Planning practice guidance (PPG) has been updated to reflect new Community Infrastructure Levy (CIL) regulations that came into force on 1 September. Here are five key things you need to know about the changes.

  1. A section on ‘monitoring and reporting’ has been introduced.
  2. Councils are given autonomy over how they should consult when introducing a levy.
  3. More detail has been provided on how indexation should be applied to section 73 applications, which amend an existing planning permission.
  4. Guidance on spending CIL revenue has been revised.
  5. Authorities are explicitly advised that ‘charging authorities can use funds from both the levy and section 106 planning obligations to pay for the same piece of infrastructure.

Neil Jones, Partner in our Town Planning department, shares his views and comments on each of the above and how the updates might impact local authorities, developers and the general public alike.

The full article is on Planning Resource (4/9/2019).

Rapleys, the planning and property consultancy, has said the automotive retail industry is taking a “wait and see” approach on investment in electric vehicle (EV) infrastructure.

While there are some franchises that will mandate a certain level of infrastructure and charging points based on their corporate identity, Mark Frostick, Rapleys senior associate roadside and automotive, told AM: “Investment in EV infrastructure is generally not on a lot of people’s radar from a property perspective right now.

“Everyone is looking at how technology is changing and doesn’t want to be caught investing in the wrong thing or to the wrong level.

“There are a lot of groups waiting to see what is happening before making that investment decision.”

For more from Mark Frostick and Peter Nicholas click through to the full article on AM Online.

Today’s statistical analysis from the ONS makes interesting reading. There was somewhat of a furore about a year ago when the ONS published – for the first time having taken over the statistical responsibility from MHCLG – the 2016-based Household Projection figures. These updated figures were interpreted by many to mean that fewer homes needed to be built than was previously thought. In particular, those arguing for lower levels of housebuilding saw the numbers as justification to scale back housing plans.

However, this approach risked undermining the government’s pledge to prioritise housebuilding and the overall national target of 300,000 new homes built every year. As a result, Government quickly stated that when calculating housing need, the previous2014-based Household Projections should be used. The primacy of the 2014-based figures was re-confirmed inupdates to the Planning Practice Guidance earlier in the year.

Given that today’s analysis concludes that the difference between the 2014 and 2016 figures were as a result of methodological improvements informing the latter, the issue looks likely to be a continued bone of contention between Local Authorities, developers and the government. Notwithstanding this, at least for now the 2014-based figures look likely to be the first port of call for the majority of base-line housing need calculations.

As featured in Planning Resource.

‘While looming uncertainty around Brexit has caused turbulence in many UK property markets, the trade counter sector has remained – to borrow a phrase from our outgoing prime minister – strong and stable.’ – Property Week.

Alfred Bartlett, Partner and Head of the Retail and Leisure Group, spoke to Property Week regarding the strong market for the trade counter sector.

“As well as buying tired buildings, investors are continuing to buy other industrial units and convert them to trade counters, says Alfred Bartlett, partner and head of the retail and leisure group at consultancy Rapleys. “We’ve just acquired a car dealership site for a client, which is being converted into a trade scheme. Another client just bought a reasonably prominent industrial terrace and that was converted to trade units,” he says.”

“It is a sign that landlords are increasingly attracted to the rental growth and strong financial covenants that trade counter occupiers provide. Bartlett says he is currently acting on purpose-built trade counter schemes in both Clacton and Tamworth that “in the past would’ve been out-of-town retail schemes”.”

“A combination of short supply and an increased focus on the general public has brought trade counters to the high street for the first time, often into units vacated by struggling retailers. Screwfix and Toolstation have been particularly acquisitive, says Bartlett, who acts on behalf of Toolstation looking for high street sites.”

“We’re in the infancy of building up portfolios. You can see some building now that will become attractive to the big funds. There’s definitely investment appetite in the trade sector,” he says.

The full article from Property Week can be found here.

‘Lookers car dealership boasts flat above – a one-off or a new mixed-use template, asks Nick Hughes’ – Property Week.

‘Standing three storeys tall beneath a block of modern apartments, Lookers in Battersea, south London, is not your average car dealership – on two counts. Not only is it the largest Volkswagen showroom in Europe, it is also part of what is thought to be the first UK mixed-use scheme to include a dealership.

The development has been the best part of a decade in the making and involves three key players: Lookers, developer Linden Homes and agent Rapleys, which brought the other two parties together.’

Angus Irvine, Head of Development Services, brought Lookers and Linden Homes together to achieve a balanced and innovative scheme in this desirable London postcode. Stretching back for several decades a dealership has occupied this site but Lookers Chief Executive, Andy Bruce, could see the dealership ‘being dwarfed by the rise of surrounding developments’ over the last few years. With no intention to sell the freehold of their site they turned to Rapleys to unlock the value in the land and in this area, the value was in upward development.

The result was a tower development scheme with 173 apartments and ‘a full-blown dealership with servicing. That’s why this is unique’ says Angus. To overcome the challenges the multi discipline Rapleys team, led by Angus, brought together experts from across the firm’s DevelopmentPlanningInvestment and Building Consultancy practices to work with Lookers to maximise the significant land value of the site.

For the full article follow this link to Property Week or for direct advice on how Rapleys can help unlock the land potential on your site speak to Angus Irvine.

 

Richard Curry, Partner in the Retail & Leisure team, speaks to Food Navigator about Amazon’s investment in Deliveroo. The online retail giant will lead a new $575m investment into the food delivery company alongside other investors. This investment will allow the food delivery service to improve the company’s tech team in the UK headquarters and expand further to reach new customers.

Is Amazon laying the foundations for a move into bricks and mortar? 

Amazon’s move is evidence of it tapping into a growing trend for food delivery, in urban zones especially, and possibly setting the foundations for a move into bricks and mortar, believes Richard Curry, partner in the retail team at property and planning consultancy Rapleys.

