Retail Insights Q4 2023 – Q1 2024 Kent

Kent's sizable and prosperous population of 1.9 million positions it as a significant retail market. Offering a diverse array of shopping experiences, from discounted designer goods at Ashford's Designer Outlet to antique treasures in Margate and Ramsgate, Kent caters to various consumer preferences. Additionally, it hosts an independent start-up hub in Herne Bay and traditional high streets in Tunbridge Wells, Canterbury, and Deal, alongside numerous shopping centres scattered throughout the region. Notably, Bluewater stands out as the largest shopping centre, boasting approximately 1.82 million square feet of retail space. Overall, Kent accommodates around 42 million square feet of retail space, translating to roughly 21 square feet per capita, in line with the national average.

While vacancy rates have stabilised since the onset of the pandemic, currently standing at 2.6%, this marks the highest level in a decade. Despite mildly positive net absorption, the market faces challenges from new developments and weakening occupier demand, potentially leading to upward pressure on rental rates in the short term. Retail activity in Kent experienced a downturn in 2023, reaching its lowest point since at least 2009, influenced by factors such as rising interest rates and a cost-of-living crisis.

The leasing landscape reflects a mix of occupiers, with discounters and grocery retailers notably active in larger deals. Notable recent transactions include Poundland securing 25,000 square feet in Gravesend and City Electrical Factors leasing 19,000 square feet in Dartford Trade Park. Meanwhile, Co-Op leased 6,000 square feet in Dartford. Construction activity in the retail sector primarily revolves around mixed-use residential and regeneration projects, with the Gravesend Heritage Quarter being a notable example, encompassing 130,000 square feet of retail space alongside residential units and community amenities.

Efforts to revitalise existing retail spaces are underway, exemplified by Tunbridge Wells Borough Council's strategic initiatives for the Royal Victoria Place Shopping Centre, focusing on enhancements and improvements. Despite a slowdown in rental growth, with a decrease of -0.3% over the past year, average retail rents in Kent remain relatively high at £29 per square foot, though with significant variation across submarkets. Dartford commands the highest rents at £86 per square foot, while Dover, Swale, and Gravesham offer more affordable rates at £16 per square foot.

In terms of investment activity, the past 12 months have seen investment volumes totalling £186 million, below the five-year average of £282 million. Recent transactions have predominantly involved smaller-scale storefront retail deals, contrasting with larger transactions in 2023 focused on supermarket assets and retail parks. Notably, Sainsbury's Reversion Portfolio, comprising 26 stores, witnessed significant trading activity, culminating in Supermarket Income REIT's acquisition and subsequent sale to Sainsbury's.

Annual investment volumes for the past 12 months stand at £186 million, which compares to the average for the past five years of £282 million. Much of the activity over the past few months has involved storefront retail transactions for less than £1 million. Larger deals earlier in 2023 saw investors trading supermarket assets and retail parks. The Sainsbury's Reversion Portfolio comprising 26 Sainsbury's stores was traded twice at the start of the year. The Sainsbury's, Mills Road was included with the Supermarket Income REIT's purchase for £196 million for a 25.5% stake from British Airways Pension Trustees, increasing their holding to 51% of the portfolio, with the remainder held by Sainsburys. Supermarket Income REIT subsequently sold it's 51% share to Sainsbury's for £430 million in March.