Blog Archives - Green Street https://www.greenstreet.com/category/thought-leadership/blog/ Definitive Leaders in Real Estate Analysis & Research Tue, 09 Sep 2025 21:14:38 +0000 en-US hourly 1 https://wordpress.org/?v=6.8.2 https://www.greenstreet.com/wp-content/uploads/2025/05/cropped-favicon-32x32.png Blog Archives - Green Street https://www.greenstreet.com/category/thought-leadership/blog/ 32 32 Introduction to Tenant Default Risk https://www.greenstreet.com/tenant-risk-introduction-to-tenant-default-risk/ https://www.greenstreet.com/tenant-risk-introduction-to-tenant-default-risk/#respond Tue, 12 Aug 2025 13:39:42 +0000 http://wordpress.greenstreetapps.com/?p=13587 Across the retail property sector, the primary factor in calculating the financial return of an asset is its rental income. Therefore, gaining a detailed view and understanding of the potential risk to total income is vital when evaluating tenants within a portfolio. Why Is Measuring Risk Important to Retail Investors? The UK retail sector has been […]

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Across the retail property sector, the primary factor in calculating the financial return of an asset is its rental income. Therefore, gaining a detailed view and understanding of the potential risk to total income is vital when evaluating tenants within a portfolio.

  • Why Is Measuring Risk Important to Retail Investors?

The UK retail sector has been significantly impacted over the last 10 years by company administrations and Company Voluntary Administration (CVAs), with 2018 even being referenced to as “The Year of the CVA” due to the number of high-profile companies using the restructuring tool to avoid insolvency.

With rising inflation, increased costs from public policy changes on National Insurance, tariff impacts and global conflict, the resilience and financial health of retailers has never been more important for investors assessing and monitoring their portfolios.

  • What Retail Analytics Tools Can Help Retail Investors?

With the upcoming release of new features to Retail Analytics Pro product, Green Street will enhance its analytical offering by gaining new data on the corporate risk of national chains across the UK from Company Watch, a market leading financial risk analytics company.

Using data from Company Watch, Green Street’s Retail Analytics Pro will offer enriched data-driven scores that reveal the real financial health for UK and Ireland registered companies.

  • Who is Company Watch and how do they rate financial health?

Company Watch is a UK-based specialist in financial risk and credit analysis, leveraging machine learning and public company data to help businesses predict distress, optimise due diligence, and monitor supplier.

Its flagship H Score® product rates each UK company’s financial health on a scale of 0–100, flagging those with scores below 25 as high-risk warning cases and helping foresee insolvencies before they occur.

Working with leading banks, insurers, large corporates, fraud and underwriting teams to monitor financial health, predict insolvency risk, and enrich portfolio management dashboards.

  • What are the key risk factors to evaluate Tenant Default risk?

There are seven key risk factors that are considered when evaluating corporate risk:

  1. Profitability – profit generation to meet its short-term commitments
  2. Liquidity – liquid assets such as debtors and cash in relation to rate of expenditure
  3. Stock and Debtors – management of working capital, with a preference for lower stock and debtor balances
  4. Current Assets – current assets provide coverage over the company’s liabilities
  5. Equity Base – company’s equity base in relation to its liabilities as reflection of their stable financial position
  6. Current Funding– a higher reliance on current liabilities to finance assets is negative as it indicates liquidity risk or financial instability
  7. Debt Dependency – assessment of a company’s dependence on debt to fund its tangible assets, with short term debt particularly viewed negatively given is reduced flexibility

The new and enriched metrics will soon be available in Retail Analytics Pro, providing clients with unique financial insights to help them optimise their portfolios

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Powering Retail Strategies: Trade Area Power Scores Launch in the UK Market https://www.greenstreet.com/power-your-retail-strategies-tap-scores-launch-in-the-uk-market/ https://www.greenstreet.com/power-your-retail-strategies-tap-scores-launch-in-the-uk-market/#respond Wed, 30 Jul 2025 09:05:29 +0000 http://wordpress.greenstreetapps.com/?p=13539 Proven and trusted in the U.S., Green Street’s Trade Area Power (TAP) Scores have become a go-to benchmark for assessing the local demographic strength of an asset, with TAP scores referenced in our research notes widely to support analysis of assets. Now, this powerful tool is set to launch in the UK, within Retail Analytics […]

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Proven and trusted in the U.S., Green Street’s Trade Area Power (TAP) Scores have become a go-to benchmark for assessing the local demographic strength of an asset, with TAP scores referenced in our research notes widely to support analysis of assets. Now, this powerful tool is set to launch in the UK, within Retail Analytics Pro, allowing users to gain a powerful new data metric for understanding location quality.

Investors, brokers, and retailers alike have long relied on demographic data to guide decisions, from evaluating asset quality to understanding catchments. However, processing this information and making cross-market comparisons can be challenging. Green Street’s TAP Scores simplify this by combining income, population density, educational attainment, and housing affordability into a single score, from 1 to 100, that captures the demographic strength of a location. This standardised metric helps identify comparable catchments, benchmark new sites, and forecast sales performance with greater confidence.