If a consumer could receive Deliveroo delivery of Amazon’s range of goods, he told FoodNavigator, “that is tapping into a food market and competing with retailers.”

If Amazon were looking to set up in bricks and mortar space, he notes, then, “having all this infrastructure in place is going to be key, as most of the bigger organisations that are already established in bricks and mortar have antiquated distribution networks that are focussed on stores.”

It would also need to show a point of difference to stand out. ” Having this facility would give them that in my view.” He added that from Amazon’s perspective the investment was a ‘win-win’.

“It gives them another way of breaking into that [food goods delivery] market in its own right and at the same time if they did want to go nationwide into bricks and mortar they are setting up that to give themselves the opportunity to make that decision without it being expenditure on a gamble.

They know that the [Deliveroo] operation works and it doesn’t necessarily commit them to go into bricks and mortar but it would be required by them if they were to.”

For the full article with opinions from other experts click here.

“Housing minister Kit Malthouse has announced the five successful bids to create new towns across England. Between them, these settlements could deliver 64,000 homes.

The communities will receive a share of £3.7 million in funding that aims to ‘fast-track’ specialist survey and planning works necessary for their development…

Jason Lowes, a partner in the planning team at Rapleys, said the funding deal is further confirmation that garden communities ‘very clearly’ remain a key part of the government’s new homes strategy. While they should be welcomed in principle, Lowes said they are ‘by their nature a long-term solution and only part of the picture.’

‘Nearer-term solutions, such as the expansion of existing cities, towns and villages, are also critically important to ensure that people who want to can find new homes close to their families. This needs to be pursued through intensifying densities in appropriate locations, not least town centres, and reviewing the spaces around existing settlement boundaries – including, if necessary and appropriate, green belt land – particularly brownfield green belt land.'”

For the full article go to The Planner by clicking here.

The Competition and Markets Authority (CMA) cast doubt on the planned Sainsbury’s-Asda merger as it reports ‘extensive competition concerns’. The experts react to the findings, with partner in Retail & Leisure, Richard Curry, sharing his views with The Grocer, Bloomberg and the European Supermarket Magazine.

As reported in The Grocer, Curry comments ‘…the only two alternatives that offer the same product range and shopping experience are Tesco and Morrisons – who are unlikely to be interested in enough of the large format stores likely to be seen as problematic by the CMA to make a difference.

The CMA’s provisional findings do increase the likelihood of the Sainsbury’s-Asda deal being scrapped. However, Walmart will clearly still be looking to offload Asda and there will likely be other suitors waiting in the wings.’

The full analyst from Richard and other experts can be views in the following publications:

 

 

Today in Property Week, Nick Hughes asks ‘what impact the divestment of Sainsbury’s/Asda stores would have on the sector.’

‘A great deal for customers, colleagues, suppliers and shareholders of both businesses.’ That’s what the leaders of Sainsbury’s and Asda promised in April as the two confirmed plans for a £51bn mega-merger that, if approved, will reshape the grocery landscape with significant implications for the retail property market…

…A rebalancing of the big four’s property portfolios, although meaningful, is unlikely to significantly alter the dynamics of the grocery market; however, Rapleys partner Richard Curry floats a prospect that has the potential to change the face of the food retail landscape in the UK and send every supermarket executive into a state of high alert.

‘The CMA included (Amazon-owned) Whole Foods as part of its phase-one investigation’, Curry notes. ‘While Whole Foods itself is unlikely to take on a large-footprint Asda or Sainsbury’s unit, it does raise the question of what role Amazon more broadly will play going forward’. ‘We know the CMA is considering the impact of online retail on grocery shopping and if Amazon senses an opportunity to take on a nationwide portfolio of large units that can be subdivided to house various operations – from Whole Foods groceries to non-food and logistics – the temptation to make a big bricks-and-mortar splash will be strong indeed.’

The full article is available here on Property Week. 

It could take until next year to get a final picture on how and where a merged Asda/Sainsbury’s business will have to dispose of sites (stores and petrol stations), according to Mark Frostick. Mark states it will be an even longer term before a final position on pricing is agreed, so, for now, it will be a question of wait and see.

It is likely that the majority of the petrol stations that the new company will operate will be dependent on the food store attachment. In terms of potentially disposed properties, with the discount stores still held as most likely purchasers,  the likelihood of them keeping the petrol elements operational seems very slim indeed. However, it is early days and the outcome could still prove unpredictable.

Mark expands on his expert opinion of the market and the possible outcomes of this merger in the full article in Forecourt Trader here

Phil Blackford, head of automotive and roadside, shares his opinions with The Grocer on how independent fuel suppliers have partly benefited from the majority of oil suppliers exiting direct fuel retailing. ‘This gap in the market has given the independents almost free reign to expand.’

There has been a fundamental rethink from the forecourt traders and the retail offering they want to make, moving away from the ‘mags and fags’ to the more sophisticated convenience offering of local produce, craft beers and artisan breads. This shift has opened up the forecourts offerings with ‘food to go’ options increasing also (for example Applegreen’s partnership with the likes of Chopstix Noodle Bar) the forecourts are switching to an attractive destination.

To read the full story go to The Grocer or get in touch with Phil Blackford to better understand the new business models and benefits they could have.

In 2015 the government extended permitted development rights to create more housing and then the 2017 autumn budget announced potential further extensions. But does bypassing the full planning process mean local authorities are missing out and are some homes failing to deliver an acceptable standard of living?

The RTPI has warned of ‘unintended consequences’ of permitted development over the years with a danger of curtailing the proper provisions of amenities and general standard of living, but is it as bad as that?

Jason Lowes shares his comments and states ‘this line of thinking risks undermining the advantages that PD can offer…’

Read more in The Planner here.

Jardine Motors Group has completed the sale of the company’s former Jaguar Land Rover dealership in Slough, Berkshire. The building was available due to Jardine relocating to a nearby purpose-built 42,000 sq ft JLR dealership.

