Food outpaces fashion
With respect to type of retailer, as stated last year, food and services will continue to play a more significant role in high street cities and become more important tenants for the Fund in the process, mostly by moving into former fashion or shoe stores. The Fund is adapting by acquiring assets such as Steenweg 56 in Utrecht or Spui 10 in The Hague, which are key examples of top-performing F&B stores in high street cities.
Decline in shopping on the outskirts
The Fund is also disposing of assets with a high risk of future obsolescence or which cater to a small portion of the retail market, since these buildings are less flexible in terms of fulfilling other inner city purposes. Lastly, the Manager has identified a renewed scarcity in the city centres and a clear lack of development in other retail areas. As retailers gravitate towards the core shopping area, secondary and tertiary shopping areas on the outskirts are decreasing in size.
Subdued yields compression
Yield compression over the past few years has been flatter for retail compared to other major asset classes (residential, offices and logistics) and in some countries, gross yields for retail are now higher than office or logistic yields. This results in favourable conditions for investing in supercore retail real estate, with a solid spread, a perpetual value driver, and returns linked to continued urbanism.
Prime retail has been a main reason for the continued outperformance of the Fund. However, as past performance is by no means a reason to sit back and relax in the shifting retail sector, the manager discusses trends shaping the future of high street retail in the Annual Report 2018. The article can be read here. High street retail has been, and will be, at the forefront of the ASR Dutch Prime Retail Fund. However, in light of the trends mentioned in the article, the use of these properties and their presence in the Fund’s Portfolio will change.