AshbyCapital is one of a select few investors still active in the retail property market. Last week, it exchanged contracts to acquire Abbotsinch Retail Park in Paisley, Scotland, from Hammerson for £67m.
The sale price, which was 3% below the asset’s book value in Hammerson’s latest accounts, reflected a 7.8% net initial yield.
While best known for its office investments, AshbyCapital has made several investments in the retail market. For example, in 2016, it bought Morfa Shopping Park in Swansea, Wales, from The Crown Estate for £83.5m.
Property Week caught up with AshbyCapital’s chief executive Peter Ferrari to find out why the firm is happy to buy retail property in the current market and what else it is running the rule over.
Why buy retail property now?
Clearly, retail has experienced significant challenges over the past few years. The negative headlines have led many investors to write it off completely. But while there has been a contraction in the retail market and some assets need to be fundamentally rethought, not all retail should be tarred with the same brush. There will always be a place for high-quality retail, in convenient locations, with parking and mixed with leisure and food and beverage outlets.
Do you think retail prices have bottomed out?
There is such a wide variety of retail assets that it is difficult to generalise; there are some very high-quality properties that have maintained their value and some very difficult assets where prices are now a fraction of what they once were. However, it is a sector where value can be found if you choose the right assets in the right locations and factor in the risks.
Why this retail park and what do you plan to do with it?
We are great believers in investing in the highest-quality assets; Abbotsinch, just like our other retail parks Morfa in Swansea and Westside in Guiseley, is the dominant retail park in its area with a strong mix of tenants. We will be working with UK real estate asset manager and developer Quadrant to ensure the best possible offer for shoppers and to maximise the value of our investment as we have done at our other retail parks.
Are you only interested in retail parks?
We invest across multiple sectors and are interested in high-quality assets in strong locations. While retail parks particularly fit our criteria, they are not our only interest in retail. Our purchase of 127 Kensington High Street and Kensington Arcade earlier this year combines a major office development with a 16-unit retail asset and annual footfall of around 12 million people.
Are you optimistic that retail property will recover?
The way people shop has changed for good and we don’t expect physical retail ever to return to how it was before internet shopping began its rapid rise. But people have an innate desire to go out and socialise rather than doing everything from behind a screen.
As long as retail offers something experiential, is easily accessible and is teamed with a leisure offering, there will always be a place for it. A recent survey found that half of millennials prefer shopping in physical stores to buying online and a separate report suggests that, even in 2028, 50% of all retail sales will still be in physical stores.
What other sectors are you looking to invest in?
We continue to be interested in office and mixed-use developments in locations with strong long-term prospects, to complement our investments in London’s Farringdon, Kensington and Fitzrovia, as well as Slough and Birmingham.