Mark Frostick, senior associate at Rapleys added: “This clearly shows that in spite of negative headlines about the automotive market in the press, there remains a market in the press, there remains a market for prime freeholds from the sector.”

For the full story go to motortrader.com

Top 50 Indie Karan Retail has secured the lease on the BP-branded petrol filling station fronting the A2 at Bapchild just outside of Sittingbourne, Kent, in a deal arranged by Rapleys.

Damien Lippet commented ‘due to the client’s requirements the property was offered confidentially to the market. However, opportunities to acquire well-established forecourts such as this are relatively few and far between in the south east…’

For the full details click through to Forecourt Trader. 

Daniel Cook shares his opinion with AM Online about how the decision Vauxhall has taken to ‘rationalise’ its network of dealerships may have come as a shock, but does this really indicate the death of the bricks-and-mortar dealership model?

Parallels could be drawn between various retailers, like Toys R’Us and Carpetright, who have felt the strain on being tied into properties but the dynamics of the automotive trade are very different.

Click here to read more from Daniel.

According to Daniel Cook, partner in the Automotive & Roadside team at Rapleys, the market may have topped out. “Looking at the UK market right now, there are signs that dealership values may have peaked. Fundamentally, there is an increasing quantity of dealership properties on the market, largely driven by the volume franchises who are looking to streamline their portfolios.”

The full article can be found in Motor Trader or by clicking here.

The Planner: 22/02/2018

“Given the costs involved in securing a planning permission, it is just not credible to imagine that developers would then sit twiddling their thumbs once permission is actually granted – however, that seems to be the starting assumption of the LGAs position.”

Noting that every council is different, Lowes said that the LGA’s plans would require a “quantum leap forward in terms of skills, funding and strategy”.

Read the full article on www.theplanner.co.uk

Forecourt Trader 25/10/2017

“Plans to force motorway services and large petrol retailers to install electric charge and hydrogen refuelling points under a new Bill being introduced in Parliament, could cost the industry millions, depending on the definition of ‘large’, according to Mark Frostick, senior associate in Rapleys’ automotive and roadside team.”

Frostick predicts that the costs could amount to £250m for the industry.

Read the full article on forecourttrader.co.uk

TheBusinessDesk.com 04/10/2017

“The opening of a new foodstore at a Birmingham mixed-use development is expected to trigger interest in the site from would-be tenants.

The new 13,000 sq ft M&S Foodhall is acting as the anchor tenant of the scheme, which is situated on the corner of St Mary’s Row and Oxford Road in Moseley.”

Alfred Bartlett, Head of Rapleys’ Retail & Leisure Group, said: “This is a landmark scheme for Moseley and the surrounding local area that has significantly enhanced what was previously a dilapidated car dealership site.

“M&S’ occupation is a real boon for the development and we anticipate significant and continued interest in the remaining two commercial units.”

View the full article at TheBusinessDesk.com

“An investigation into investment schemes has harmed [the self-storage sector], but more mature investors aren’t spooked” – Andrew Stone, Property Week.

Property Week’s self-storage supplement looks into the image problem the sector has as The Serious Fraud Office (SFO) investigates aggressively sold self-storage investment schemes.

Rapleys’ Colin Steele, partner in the Industrial and Logistics team, comments in the article:

“Larger companies and more sophisticated financial investors are seeing past [the bad reputation]. They operate on a different set of models and calculations and they are looking at excellent returns.

In the long term, this will be a storm in a teacup. The longer-term strength of the industry is there for all to see. Self-storage sites can get up to 80% to 90% occupancy, offer strong visible cash flows and good yields and are recession resilient.

The main challenge facing the industry now is finding suitable sites.”

Read the full Property Week article online here.

 

Matt Greenaway, senior associate in the Rapleys Retail & Leisure Group, comments on food-to-go brands and drive-thru’s in the latest Trade Counter supplement of Property Week magazine.

“As versatile as they are, food-to-go brands do have certain preferences – units of around 1,000 sq ft are usually the best option for food-to-go brands.

Ideally, they prefer units in visible and accessible locations within estates where they can capitalise on visitors to the trade parks and passing customers, but we won’t see freestanding drive-thru restaurants and coffee shops included in many schemes unless they occupy the most prominent main-road fronting locations”.

He believes that in-line units or, more likely, pod units, where landlords can generate attractive rents from small spaces, will become more common.

Read the full Property Week article online here.

Property Week 17/03/2017

Philip Hammond may not have the same propensity for rabbit-conjuring as his predecessor did, but his approach to business rates does have a whiff of March hare madness about it.

Rapleys’ Nik Moore take a closer look at Hammonds’ decision in this week’s Property Week.

To read the full article click here.

Commercial News Media 21/02/2017

Alan Watson, head of rating comments on the appeals process and the frustrations that many businesses are having with the new business rates.

To read the article in full click here.

A planning committee will next week consider whether to grant permission for 48 new flats at Torvean Caravan Park.

Plans for new flats next to the Caledonian Canal on the outskirts of Inverness have been recommended for approval. A planning committee will next week consider whether to grant permission for 48 new
flats at Torvean Caravan Park.

The homes would be built in six blocks, with some overlooking the canal.

Council planners have recommended approval for the scheme saying it will help tackle housing need in the area.

However, Muirtown Community Council have objected claiming the development is over-development and surface water drainage into the canal.

The plans have been submitted by the present owners of the caravan park under the name Caledonian Highview Ltd.

The development would also spread onto a nearby petrol station which has lain disused for several years.

Planning agent Neil Gray of Edinburgh-based consultancy Rapleys has previously said the applicant had been in talks with the council for some time about the project.

He said that the aim is to create “something a bit different” for the area, which is set for substantial new development in the coming years due to the< West Link road, the new Torvean Golf Club and the relocated Highland rugby pitches.

Council planning officer Elaine Watt said: “The proposal will result in development of a ‘windfall’ site and the contribution towards providing additional housing, including 25% affordable, is to be welcomed.