Here’s a look at the four core demographic metrics behind the score and why they matter.

 Household Income

Median household income is a critical indicator because it directly reflects the local population’s spending power. Areas with higher incomes can typically support a stronger mix of tenants, including premium retailers, which often generate higher sales productivity. Wealthier catchments are generally more insulated from economic downturns and can offer more stable rental income and long-term asset performance. It also informs decisions about tenant mix, rent levels, and investment strategy, helping to align the asset with the needs and expectations of its local customer base.

Population Density

 Population density indicates how many people live within a defined area. High density means more potential customers nearby, supporting steady footfall for retail tenants. Higher population density signals the opportunity for stronger sales volumes and tenant demand, making it a key measure of a location’s consumer base.

Education Attainment

Areas with a higher share of graduates often have stronger job markets, particularly in professional sectors, which can drive higher income levels. A higher percentage of degree-holders often correlates with higher discretionary spending levels, and a stable employment base that is resilient to economic shocks. This creates retail destinations that can generate above average spending levels which create better investments for landlords and strong performing stores for retailers.

Affordability

The affordability ratio (calculated as median home value over median household income) captures the cost-of-living pressure in an area and gives a simple snapshot of how affordable housing is relative to local earnings, while also gauging whether local consumers have room for non-essential spending.

For most households, housing is by far the biggest single expenditure. In places where the affordability ratio is high, a larger share of household income goes toward housing costs, leaving less disposable income. While high house prices can reflect desirability, if they significantly outpace incomes, they may limit household spending power.

By combining these four powerful metrics, we get a clear picture of local demographic strength. TAP Scores offer a clear, data-driven view of local demographic quality, helping clients make smarter and faster decisions.

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Retail Recovery: FY 2024 Store Openings and Closures – PwC report driven by Green Street Data https://www.greenstreet.com/retail-recovery-fy-2024-store-openings-and-closures-pwc-report-driven-by-green-street-data/ https://www.greenstreet.com/retail-recovery-fy-2024-store-openings-and-closures-pwc-report-driven-by-green-street-data/#respond Thu, 27 Mar 2025 10:19:46 +0000 http://wordpress.greenstreetapps.com/?p=13305 Over the course of 2024, Green Street have seen that investment activity in the retail sector is gaining significant momentum. Last week, PwC published their bi-annual report, featuring proprietary data from Green Street, highlighting the positive shift in retail through the latest openings and closures of chain stores, leisure venues, and service outlets across Great […]

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Over the course of 2024, Green Street have seen that investment activity in the retail sector is gaining significant momentum. Last week, PwC published their bi-annual report, featuring proprietary data from Green Street, highlighting the positive shift in retail through the latest openings and closures of chain stores, leisure venues, and service outlets across Great Britain in 2024.

Openings and Closures

Green Street tracked more than 206,808 outlets operated by multiple operators across Great Britain and found that chain outlet closures have dropped to their second-lowest level in 10 years, at 12,804. This translates to an average of 35 closures per day.

Total GB Openings and Closures by year:

chart visualization

Daily opening figures meanwhile stayed the same averaging 25 openings per day. While this remains higher than the pandemic years, it still lags behind the pre-pandemic high of 34 per day in 2017.

Across Great Britain, the landscape remains relatively steady, with net changes ranging from -1.4% in Wales (a loss of 131 outlets) to -2.3% in the East of England (down 452 outlets). While closure rates fluctuate between regions each year, the longer-term trend over the past decade shows all regions landing within 2 percentage points of the national average for cumulative closures.

Category analysis

Convenience stores and coffee shops led the way in 2024 with more than two net openings each week, driving growth across the leisure, grocery, and value sectors. Large supermarket chains accelerated the growth of convenience stores as they continued expanding their smaller-format stores, contributing to 171 net new openings in this category. Coffee shops followed closely with 105 net additions, as they focused on expanding their out-of-town and drive-thru locations.

At the other end of the spectrum, ongoing shifts in how people live, shop, and work — alongside a handful of high-profile restructurings — drove many of 2024’s closures. With chemists, pubs and bars, banks, and car-related outlets accounting for half of all net closures.

The 2024 results show signs of recovery, with closures continuing to stabilise and a reduction in consolidation with much of the portfolios now leaner and fit for purpose. 2025 will be a challenging year, with costs rising due to new tax policies impacting margins.

Green Street’s Retail Analytics Pro unlocks new possibilities for investors, occupiers, and public sector stakeholders, supporting data-driven decisions that enhance retail performance and local regeneration. By combining advanced data science with extensive industry expertise, Green Street continues to set new standards for real estate insights, empowering stakeholders to make smarter, more informed decisions.

