show that, year-on-year, the number of assets transacted via SLB has risen four-fold and is 31 per cent above the average of the past five Q1-Q3s. So what is it that’s driving this trend?

In a precarious market, retailers are being faced with the need to rationalise portfolios and this type of transaction represents a way to lower risk and release capital which they can reinject back into the core business.

In essence, SLB transactions are a great way for retailers to stay nimble with regards to other investment opportunities such as building on digital platforms to keep up with the rise in e-commerce, driving capital into logistics facilities and dealing with rising rents and business rates.

In fact, the activity to-date has largely been driven by fashion and supermarket brands – with countries including Spain (55 per cent), the Netherlands (13 per cent) and France (11 per cent) at the forefront of this investment strategy. These are countries with mature markets where retail ownership still offers an attractive return on investment.

So how are investors benefitting? In simple terms, SLB is an attractive option for value-add investors looking across a continent where retail investment opportunities are increasingly rare. With the transaction figures in Q1-Q3 this year standing significantly higher than the same period last year (approximately €1.2 billion), it‘s clear that this is a trend here to stay.

From an investor’s perspective, as long as the retailer offers a strong covenant and retail units are in prime locations, it’s an alternative opportunity to source property and to invest large amounts of capital, which in return will provide secure income streams. 

As retailers face ongoing pressures to provide a strong online presence with accompanying technology not only online but also in-store, re-evaluating their commitment to fast-changing consumer trends will be paramount to ensure survival.

With the relationship between retail and logistics becoming ever more intertwined, SLB investment is something we can expect to see a lot more of as we move closer into 2019.

Further information

Read more: Retail investment in Europe rebounds