“The former petrol filling station has lain vacant for a number of years and makes little positive contribution to the area, particularly when viewed from the A82. “The importance of this area in making a positive contribution at one of the main gateways to the city is noted and the design and layout has done much to achieve an acceptable and appropriate standard of development.”

Property Week: 2/12/2016

The overwhelming consensus on chancellor Philip Hammond’s first – and apparently last – Autumn Statement was one of frustration.

While some individual measures, including additional infrastructure spending aimed at unlocking housebuilding, were welcomed, most commentators felt that the chancellor failed to go far enough to meet businesses’ concerns.

Alan Watson, Rapleys Head of Rating, provides his comments within the article stating that despite the chancellor’s promise that his first and last Autumn Statement would be pro-business and pro-growth, once again businesses have been short-changed over rates.

Read the full Property Week article here.

 

McDonald’s and Metro Bank are not obvious competitors, yet when it comes to securing sites for new drive-thru outlets the two may soon be going head to head.

Drive-thrus have traditionally been the preserve of fast-food chains whose customers appreciate their speed and convenience, but in recent years there has been a notable increase in new drive-thru concepts outside the food and beverage (F&B) sector.

Metro Bank opened its first drive-thru in Slough in 2013 allowing customers to drive up to the bank and carry out transactions without leaving their vehicles.

The pilot proved so successful that last October, the company opened its second drive-thru in a retail park in Southall, west London, which like its Slough branch is located close to a busy main road.

Metro Bank says it is actively on the lookout for more suitable drive-thru sites. But is Metro Bank the exception that proves the rule that drive-thrus are best left to the fast-food giants?

Intuitively, a drive-thru retail bank where customers can make physical transactions goes against the direction of travel in banking, which is towards online and mobile.

However, Calum Ewing, Metro Bank head of property, says the format has proved a hit with its customers.

“Our drive-thrus are popular with a wide range of people, from parents with a car full of children to disabled customers and those who want to shelter from the bad weather,” he says.

“Customers are able to use the drive-thru to carry out full cashier services from the comfort of their cars, including paying in cash and cheques, as well as withdrawing funds from their account.”

An old idea
Drive-thru banking is not a new concept in the UK. Barclays opened the UK’s first drive-thru bank in Hatton Cross in 1998, although it closed within six months. HSBC, meanwhile, has previously announced plans to trial drive-thrus although as yet no sites have come to fruition.

Retail banks are not alone among non-food businesses in experimenting with drive-thru formats. Indeed, the concept is even gaining traction in the property world.

Earlier this year, an estate agency in Cornwall – MPH Legal & Estate Agents – opened on the site of a former petrol station, allowing people to drive up, take a property brochure and go. From dry cleaners to off-licences, other operators have also taken the opportunity to open drive-thrus, with varying degrees of success.

Where they have failed, non-traditional drive-thru occupiers have tended to fall down on at least one of the three main criteria for a successful drive-thru format: convenience, practicality and standardisation of service.
Rapleys associate Mark Frostick believes drive-thru dry cleaners provide a case in point. “I don’t think drive-thru dry cleaners ever really worked,” he says. “If you’ve got a big suit and you’ve got to hand it out of the car window and someone else has got to get it through the window it’s a bit of a faff. It’s just as easy to park up and go into the store.”

Where the fast-food chains have thrived is in offering an easy, efficient service that can be replicated at every drive-thru outlet. “You’ve got to know what you’re getting before you turn up, so if you turn up to a McDonald’s, whether it’s in Aberdeen or Penzance, and you order a Big Mac, you’ll get exactly the same product,” says Frostick.

Another barrier facing new entrants to the drive-thru market is the lack of availability of suitable sites. “There is a general lack of opportunity because a lot of the right locations have been densely developed,” says David Chittenden, head of automotive and roadside at Colliers.

Metro Bank’s two drive-thrus are attached to a full-service bank, so the company is on the lookout for sites that are able to facilitate both formats.

“As with all our sites, we look for areas with high footfall – or traffic in the case of our drive-thrus – retail parks being a good example,” says Ewing. “Most importantly, we always ensure that our stores are prominent and highly visible to our customers.”

Competition for sites
The issue Metro Bank is likely to face as it tries to expand is that this list of requirements could just as easily apply to any of the fast-food giants, the majority of which are also planning to grow their drive-thru portfolios. “KFC, McDonald’s and Burger King are desperately looking for these sites and are out there with lists as long as your arms,” notes Frostick.

High demand for suitable locations means such sites come at a premium. “People are paying good money for strong transient sites with good passing trade and accessibility,” says Frostick. “If you’re a Metro Bank potentially competing for that site you’ve got to ask yourself: how much money do we make out of that lane and do we need to be there?”

The cost of securing new sites may also prove a barrier for new entrants looking to pilot drive-thru concepts, given that the return on the initial investment cannot be guaranteed.

“You have to pay a lot of money for these sites and so you have to think about your exit strategy,” says Chittenden. “If you’re creating something that isn’t fit for purpose in five or 10 years’ time, then what’s the point?”

If the reality is that non-food drive-thru concepts are likely to remain niche, it could be that the greatest threat to the future hegemony of the big three drive-thru operators – McDonald’s, KFC and Burger King – will come from fellow food sector players.

Taco Bell opened its first UK drive-thru in Cleethorpes earlier this summer, while Krispy Kreme is known to be on the lookout for more sites after opening a Hotlight format store including a drive-thru in Hampton, Peterborough, in July.
hen there are coffee chains Costa and Starbucks, which are aggressively expanding into the automotive sector. Starbucks is targeting 200 drive-thru sites by the end of 2016, while Costa told Property Week in January that a trebling of its drive-thru network to more than 100 sites was a realistic medium-term aim.

“The coffee boys have come in and done exactly what they’ve done to the high street,” says Frostick. “They are competing with McDonald’s and KFC for sites.”

