The UK supermarket sector is βre-bootingβ, according to MSCI, with investor type changing and operators shifting their trading approach.
The research firm said the retail sub-sector was attracting a βnew generation of investorsβ, with private equity investors and overseas buyers showing more appetite for a sector traditionally dominated by institutional capital.
MSCI and Colliers Internationalβs jointly published βUK Supermarkets Investment Reportβ monitored the performance of 273 supermarket properties, with a combined value of Β£6.8bn (β¬8.6bn).
James Watson, head of retail capital markets at Colliers International, said the restructuring of the sub-sectorβs investor base mirrors changes in the supermarket sector, which has seen a shift away from the giant stores of the 1990s βrace for spaceβ expansion programmes towards smaller, grocery-focused stores.
Recent property returns are βhistorically lacklustreβ, at around 2%, MSCI said.
However, new investors have kept the volume of transactional activity above the Β£1bn mark.
βThere has been recent encouragement for the sector in some improved trading figures, and there are clear indications operators are beginning to find a way forward,β Watson said.
He said a βtwo-tiered marketβ had now emerged between prime and secondary stores.
βWhilst there is still demonstrable institutional appetite for prime assets, there is also demand for the more secondary product from private investors who are reassured by the covenant strength of the occupiers and the long-dated, RPI-linked income streams,β he said, adding that investors were seemingly unconcerned by Brexit fears.
The research notes that the RPI-linked leases that dominate in the sector are still a considerable attraction to investors, particularly with bond returns being at all-time lows.
