REACT NEWS: Outlook 2022: optimism returning to retail sector

After some tough years for the sector, investor appetite is expected to return in 2022.

After years of doom and gloom around retail, optimism is finally returning to the sector.

Having proved its resilience during the pandemic, there is no surprise that the convenience subsector is highly sought after, but investor interest is now growing for a broader range of retail properties. Out of town retail, designer outlets and prime shopping centres may all be headed for a successful year.

Although the omicron variant is causing some uncertainty around the sector, the consensus seems to be that 2022 will bring the return of investor appetite to the European retail market.

Johnnie Wilkinson, CEO of Greenman

The pandemic has shone the spotlight on what was once a relatively niche retail sector; however, the popularity of grocery anchored retail was rising long before the pandemic struck and continues despite the resulting tightening in yields across the sector.

Investors are primarily attracted by the long leases, resilience during the pandemic and the enduring relevance of well-placed grocery assets in the future grocery supply chain, but this is only scratching the surface. We believe that during 2022 investors will start to realise the full potential of these highly versatile assets.

At Greenman Group, we’ve already been putting plans in place to capture this potential and have launched a series of integrated businesses over the past couple of years aimed at providing value-add services to our occupiers. Potager Farm, our vertical farm business, is a recent example.

Sustainability is another hot topic for 2022 and beyond. There has been a lot written over the past 12 months about how much it will cost real estate businesses to meet incoming sustainability and ESG measures. Conversely, we believe there’s a huge opportunity to combine sustainability with increased profitability and investor returns.

Through the provision of additional services to our occupiers, whether vertical farms, renewable energy from onsite resources such as PV panels or data that will help them to run their businesses more efficiently, we believe we’ll be able to diversify our income by 2025, so that 5% comes from these non-rent related services.

There is a huge amount of innovation about to hit the real estate industry and the transformation is well underway in the grocery retail sector. In our view, the next 12 months and beyond will be among the most rewarding to be active in our industry.

Read the outlook of other real estate leaders in the full React News article here.