Chittenden says that for brands looking to grow their network of drive-thrus, there are still good sites out there, but the majority are in secondary rather than prime locations, meaning operators have to be a little more flexible in their requirements.
Frostick echoes the point and adds that drive-thru formats are still popular with developers of new roadside service areas or retail parks so long as they can secure the right operator.

“If you can put a KFC or a McDonald’s on the front of your car park and only lose half an acre in car parking spaces, it’s a much better return than having those extra car parking spaces,” he says.

However, the risk of putting an unproven concept into a new development is one many developers are not willing to take. This, coupled with the numerous barriers to entry, means agents like Frostick are “not getting flyers through from hundreds of people saying I want a drive-thru site”.

So banks, estate agents and other non-traditional drive-thru occupiers are unlikely to become a firm fixture on Britain’s road network. Fast-food chains are another matter, though. They could well face increased competition for sites as consumers drive demand for the next generation of drive-thrus.

Few property investment sectors have motored along at as rapid a rate of knots as automotive over the past few years.

Investor appetite for car dealership lots is booming, with the sector offering the enticing combination of long leases, strong covenants, inflation-linked rents and regular tenant investment to ensure buildings match the aspirations of the car manufacturing giants.

The average lot size has also increased significantly in recent years, according to new research from Knight Frank. Its Automotive Capital Markets 2016-17 report shows that whereas a decade ago the typical investment lot size was approximately £2m to £5m, today the £7m to £10m bracket is well populated and assets and portfolios in excess of £10m are becoming increasingly commonplace.

Rise in registrations
These larger assets are expected to become more common in the future as car brands demand larger facilities off the back of four years of rising new-car registrations.

But has the market still got plenty of fuel left in the tank or are there threats on the horizon that will slam the brakes on automotive investments?

Since the millennium, there has been significant consolidation in the car dealership sector and the trend continued in the last year, with more than £500m of corporate acquisition activity registered making it one of the busiest 12 months for a decade, says Adam Chapman, partner and national head of automotive at Knight Frank.

“Merger and acquisition [M&A] activity has been prolific, which is a huge sign of the health of the sector not purely from the investor perspective but also from the occupational perspective,” he says. “We’ve seen more companies doing business-to-business transactions in the past 10 years and we’ve seen huge amounts of consolidation, with the bigger groups getting bigger and buying in brands. That’s resulting in a significant windfall for a lot of investors.”
n addition to car dealership businesses snapping up rival operators, the market has been buoyed by the arrival of more UK funds – propcos set up to specifically target automotive investment stock and foreign investors drawn by the cheap pound.

Their arrival has coincided with the perception of automotive as an investment class shifting from something considered alternative to something seen as more mainstream, and this reappraisal hasn’t been adversely affected by the outcome of the EU referendum, according to Chapman, who says deals have still gone through post vote.
“We’ve seen other sectors where prices have been reduced or purchasers have tried to take advantage [of the vote], but in our sector values have held up extremely well and I can’t think of too many examples where prices have been chipped,” he says.

It comes back to the scarcity of stock and strong fundamentals, he adds. “We’re selling a portfolio at the moment and a party tried to come and make an adjustment to the price to reflect the uncertainty and we said that nothing has changed – the product is solid and it’s a great sector. Ultimately they agreed.”

Investment opportunities
The scarcity of stock remains a major challenge, but Chapman believes there is an opportunity for occupiers to take advantage of the pent-up investor demand for automotive property.

Data – leasehold vs freehold ownership
“The fact that nearly 80% of the automotive market is freehold sounds like an enormous amount to me and that clearly provides a finite amount of leasehold and therefore investment opportunities,” he explains. “As investment appetite continues to gather pace, I think the dealer groups will start to question whether it is financially sensible to hold those very impressive, bespoke, retail-led dealerships or whether their business is about selling cars. If it is then sale and leaseback in some form could release a huge amount of money for them to invest in other [dealership] groups.”

While the opportunity to do sale-and-leaseback deals might appeal to some occupiers, others may be put off by past experience of the funding mechanism, believes David Chittenden, head of automotive and roadside at Colliers International.

“The dealership groups can do these types of deal at the moment, but the problem is that when they do the deal with the original landlord it’s happy days, but when the existing landlord sells on to a third party the relationship can break down, so a lot are saying they don’t want to do sale and leaseback anymore,” he says.

A handful of new dealership developments are taking place at the moment, which would help to bring much-needed new stock to the market, Alisdair James, partner in the automotive and roadside team at Rapleys. However, finding appropriate sites can be difficult because dealers are looking for spaces that bear the same characteristics that appeal to the likes of care home operators and residential developers.

“Jaguar Land Rover wants the same dealer partner to represent both brands in the same territory and that’s created a bit of musical chairs,” says James. “But in some towns it’s increasingly difficult to find a four-acre site that can satisfy both brands in one location, so it becomes quite a challenge.”

Other prestige car manufacturers are also putting pressure on their dealers to ensure their premises are kept up to scratch. If they aren’t, the manufacturer may choose to relocate to another location. But many dealership groups, especially the smaller ones, can’t afford the high cost associated with building bespoke dealership property, notes Chittenden.

A model for the big boys
“I do a lot of work with the retailers and it’s tough out there,” he says. “We’re seeing a lot of smaller groups exiting who can’t afford to survive because it’s become a model for the big boys. It’s a good time for them to sell because money is cheap and the investment market is still strong for this product.”

The big question is how much longer the appetite for investment opportunities will continue. Over the next few years the automotive sector could experience a seismic shift. We are already seeing showrooms get bigger because the model ranges of manufacturers are rapidly expanding and at the same time, many experts expect that in the future there will be fewer dealerships around. That is partly due to the further consolidation and M&A activity expected among the larger dealer groups, but it is also down to the growing importance of the internet and the next generation of car purchasers.

