Ediston Property Investment Company plc ('Ediston' or 'the Company') is a UK-listed Real Estate
Investment Trust (REIT) investing in commercial property throughout the UK.

17 June 2022

Resilience in Retail Warehousing

Resilience in retail: why we believe retail warehouses are still winners

Since the COVID-19 Crisis began, retail warehousing has demonstrated its resilience – holding up much better than most other areas of the UK retail market. But now, as we contend with a cost-of-living crisis, does the sector still have more to offer?

We believe it does. That’s why the Ediston Property Investment Company has become a retail warehouse specialist, having sold our office and leisure holdings. With every week that passes, we are reassured that this was the right thing to do.

Retail warehousing’s strengths shone during the pandemic. Many stores in retail parks were able to stay open even during the most stringent lockdowns. Their out-of-town locations proved attractive, and online and offline shopping worked in harmony.

But these attractions aren’t transitory. The ‘omnichannel’ approach – which combines online and offline shopping – has found permanent favour with both retailers and the public. Its most obvious manifestation is the click-and-collect model, which allows customers to browse and order from the comfort of their homes before picking up in person.

As ever, convenience is king. Click-and-collect gives you the chance to try on clothes or check that you’re happy with your goods. It allows for quicker transactions as you pick up your purchases rather than wait for delivery. And it avoids the need to wait at home until your order arrives.

Crucially, omnichannel still has room to grow. For example, several retailers have improved their click-and-collect offers. That’s because consumers love it. And retail warehouses provide the combination of logistics and location that makes it work best.

Retail parks have other attractions for customers too. Out-of-town locations work well for many commuters, allowing people to pick up items on their way home from work, with retail parks typically having later operating hours than town centres. Also, retail parks generally offer free parking – making an afternoon’s shopping cheaper, more convenient and much less stressful than trying to negotiate the more congested city centre, where parking is often more difficult.

Another advantage of retail parks is that they increasingly offer charging points for electric vehicles. Some clean-energy companies are working with park owners to roll out EV charging nationwide. With EVs set to account for a third of all road vehicles by the end of this decade, charging points add to retail parks’ attractiveness as ‘one-stop’ destinations – where you can shop, eat out and charge your car all in one go.

Meanwhile, retailers benefit from the omnichannel model because customers tend to make additional purchases when they come to collect their goods. Industry reports suggest that around 40% of click-and-collect customers make other purchases in store when they pick up online orders. And both customers and retailers benefit from savings on postage and packing.

Then there’s flexibility. Retailers know that their needs can change rapidly. To make the most of their outlets, they often want to contract or expand. Retail warehousing is inherently flexible, as units can be split, combined or swapped to give tenants the space that best fits their requirements.

That flexibility extends to function too. Retail warehouses can serve as shops, distribution hubs and storage depots rolled into one.

And they can accommodate drive-thru facilities, which are consistently popular with consumers and are the preferred option for many of the coffee and fast-food operators. We have built drive-thrus on several of our sites. We believe that development is a good way to build ‘something from nothing’ on land we already own. It allows us to create new income streams, and capital upside, in a risk-controlled way.

With challenges ahead, out-of-town retail parks are the retail outlets that look best placed to thrive. In part, that’s down to the convenience-led nature of their tenants, including variety and discount retailers. But it’s also because retail parks simply cater to current shopping habits better than the high street. That’s why we continue to see retail warehouses as long-term winners – and why we intend to focus exclusively on the sector for the foreseeable future.

EPIC for income

By concentrating on retail parks, we believe EPIC harnesses all of these attractions. In a yield-starved world, its current 8.7%* dividend yield is believed to offer a compelling level of income. And that dividend is fully covered and paid monthly – with scope for increases as conditions normalise.

Investments in retail warehousing also offers a degree of protection from inflation. Given the steep recent rise in prices, that’s a crucial consideration for investors. Commercial property isn’t a panacea for inflation, but rents will eventually rise in response. And retail parks offer tenants much more flexibility to adapt to changing conditions.

Our retail-park portfolio has come through the Covid crisis in good shape. We think it’s well placed to continue delivering for our clients as economic conditions improve. And with our fully, covered dividend, there could be a compelling case for investors to choose EPIC for income.

 

*As at 30 June 2023

 

The contents of this article should not be construed as legal, tax, investment or other advice. Each prospective investor should make its own enquiries and consult its professional advisers as to the legal, tax, financial and other relevant matters and risks concerning any investment opportunity.

Past performance is not a reliable indicator of future performance – the value of a stock market investment and any income from it can fall as well as rise and investors may not get back the amount invested.

Whilst information contained in this article is believed to be accurate at the date of publication, it is subject to change and does not purport to provide a complete description of Ediston Property Investment Company Plc (the “Company”) or its future prospects or performance. Any forecast, projection or target is indicative only and not guaranteed. In particular, the payment of dividends and the repayment of capital are not guaranteed.

The Company invests in property assets which can be highly illiquid, typically do not grow at an even rate of return and may decline in value, all of which may have a negative impact on the value of the Company.

To the fullest extent permitted by law, The Company, Ediston Investment Services Limited and their respective directors, advisers or representatives shall not have any responsibility or liability whatsoever for any loss (whether direct or indirect) arising from the use of this documents or its contents.

Issued and approved by Ediston Investment Services Limited which is authorised and regulated by the Financial Conduct Authority (FRN:706655)

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