COVID-19 has seen some sectors of the commercial property market hit very badly (non-essential retail shops, pubs, restaurants, hotels and leisure) with enforced Government lockdowns. However, there are also others which have been thriving, Supermarkets, Convenience Stores (Tesco Metro, Co-Ops, McColls, SPA, Little Waitrose etc) and traditional Corner Shops.
Initially it started with panic buying, mainly of loo rolls and pasta, as the usually stiff upper lipped British turned into frenzied doomsday preppers. Shelves were being stripped of pretty much anything that the supermarkets could stock them with and delivery slots booked up for weeks in advance. To put this into perspective, Tesco expanded its home delivery channel by the equivalent of two Ocado sized businesses in just 6 weeks!
The other winners have been smaller convenience stores and corner shops. People not wanting or able to make the journey to a large supermarket or unable to shop online (many of the elderly) who have been using their one hour of daily exercise to pop out for some basics (bread, milk, butter etc). Ironically it was some of these shops who were able to keep supplying loo rolls, pasta and flour, when the bigger supermarkets were struggling. These are now prevalent on the ground floor of new build apartments and taking over ex public house sites which offer the required size of building, are usually well located in the community and offer plenty of parking.
Corner Shops were historically part of the community, they were family owned and run, you spoke with and saw the same person on the till every day. Despite the uncertainty, convenience stores still remain in high demand as they provide a useful local stopgap for people to purchase items that they need as they progress throughout the week – sometimes even offering Post Office services in store too.
According to research from IGD in June 2020, the average shopper conducts 7 shopping trips at convenience stores in a month and spend around 8 minutes in-store, so it should come as no surprise that the value of the convenience sector is due to increase from £41.4 billion (2019) to £48.2 billion by 2024 – a rise of 16.6%.
Whilst supermarkets still tend to be a more institutional investment by both length of lease and quantum, convenience stores are usually on shorter 10 year leases and depending on location can start from c£300,000 based off a 6 to 7 % yield. In the current long term low interest rate environment, this is the perfect ticket size for a local private investor or pension investor.
As a result, the market for convenience retail investments is well established and will remain buoyant against fading interest in the wider high street occupiers, which makes investing in a convenience store or corner shop a relatively safe retail property investment.
Photo by Mehrad Vosoughi on Unsplash