Chittenden thinks that for millennials and the generations that come after that car ownership will become less important as the sharing economy and short-term
car hire businesses such as Zipcar gain a greater foothold.

High-footfall locations
The industry is responding to the changing demands of modern consumers head-on by establishing a greater presence in high-footfall locations such as shopping centres.

“These sites have become more prevalent over the last few years and I can see more and more manufacturers opening sites in shopping centres,” says Chittenden.

However, these locations aren’t without their problems, as Rapleys’ James points out. “If you want to offer test-drives it’s a lot harder to do from shopping centre sites,” he explain
So investors need to be aware of the changing dynamics in the automotive sector to ensure the investments they buy today are future-proofed for the duration of the lease.

That said, while the automotive sector faces a number of challenges, with new-car sales showing little sign of slowing, Chapman is bullish about the prospects of this burgeoning asset class.

“Pricing is robust, certainly for the absolute prime assets, and we’re seeing a real surge in investor demand, with this flight to quality that you see in uncertain times,” he explains. “The prime automotive dealerships, which are typically 20-year plus terms to solid covenants with fixed RPI-linked rents, are about as attractive an investment product as it gets.”

In short, there is little sign that the brakes will be applied on investment in the automotive sector any time soon.

When it comes to neighbourhood stores, convenience is all very good, but blanket saturation can be downright detrimental.

Has the UK convenience store sector reached saturation point? That’s what a new report published by the Local Data Company (LDC) in June appeared to show. The report, which studied the growth of convenience stores over a five-year period, found that although the total number of stores in the UK had grown from 13,617 in 2010 to 16,426 at the end of 2015, a number of convenience store formats experienced a decline in operational stores. Additionally, 228 UK towns saw a net loss in convenience stores in 2015.

So has the UK convenience store market run out of gas? LDC data shows that of the 14 convenience store fascias studied for the report, five endured a fall in store numbers last year, namely Londis, Tesco Metro, Mace, Budgens and M Local (which was later rebranded My Local). Some of these falls were a result of rebrandings rather than store closures, although the demise earlier this year of the My Local format – formerly owned by Morrisons – underlines how challenging this sector is at the moment, according to Matthew Hopkinson, director at LDC.

“It is not an easy market to enter, as Morrisons discovered to its cost when it opened 140 stores, many in old Blockbuster shops, only to close them all less than two years later,” says Hopkinson.

Fierce competition

The sector is extremely competitive, Hopkinson adds, and is now facing new threats from e-tailing. “Competition is fierce, costs are high and increasingly there is talk of a resurgence in online groceries that might be accelerated by Amazon’s entry into the UK market,” he adds. “There is much jockeying for position and consumer spend among large-format supermarkets, convenience stores and the discounters. Further change and casualties can be expected when everyone has to operate a healthy margin to survive and innovate.”

It is a view shared by Louise Etherden, associate partner at location specialist CACI. “The ‘c-store’ market has definitely become a lot more competitive and the rate of growth has slowed down quite a bit,” she says. “Retailers are putting more thought into the locations they’re opening, and they are spending quite a lot of time making sure they’re getting the right store in the right location and getting the ranging right.”

They are also making sure that they pay the right price for locations, according to Richard Curry, a partner in Rapleys’ retail and leisure team. “A lot of the recent slowing up is because developers have been paying more and more for sites and the only way they can make this work is to keep bumping up the rent on c-stores,” he says. “So I think the c-store operators have decided enough is enough because there is only so much trade to be had out of an area,” he says.

Another reason behind the recent fall in c-store sites in some locations is natural portfolio churn, with retailers closing weaker-performing stores when better locations in the area become available. “It is a normal part of the property ownership cycle to churn your estate,” says Steve Rodell, managing director at Christie & Co, which acts for McColl’s.

“When McColl’s put 100 sites on the market last year, everyone was on the phone to us saying: ‘What’s wrong with McColl’s – is there a problem?’ But what you’ve seen happen in the past few months is McColl’s has just bought 300 really good-quality Co-op stores and is selling out 100 of its bottom-end confectionery, tobacco and news outlets and some other bits and pieces in between. The grocery retailers are always churning sites.”

In demand

A number of retailers, such as Sainsbury’s, Spar, Costcutter and the Co-op, are also currently in the market for more c-store opportunities. As a result, Richard Petyt, partner at Knight Frank and formerly of Asda, does not see demand waning any time soon.

“I think the convenience format with the bigger retailers is here to stay,” says Petyt. “They’ve been doing it for a number of years and they are very good at it.” However, he says it will be a challenge for these retailers to turn a profit due to the competition from discounters and the fact that their cost base is set to rise as the new minimum wage comes into force.

Petyt expects further c-store openings in locations such as London, where retailer demand is still strong, with fewer openings in weaker locations in regional towns where the demographics are not so promising.

Etherden concurs, adding that CACI’s research shows while London is well saturated with c-stores, because there is a lack of superstores and less competition from discounters more money goes through convenience. “Many of the northern cities such as Halifax, Liverpool, Warrington, Wigan and Huddersfield are relatively underserved for convenience, but there is a strong presence from the discounters,” she adds.

Don’t believe the hype?

Not everyone is convinced that the c-store sector will keep on growing. One naysayer is Fraser McKevitt, head of retail and consumer insight at research and data consultancy Kantar. “In terms of the general pattern of convenience, we think the whole story about convenience being a boom area has been massively overstated,” he says. “Where we have seen growth, we’ve seen a lot of it supported by store openings and those store openings for the big guys are to some degree cannibalistic.”

He also says the “media narrative” around consumers shopping little and often and abandoning the traditional big shop in favour of the local c-store doesn’t hold water. “Our numbers don’t support that,” says McKevitt. “What we’ve found is that people are moving their money out of the big stores, but they are moving their money online, or they’re doing smaller shops in the big stores and in the discounters, leaving the convenience sector as a little bit of a sideshow.”

