The outstanding returns generated for investors by out-of-town retail property are likely to slow as the consumer boom wanes, according to research from Lambert Smith Hampton. However, retail warehousing will continue to outperform other property sectors.
According to the LSH Retail Warehouse Report, consumer spending on durable goods has grown by 8 per cent a year over the past seven years, and this has driven demand from bulky goods retailers for out-of-town stores. This in turn has forced up rents on retail parks by an average of 5.7 per cent a year over the past decade, and prime parks have seen even stronger growth at 9.4 per cent a year.
But growth in consumer durable spending is expected to slow to 5 per cent a year. This would see rental growth for prime retail warehouses continue at about 6.4 per cent a year over the next five years.
In the worst-case scenario, growth in durable consumption could drop to 2 per cent, which would see rental growth fall below 4 per cent a year.
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