Convenience stores buck commercial property trend

Convenience stores, corner shops and supermarkets could present a good opportunity for commercial property lenders amid the coronavirus pandemic, according to Proplend.

The peer-to-peer commercial property lender said that while non-essential retail shops, pubs, restaurants, hotels and leisure have all been hit hard by the lockdown, supermarket sales rose through panic buying and convenience stores and corner shops have been busier than ever.

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Research from IGD, cited by Proplend, found that the value of the convenience sector is due to increase from £41.4bn last year to £48.2bn by 2024, a rise of 16.6 per cent.

Proplend said whilst supermarkets still tend to be a more institutional investment, convenience stores are usually on shorter 10-year leases and depending on location, loan values can start from around £300,000 with a six to seven per cent target yield.

The lender said in the current long-term low interest rate environment, this is the perfect ticket size for a local private investor or pension investor.

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“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,” Proplend said in a blog on its website.

In May, Proplend predicted that the Covid-19 pandemic will drive more investors towards commercial property.

The platform said with rising prices leading to over-inflation, commercial property remains an attractive asset class, while ongoing uncertainty and stock market volatility may also drive new investors towards it.