At the moment, the numbers don’t provide any real clarity as to whether or not the UK c-store market has already reached saturation point, or if we are merely in the middle of a temporary slowdown. But the continued rise of the discounter groups and the lack of strong c-store sites at affordable rents suggest that the future rate of expansion will not be as fast as it has been in recent years.

The UK commercial property market has seen a significant drop in confidence and investor demand following the Brexit vote. That was the conclusion of the Royal Institution of Chartered Surveyors commercial property market survey carried out after the Referendum on 23 June.

It said both the investment and occupier sides of the market had been impacted and rent and capital value expectations were now in negative territory.

That’s the UK picture. But what does Brexit mean for dealer property values? For the past few years the market has been buoyant, particularly for large, in-demand roadside sites.

Alisdair James, a partner at Rapleys, believes it is too early to say how much dealership property will be hit.

“The first indicator will be consumer confidence and the car sales figures over the next few months and particularly the September plate-change.

“If the uncertainty caused by Brexit impacts on consumer confidence and car sales decline significantly then we can expect a knock-on effect in the property market and for site values. For the time being however it seems to be business as usual.

“Where dealer groups remain under pressure from their manufacturer partners to upgrade or relocate their facilities they are continuing with their plans as before. A softening in the market could even present new opportunities for cash-rich dealer groups, particularly if competition for prime sites from alternate uses declines.

“In the short term, we have not seen a drop-off in enquiry levels for dealership property, and Brexit’s shadow has not deterred a number of recent corporate transactions, which have completed since the referendum vote. Others completed pre-June 23, despite the uncertainty. We expect this activity to continue,” he said.

Paul Taylor, a senior director with Bilfinger GVAs also believes it is too close to call on the Brexit impact.

“Logic points towards there ultimately being an adverse knock-on effect arising as a consequence of the worsening economic conditions that are likely to prevail.

“If customers are more reticent to commit to new car purchases and particularly if list prices were to rise due in part to the exchange rate deterioration, then one could anticipate a slowdown in the market.

“In reality, this may have been anticipated in any event regardless of the outcome of the referendum given the last four years of sustained headline growth.”

He also pointed out that it is difficult to get valuation data on much dealer property.

“In reality, relatively little prime dealership property is traded on the open market. The bulk of manufacturer-compliant property is transferred as part of business transactions, and the associated valuations are rarely published or totally reliable,” he said.

We also asked some of the experts what impact Brexit has or will have on institutional investors and dealership property?

At the wider level UK property funds managing billions of property assets have marked down their value of the building they own by 5%. These were mostly carried out by funds that are open to retail investors who can demand their money back at short notice.

Martin Carey, head of Investment at Rapleys said: “Brexit has undoubtedly caused something of a shockwave. The motor trade sector is unlikely to see the full extent of the referendum result for some while yet.

“While the automotive manufacturing industry has been vocal in its concerns, the mood amongst dealership operators is slightly more nuanced and this is being reflected in an investment market which hasn’t lost its appetite.

“For prime assets we anticipate that the market will remain stable and we are seeing a degree of confidence in the sector with dealership investment opportunities coming to market with little movement on asking terms and anticipated realisation figures.”

Carey argued that funds were still in the market for dealership opportunities which have strong covenants with long term rental growth prospects.

“Dealerships which have long-term, index linked income streams are still at the top of the shopping list with early indications that for the right asset, transactions are at pre-Brexit levels,” he said.

“Dealership property is still seen as a relatively safe investment, with Brexit not yet, altering the market fundamentals for occupiers and consumers.

“Dealership networks are continuing to expand fueling a steady stream of investment opportunities coming to market. While the Brexit tremors will continue to cause uncertainty, the automotive property market might just be better placed than most to weather the storm.”

Taylor at Bilfinger GVA said it was early days. “Logically demand will be thinner, at least in the short term, as many of the recent buyers of prime real estate in the sector have been the retail funds.

“In theory, with fewer buyers for prime stock, values could cool, although there is an argument that the very best investments will hold their value or even improve marginally given demand in the wider market is predominantly for long dated secure income,” he said.

APC property market review

In June Automotive Property Consultancy (APC) identified just over 1.5 million square feet of motor retail property which was available on the market. Over 70% of this was in the Midlands and the North with the West Midlands alone providing a quarter of the total. But demand for property is lagging behind.

“Requirements, by comparison are well down on the levels seen over the past two years. Geographically, half the current requirements have been targeting Greater London or the South East, the area that only represents 12% of the vacancy,” said Bill Bexson, managing director of APC.

“Typically, the requirements are for between one and four acres of land with between 10,000 and 20,000 square feet of premises. Physical presence on main roads remains the primary conduit to market,” he said.

Bexson said there was demand for bigger and fewer outlets with extensive parking.

“This has created a more clearly segmented market than before, exacerbated by continuing market consolidation, establishing distinctive value brands. “This places those controlling the best properties at the apex of the opportunity curve to secure the best franchises and generate the best returns.”

 

The prospect of moving house is fairly daunting and the concerns and considerations concomitant with private property moves are presented in a magnified fashion when one is considering moving premises for commercial purposes: is it affordable, what is the right location to maximise custom, how best to use space when space is increasingly at a premium etc.? IMI Magazine’s ‘moving’ special seeks to answer these questions and provide you with a plan of action if you are considering a relocation.

Businesses looking to upgrade or relocate premises may, like Phil and Kirsty, be focused on ‘location, location, location’, but those who ignore other key factors when deciding upon a new site could end up with a property headache that even the dynamic duo can’t cure. Whilst a property may be suitable in physical terms there are many issues that a site inspection won’t necessarily reveal.

Planning

For example, planning consent may be required for building work but also for a change of use which, with traditional stock in short supply, is an obstacle many are having to traverse. Current legislation requires that changing a property into a car showroom or workshop will almost always need planning consent. ‑is will need a planning application and whilst a decision should be available within three months this can, in some cases, take longer. A relocation plan should always include an appraisal of whether planning consent is required at any stage and, if so, a timeline introduced which factors in delays and mitigates any potential risk to business.

