Our Market

What is the local shopping market?

The local shopping sub-sector of the retail market caters for local communities and tends to serve a limited catchment area. Local shopping is focused on suburban parades and neighbourhood centres, as well as individual convenience stores. These are typically located in individual districts within conurbations and villages. However, the local shopping market can also include niche retail areas in city centres serving local or specialist needs.

Local shopping is distinct from the traditional high street in that it tends to lack comparison shopping. In contrast, it caters for top-up and just-in-time purchases, with a high proportion of non-discretionary spend. It is characterised by comparatively small unit sizes and a high proportion of independent traders, who are often known personally to their customers.

Developments within the retail shopping environment are placing an increasing emphasis on local or convenience shopping. The factors involved include:

  • increased footfall for local parades as a result of higher petrol prices and travel costs;
  • the trend towards "just in time" shopping;
  • greater understanding within local and national authorities of the importance of sustaining local community amenities;
  • the general improvement of the convenience store offer.

Local shops provide older consumers with the opportunity for social interaction. Green issues are forcing consumers to think carefully about car travel, with parking, congestion and road charging schemes also likely to favour the local shopping market. These trends have been recognised by major national supermarket operators, a number of whom have announced plans to open significant numbers of local convenience stores.

The convenience shopping market was worth £20 billion at the time of LSR's listing on the London Stock Exchange (Source: Colliers Research). By 2010 the market had expanded to £33.6 billion, and is expected to continue growing and to be worth approximately £42.2 billion by 2016 (Source: Convenience Retailing 2010: Future Trading Strategies, IGD).

A key characteristic of the local shopping market is the affordability of rents. Research from Colliers CRE found rents were, on average, below 7% of turnover, comparing favourably with typical high street ratios. Rent affordability is therefore a key factor in LSR's acquisition and asset management decisions.

Investment in local shops has traditionally been the preserve of the smaller, often locally based investor. With little competition from institutional or larger property companies, the market remains fragmented and underdeveloped. In buying in this market we are able to exploit pricing inefficiencies when properties are subject to limited, or in some cases, no marketing. LSR's establishment of a network of over 100 local agents has been key to its ability to identify and execute investment opportunities. Our professional and proactive approach to asset management also provides us with opportunities to generate above average returns for our shareholders.

Published : Monday, October 23, 2017 7:03 AM

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