A window of opportunity in convenience real estate

A window of opportunity in convenience real estate

One word that effectively summarizes convenience real estate in 2024 is resilient, underpinned by constrained supply, positive NOI growth and a reset in pricing.

As we look to the coming year, we at Mitiska REIM believe that a window of opportunity is clearly opening up, providing an attractive entry point for specialized value-add investors to capture a recovery in real estate markets across Europe.

In this latest blog, we outline the opportunities we see across retail parks, multi-let light industrial, urban logistics and self storage, and why sustained and strengthening market tailwinds are continuing to support significant value creation in these sectors and renewed interest from investors in these property types.

Retail parks remain in robust health and very attractive to investors

The retail park sector ended 2024 in robust health with attractive relative yields and increasingly strong fundamentals. Looking ahead, Hines says in a recent report that solid wage growth, positive consumer sentiment and stabilizing global inflation are converging into a compelling investment thesis, particularly for food-anchored retail parks.

Food-anchored retail parks with a focus on value-orientated shopping have flourished over the past few years, with essential product categories, convenience goods and services continuing to be very successful at driving footfall.

In its 2025 retail outlook, Green Street News reports that the occupational market is the best in over decade, and we expect to see strong tenant demand across our European markets. In Western Europe, retail brands are becoming increasingly attracted to the retail park format, which offers accessible locations, affordable buildings and flexible design, plus sustainable real estate solutions. The same benefits are clear in Central European markets, but here also shoppers are looking for necessity retail which is modern, sustainable and conveniently located, creating the opportunity for our retail parks to become the dominant retail schemes in their catchment areas.

For investors, demand has remained high for quality retail park assets in Europe. The resilience of retail parks has now been proven across a range of economic conditions, and we are seeing significant interest from potential buyers for assets that have completed our value-add and development programs. We’re also continuing to see more attractive entry pricing as owners come under pressure to sell assets and we think market volatility will continue to create exceptional opportunities.

A positive inflection point for multi-let light industrial and urban logistics

Multi-let light industrial and urban logistics are arguably the largest benefactors within commercial real estate following the pandemic, as companies have rethought global supply chain risk and reconfigured their processes to get goods closer to end users. While nearshoring and reshoring remain relevant, supply shortages have also highlighted the need for just-in-case inventory in addition to the predominant just-in-time approach.

Cushman & Wakefield says that a positive macroeconomic outlook for 2025 signals a potential inflection point for the industrial and logistics sector, supported by improving business and consumer confidence alongside lower interest rates, with the expectation that properties with solid sustainability features and prime locations will outperform.We are seeing demand on the rise for multi-let light industrial and urban logistics schemes as a growing number of small and medium-sized businesses look for convenient sites close to their customer bases and their employees in which to expand their operations, while new supply remains constrained.

The flexible design of light industrial and urban logic developments, often in mixed-use settings, is ideally positioned for the differing business models and space requirements of SMEs and we remain bullish on the prospects for this sector.

Increasing demand for self storage in an underserved market

Self storage is a growing and underserved segment of the real estate market, with demand fueled by four main consumer life events: death, divorce, dislocation and downsizing. Rising residential property prices have increased the cost of moving to a larger home, driving more consumers to look for additional space to store their goods, temporarily or longer-term.

The European self storage market is still at an early stage of development compared to the UK and US, and has seen steadily increasing market awareness and rising total investment volumes over recent years. FEDESSA figures show that investment volumes in 2024 reached a record level of €1.4 billion.

EPRA reports that the returns from self storage have also proven to be resilient during economic downturns, with the sector maintaining strong results and outperforming not only listed real estate but also some other asset classes.

We see a big opportunity open to us by targeting assets which are currently underperforming, vacant or obsolete, by repurposing existing buildings such as retail showrooms, industrial buildings and offices. This strategy not only creates significant value by acquiring sites at attractive pricing, it also contributes to sustainable development by repurposing existing buildings and providing them with a new future, in addition to retaining the embodied carbon within.

 

As we look ahead to 2025, we think convenience real estate is well positioned, particularly for those investments that require capex and hands-on asset management, which value-add strategies can capitalize on.

As we continue fundraising and deploying capital for our latest fund, MEREP 3, we believe that 2025 could become an exceptional vintage for those investors with dry powder available and specialist know-how to take advantage of the current market conditions and opportunities.

 

Links to market reports referenced in this blog:

 

Past performance is no guarantee of future results. Investment in MEREP 3 is open to professional investors only. MEREP 3 is a private AIF under the Belgian 2014 AICB Law. Mitiska REIM is a licensed alternative investment fund manager under the Belgian 2014 AICB Law. Mitiska REIM acts in its capacity as fund manager (AIFM) of MEREP Light Industrial, MEREP 3 and FRP, and fund advisor of FRI and FRI 2.