The resurgence of retail parks is here and ready to stay as a result of strong and consistent shopper demand in out of town locations. Savills reports that 2022 saw 76 new retail park store openings across the South West region, specifically in food retail and catering with retailers including Lidl, Aldi, Iceland and M&S all taking units.
The strength of new openings and expansions within the out of town sector has led to a real shortage of available space across the South West. Demand has become increasingly competitive, with occupiers of retail parks becoming more diverse with food and leisure offerings, particularly in the drive thru market.
Discount retailers and F&B operators continue to drive new acquisitions including Starbucks, Burger King, Greggs, Taco Bell, Costa and Tim Hortons, all of which opened up to three stores in the South West during 2022. In addition, strong trading from B&M and Homebargains has seen them increase store sizes across their portfolios.
Why the demand?
The resilience of the UK’s retail park market is continuing in the South West, following an ongoing period of strong occupational demand in the region, which has seen vacancy rates drop from 4.5 per cent to 4.3 per cent, its lowest level since 2018 and below the national average of 4.7 per cent, according to Savills data.
More and more shoppers are seeking convenience when it comes to their shopping with the benefit of often having free and flexible parking and shops under one roof or within close proximity to one another. We are seeing a broadening of the range of occupiers on parks, in a wide range of units sizes, which further enhances their appeal as a shopping destination.
The increase in retail warehouse units also being taken by showroom, leisure or industrial occupiers has had an impact on supply and will keep pressure on rents within the sector. For example, Tesla took a new lease on a former Bristol DIY store in 2022 Q4 and Pure Gym took over a former Argos store in Bath. Ongoing high construction costs are ensuring very few retail park developments are coming forward through development pipelines.
The vacancy rate is expected to fall further over the course of the year. A number of additional deals have already exchanged and are awaiting conditions such as planning, vacant possession or refurbishment, which, when complete, will likely bring the vacancy rate down to even lower levels.
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