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ADVERTISING FEATURE
Managers with a proven
ability to short should
be able to defend capital
in volatile markets, and
volatility may even help
these managers generate
alpha as it tends to result in
more mispricing
EDISTON PROPERTY INVESTMENT COMPANY
PARKLIFE!
Despite the ‘death of the high street’,
there’s plenty of life in retail parks.
The internet has transformed our shopping
habits. Today, with almost anything deliverable
to our doors, convenience is king. But providing
that convenience requires much more than
a warehouse and a fleet of delivery vans.
Increasingly, shoppers are demanding an
‘omnichannel’ experience. While they want to
order from home or from the office, they often
prefer to pick up those orders in store, so that,
for example, they can try clothes on before
taking them home. And they expect the same
convenience in returning goods.
According to property agent Savills, by 2022,
when the growth of online shopping is expected
to level out, more than 80% of sales will still
involve physical stores. But our changing habits
mean that many of those stores will not be
located in city centres. Meanwhile, retailers
have to consider not only how best to balance
their online and offline businesses, but also the
costs of storage, distribution and returns. For
shoppers and shop-owners alike, out-of-town
retail parks provide a solution.
We’ve all seen the gloomy headlines about
high-profile closures on the high street. But it’s
important to realise that people aren’t shopping
less in the online era. In fact, they’re shopping
more than ever before – they’re just doing it
differently. So, while the overall volume of retail
sales has been steadily rising, the number of
sales made at traditional department stores
has been falling fast. And as sales at high-street
stores and shopping centres decline, out-of-
town retail parks are emerging as winners.
These retail parks offer retailers a wealth of
attractions for owners and tenants alike. Their
lease lengths tend to be good, and the flexibility
of their units allows for easy upsizing and
downsizing as business conditions changes. As
a result, vacancy rates tend to be low. And retail
parks are well placed to benefit from the shift to
online shopping.
That’s because retail parks are perfectly
placed to provide the joined-up, omnichannel
experience that customers want. Out-of-town
locations allow commuters to collect or drop
off items on their way home. And attractive
retail parks with cafés, restaurants and other
diversions offer a full ‘experience’ for families at
the weekend.
From the retailer’s perspective, both ‘click
and collect’ and returns bring customers off
the internet and into the stores, where they
can be tempted to make additional purchases.
And out-of-town locations are ideal for ‘last-
mile’ delivery and the storage of goods bought
online. So many retailers are taking advantage of
retail parks’ strategic locations to maximise the
efficiency of their deliveries.
It’s this combination of online and offline that
makes retail parks such an attractive investment.
We foresee a future in which the major chains
have fewer stores on the high street and much
better out-of-town representation in retail
parks. ‘Bricks’ and ‘clicks’ will work together to
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deliver the consumer’s preferred experience –
and retail parks will be pivotal in facilitating that.
Not all retail parks are equal, however. At
Ediston, our investment approach is highly
selective. We avoid more than 60% of the retail-
park subsector because we’re only interested in
parks that dominate their local area. Nor are we
interested in ‘over-rented’ properties – where
rents are too high and are will be difficult to
sustain when leases expire. Instead, we favour
parks with affordable rents and the potential for
us to improve returns through intensive asset
management. We aim to get under the skin of
each property we own so that we can secure and
improve the income streams for our investors.
Our conviction in the right retail parks is so
strong that we intend to build one of our own at
our site in Haddington, outside Edinburgh. We’ve
had abundant interest from potential tenants,
and we expect most of the units to be let well
before construction starts.
Retail isn’t dying – far from it. But it is
evolving. We aim to harness that evolution on
our investors’ behalf. As e-commerce evolves
into omnichannel, we’re confident that the best
retail parks have the locations, facilities and
flexibility to prosper in the online age. ■
EDISTON PROPERTY INVESTMENT COMPANY (‘EDISTON’) IS A UK-LISTED REAL ESTATE INVESTMENT TRUST (REIT) INVESTING IN COMMERCIAL PROPERTY
THROUGHOUT THE UK WWW.EPIC-REIT.COM
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)
The problem with these instruments
at the moment is that with yields at
all-time lows, they look likely to lose
money in real terms in the long run,
while a surprise increase in interest
rates will also see their value fall
in the short term as well. Equally,
government bonds and equities can
be correlated to different risks.
Absolute power
Absolute return funds are another
popular option. Love says that
strategies relying on manager-derived
alpha rather than market beta may be
able to play a similar role in portfolio
construction. Managers with a proven
ability to short should be able to
defend capital in volatile markets,
and volatility may even help these
managers generate alpha as it tends to
result in more mispricing.
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