Whatever your views on that subject, what is becoming increasingly clear is that the structural changes in retail habits are creating opportunities elsewhere in the property market. Investor appetite for good covenants in the retail and leisure market is strong at present, but it's worth taking a moment to look at the gathering momentum in the industrial sector.
Lambert Smith Hampton's recent update for the Second Quarter of 2017 on Distribution Warehouses reports that rolling average transaction yields for industrial property was lower in Q2 than for retail for the first time ever (5.8% vs 6.09%). Knight Frank's Logistics & Industrial commentary for H1 flags capital growth at an annual rate of 6.2%, with annual rental growth of 3.8% in June 2017, well ahead of inflation; so we are seeing both yield compression and rental growth that is well ahead of inflation -- all that against a backdrop of Brexit that has seen occupier take up down by 15% on the previous 6 months.
The driver behind this is clear -- overall growth in demand for distribution centres to accommodate the rapid increase in on-line shopping, coupled with a real shortage of new development. The demand is not just at the larger end of the scale, however -- as consumers have become more demanding, on-line retailers have been pushed to meet ever more challenging delivery requirements causing pressure on retailers to create both regional distribution hubs as well as an effective network of smaller centres to fulfil "last mile" delivery to consumers' front doors.