11 May Investment opportunities in convenience real estate
In previous blogs, we have outlined the socio-economic megatrends which are driving the ongoing opportunity we see in convenience real estate, spanning food-anchored retail parks, urban logistics and multi-let light industrial.
But within this wider demand, we have also identified a number of specific investment situations that are now opening up, creating a window of opportunity for us at Mitiska REIM to capitalise on by levering our expertise and track record. We outline four of these investment situations below…
1. Contrarian opportunities in resilient retail
In the aftermath of the COVID-19 pandemic, the market has recognised that not all retail is the same. The longstanding advantages of retail parks, offering a combination of convenience, essential shopping and value for money, are now increasingly recognized by retailers, shoppers and investors.
However, at an asset level, not all investors have the appetite, approach or capital to turn around underperforming assets. This is creating opportunities for more specialist value-add investors such as Mitiska REIM to identify resilient retail assets with unrealised potential and to purchase these at substantial discounts to market valuation.
A good example of this is the PREF Portfolio that Mitiska REIM acquired from Blackstone on behalf of the FRI 2 fund in January 2020, which at the time was the largest retail park transaction in Portugal. Comprising four retail parks with a combined gross leasable area (GLA) of 78,500m2, we have implemented a value-add plan combining active asset management, refurbishment and extension, turning these assets into a top-performing core portfolio over the past three years.
2. Repurposing & retrofitting opportunities
Changes in shopping habits have, in turn, made some types of retail assets out of step with consumer demand and out of favour with modern environmental standards. Large hypermarkets and cash & carry locations are classic examples of this.
For the owners of these sites, there is the risk of these assets becoming ‘stranded’ due to the lack of demand from tenants and the capex required to improve their sustainability credentials. We see this as an opportunity to create value by repurposing and retrofitting these assets to create modern, attractive and sustainable convenience real estate projects.
Our acquisition of a former Tesco hypermarket in Pulawy, Poland, is a good example. By spotting the opportunity to take advantage of the existing zoning and trading history of the site, this project was transformed into a modern food-anchored retail park, designed to achieve a “Very Good” score on the BREEAM scale, which opened to the public in April last year.
3. The growing need for urban logistics
The e-commerce boom continues to fuel the demand for urban logistics. According to Savills, e-commerce sales across Western Europe have grown by 128% since 2015, with studies forecasting Europe-wide growth of more than 7% annually over the coming 5 years.
The key challenge for retailers and logistics operators searching for last-mile solutions is that supply is constrained due to the lack of available land, permits and other factors. Mitiska REIM’s experience in targeting urban infill sites, combined with the expertise of our local partners on the ground in 10 European markets, makes us well-placed to capitalise on this opportunity.
An example of this is the new multi-let urban logistics project we are developing in partnership with Garbe located in Senec, near the Slovakian capital of Bratislava and in close proximity to the borders of Austria, Hungary and the Czech Republic. Scheduled to open in Q1 next year, this site will offer 6 flexible units, with a total GLA of nearly 39,000m2, in one of the most sought-after logistics hubs in Central Europe.
4. Bolt-on multi-let light industrial
Our fourth investment focus area is bolt-on opportunities in multi-let light industrial, in which our Parc de l’Europe development in the Belgian city of Wavre is a good example. Catering for the increasing demand from both SMEs and larger companies for local hubs, service or distribution centers, Parc de l’Europe combines a 9,000m2 GLA retail park with 7,000m2 of small business units and 7,500m2 of contemporary offices and co-working spaces.
From an investment perspective, mixed-use assets such as this are highly complementary and offer more flexibility in both sourcing potential sites and creating developments that make the optimum use of land. Adding bolt-on multi-let light industrial as part of a mixed-use development with a retail park enables us to realise the full value of scarce urban infill locations, in addition to creating local jobs and services for the adjacent community.
The investment situations we have outlined above really come to the fore in a tougher economic environment such as the market is experiencing at present, creating an ongoing pipeline of attractive opportunities for specialised value-add investors such as Mitiska REIM. By keeping dry powder during volatile times, we continue to find significant opportunities to make off-market acquisitions of both properties and portfolios on attractive terms.
Mitiska REIM is an alternative investment fund manager licensed by the Belgian regulator FSMA (www.fsma.be). Mitiska REIM acts in its capacity as fund manager of MEREP Light Industrial and MEREP 3 and fund advisor of FRI and FRI 2. Past performance is no guarantee of future results.
Links to projects and market reports referenced in this blog, and further reading:
- Mitiska REIM buys Blackstone retail park portfolio in Portugal
- Mitiska REIM repurposes Tesco hypermarket in Poland into modern retail park
- Parc de l’Europe Virtual Property Tour
- Savills European Logistics Outlook
- The continuing opportunity in Convenience Real Estate
- Convenience remains top of the shopping list