The lie of the land

It has also been known for some businesses to take properties without taking a survey which, whilst less of an issue for a new property, can add a significant cost if repairs are required on older facilities. For example, if a roof needs replacing five years into occupation it is not just the cost to consider but the disruption to the business as well. Meanwhile, rights of way and title restrictions continue to be factors, but these can be navigated with the help of a good solicitor. Businesses should, though, also be prepared to look beyond the confines of a proposed new site and keep in mind issues and developments in the local area. A proprietor, for instance, may have just relocated to the perfect site, and invested heavily to fit out the unit, only for the site to be bypassed, or a nice quiet neighbouring unit turned into a waste centre.

Relocation can be taxing

Upgrading facilities is a significant investment and tax liabilities can impact on expansion plans.

However, George Osborne’s 2016 Budget did contain some good news for business owners on the tax front. A new stamp duty slice system provides smaller operators a cut in their tax bill, with 0% owed on the first £150,000 and 2% on the proportion between £150,000 and £250,000 (though the largest investors and developers are hit with an increase, around 90% overall have had the bills cut or kept the same). Business rates, too, were addressed by the Chancellor and, while the root-and-branch reform many operators are hoping for hasn’t materialised yet, the threshold for rates relief has doubled – giving permanent exemption to many. The business rates system must still be navigated with care, though, when considering new premises and values. Rates charges can be appealed, but the current rates are still payable until an appeal is successful, at which point a refund will be provided.

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“This is the future.” Four fateful words wielded by ex-Tesco CEO Philip Clarke as he unveiled a radical reinvention of his Watford Extra in August 2013. The most high profile launch of a supermarket in years, the £12m refit boasted a brand new layout with low-slung fresh produce aisles and a sleek F+F concession sprawled across 80,000 sq ft.

It also featured Clarke’s latest acquisitions displayed under one roof: the modern-rustic Euphorium bakery, the charming Harris + Hoole coffee shop and the bright and colourful Giraffe restaurant. Ten months after posting Tesco’s first profit drop in 20 years, Clarke had hedged all his bets – wagering a reported £12m – on this Watford vision.

But it didn’t deliver. After an initial spike, sales “slipped back into negative like for like” says Bryan Roberts, global insights director at TCC. And within a year of the Watford launch, Clarke had been booted out, setting off a chain of events that ultimately saw new CEO Dave Lewis slash capital expenditure, call a halt to the space race, cancel several projects and close a number of existing stores.
With Tesco’s big four rivals also in retrenchment mode the property sector is the quietest it’s been for years. But that doesn’t mean developers have had to shut up shop. So who’s building what, where and why? And how have Tesco and its rivals evolved their stores in Watford’s wake?

Tellingly, many features Clarke pushed through at Watford have been adopted elsewhere by Tesco. Low level fresh produce counters now appear in revamped Tesco Extras nationwide and non-food has followed Watford’s lead by adopting a more “John Lewis” approach, says Roberts, with a slicker, less commoditised look. Bigger health and beauty departments have also popped up offering in-store treatments.

Stripped back electrical ranges are now more commonplace thanks to the trial store, adds David Gray, senior analyst at Planet Retail, with a greater focus on higher margin categories like homeware and clothing. Click & collect kiosks equipped with digital touchscreens have also been rolled out.

Lewis has also pushed forward with Clarke’s plan for more concessions. With 248 hypermarkets in its portfolio (three times more than Sainsbury’s and nearly eight times as many as Asda) Tesco has more reason than its rivals to reinvigorate out-of-town stores as destinations and Clarke’s approach was a “good proposition” adds Gray. Concessions “increase dwell time, customers stay in store longer, and in theory you increase sales”.
Rollout has been limited but steady. Fourteen Tesco stores now have Giraffe restaurants, 29 have Harris + Hoole coffee shops and 63 have Euphorium bakeries. In October 2015 Lewis signed a deal with Arcadia to open Dorothy Perkins, Burtons and Evans concessions in Tesco, and earlier this month took control of Harris + Hoole in a move that put paid to rumours he would ditch the coffee business.

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Ministers’ plans to boost high streets by extending Sunday trading hours will not be “game-changing” and are unlikely to be a boon for supermarkets, according to retail experts.

On Tuesday, the government announced that Sunday trading laws are to be scrapped by the autumn, meaning councils will have the power to allow large shops and supermarkets to open for more than six hours on Sundays.
John Witherell, senior director in CBRE’s retail team, said he believes that the proposals are “not going be the game-changer the government thinks they will be”.

Independent convenience stores had campaigned most strongly against Sunday trading reform out of fear that trade would shift to larger stores.

However, Witherell said that supermarkets, which themselves have built large estates of smaller stores in recent years, were unlikely to see any significant benefit either. “All that will happen is that sales will be spread over a longer trading time, but they will also have higher operating costs,” he said.

Ministers are hoping the new approach will give Britain’s retail sector a boost. However, Ed Cooke, head of policy at the British Council for Shopping Centres, said the policy was misguided. “If the government was going to do anything to save the high street, it should be to reduce business rates,” he said.

An amendment will be added to the Enterprise Bill, which is currently passing through parliament, to enable the changes. Under the legislation, councils will be able to set ‘zones’ where the new hours will apply, meaning that they can exclude some areas. So far, few have made clear what their policy would be, but Cooke added that the legislation may enable them to “set arbitrary red lines around shopping centres”.

Witherell said council boundaries would also be an issue, particularly in large cities with multiple high streets, which could see a “bizarre situation where large shops on one side of the street will be able to open longer hours, while those on the other side cannot”.

Russell Smith, head of retail at planning consultancy Rapleys, added that a “tug of war” could ensue between local authorities, with less affluent ones being keener to embrace longer hours, and neighbouring councils feeling pressured to increase theirs to “keep up with the Joneses”.

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