Beauty is in the eye of the beholder
30 October 2018, Aviva Investors, St. Helen's, 1 Undershaft, London, EC3P 3DQ
At first glance retail may not seem to have the most beautiful future as an investment sector, but this seminar showed that it can still have a positive role to play.
Jonathan Bayfield, Senior Analyst, Real Assets, Aviva Investors suggested that investors need to understand how rapidly the market is changing under the influence of technology and mould their portfolios accordingly. Aviva clearly take a highly analytical approach to picking the right investment locations and building an appropriate tenant mix. They not only account for the financial strength of existing retailers and potential future catchment growth, but also softer factors such as the attractiveness of the environment and the experience their tenants can offer.
The shifting balance and relationship between in-store and online sales is clearly key, and means that investors need to be increasingly agile. Behavioural Futurist Andrew Phipps, who chaired the meeting, stressed the importance of not taking any conventional wisdom about retail for granted: for example, mobile phones will not always be the primary means of communication, and online retailing is not the only way forward. However, one certain effect of the internet is that consumers are becoming more and more demanding, whether for experience or convenience. But retail is all around us, and its physical existence remains critical to the consumer.
Bayfield and Phipps were joined in a panel discussion by Isabelle Hease, Head of Research & Analytics, Ellandi and Ben Terry, Head of Location Planning - Dixons Carphone Warehouse. Ellandi tend to invest in smaller centres than Aviva, but Hease agreed with Bayfield that it is crucial to hold assets that dominate their catchment, whatever area that may be. Suburban locations may be underpinned more by local amenities than by sensory experiences, but the principle is the same.
Terry emphasised that out-of-town retail can still have a big role to play for retailers like Dixons, particularly via their Currys PC World brand – even if such locations are considered unfashionable by some investors. These locations provide the space they need to display a wide range of large scale products. Terry also stressed that physical retailers may sometimes actually offer a wider choice than online giants such as Amazon, and retain competitive pricing in product lines such as white goods.