Click here to learn more about Green Street’s new
Retail Analytics Pro

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London’s Luxury Retail Playground: The Transformation of New Bond Street https://www.greenstreet.com/londons-luxury-retail-playground-the-transformation-of-new-bond-street/ https://www.greenstreet.com/londons-luxury-retail-playground-the-transformation-of-new-bond-street/#respond Thu, 13 Mar 2025 15:11:57 +0000 http://wordpress.greenstreetapps.com/?p=13210 In light of the recent news that Prada has acquired the building housing its flagship Miu Miu store on New Bond Street for approximately £250 million, we take a closer look at the historical retail landscape of this iconic shopping destination and explore how it compares to other leading luxury retail hubs across Europe. Luxury […]

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In light of the recent news that Prada has acquired the building housing its flagship Miu Miu store on New Bond Street for approximately £250 million, we take a closer look at the historical retail landscape of this iconic shopping destination and explore how it compares to other leading luxury retail hubs across Europe.

Luxury Mix New Bond Street 2008-2025:

chart visualization

Over the past 18 years the retail landscape of New Bond Street in London has undergone a dramatic transformation, solidifying its position as one of the most iconic luxury shopping destinations in the world. Back in 2008, the street featured a diverse mix of retailers, with units fairly evenly split between Premium, Luxury, and Super Luxury brands – and even a handful of Mass retailers, such as Jigsaw and Russell & Bromley.

However, over the years, the Mass retailers gradually disappeared, followed by a notable decline in Premium brands as well, this could be due to the rise in business rates across the street with the 2017 revaluation seeing an average rise of 130% on Bond Street pricing out the non-luxury occupiers. In their place, a wave of Super Luxury retailers – primarily global fashion houses – took over, with their presence more than doubling over this period. Today, Super Luxury brands dominate the street, occupying 56% of all units, firmly establishing New Bond Street as a global epicentre for ultra-high-end retail.

Comparison to Luxury High Street

To benchmark performance, the Top 30 luxury high streets across the Top 30 European markets were selected and analysed, focusing on physical vacancy rates. The physical vacancy rate analysis measures the proportion of unoccupied floorspace as a percentage of the of the total retail area, providing insights into market strength across different locations.

New Bond Street in London has one of the lowest physical vacancy rates at just 4.1%, with several units currently under development and multiple transactions taking place over the past 18 months. Comparatively, Østergade in Denmark recorded the lowest physical vacancy rate among all luxury high streets, with only 1.3% of space remaining unoccupied, reflecting the strength of the Danish luxury retail market.

On the other end of the spectrum, Calle de José Ortega y Gasset in Madrid is facing significant challenges, with nearly 20% of its retail space currently vacant. Many of these vacant properties are large-format stores, which remain difficult to lease due to their size and operational costs. In fact, Madrid’s luxury market appears to be under increasing pressure, as two of its high streets rank among the bottom five for vacancy rates. Additionally, the average size of vacant units in Madrid is the largest among the 30 high streets analysed, with many exceeding 3,500 sq ft, making them particularly hard to fill.

Floorspace Vacancy Rate

chart visualization

Green Street’s Retail Analytics Pro unlocks new possibilities for investors, occupiers, and public sector stakeholders, supporting data-driven decisions that enhance retail performance and local regeneration. By combining advanced data science with extensive industry expertise, Green Street continues to set new standards for real estate insights, empowering stakeholders to make smarter, more informed decisions.

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Measuring Retail Success: Why Floorspace is a key data point? https://www.greenstreet.com/measuring-retail-success-why-floorspace-is-a-key-data-point-2/ https://www.greenstreet.com/measuring-retail-success-why-floorspace-is-a-key-data-point-2/#respond Thu, 13 Mar 2025 14:01:06 +0000 http://wordpress.greenstreetapps.com/?p=13222 Estimating the total retail floorspace across Great Britain has long been a complex challenge for stakeholders in the retail property sector. However, Green Street, following its acquisition of LDC’s granular POI dataset, has harnessed cutting-edge data science and analytical capabilities to model floorspace across 700,000 plus retail units across GB. This landmark development provides new […]

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Estimating the total retail floorspace across Great Britain has long been a complex challenge for stakeholders in the retail property sector. However, Green Street, following its acquisition of LDC’s granular POI dataset, has harnessed cutting-edge data science and analytical capabilities to model floorspace across 700,000 plus retail units across GB. This landmark development provides new opportunities for investors, occupiers, and public sector planners, offering deeper insights into retail provision and space utilisation.

Value proposition by segment

Investors – can gain a comprehensive understanding of retail provision surrounding assets and assess how they serve local catchments using retail floorspace per capita statistics. Additionally, Green Street’s floorspace data can be utilisied in underwriting, to estimate the sales productivity of an asset, using sales per square foot estimates. In addition, floorspace vacancy metrics will add context to physical vacancy rates, understanding average unit size of vacant space, as well as aligning more closely with REITs who report financial vacancy rates.

Occupiers – can support their tactical location planning strategies in local markets by using Green Street’s floorspace data to target specific unit sizes for upsizing or relocation opportunities in order to maximise sales densities. Understand competition levels and assess the impact of competitors based on their space usage rather than just the number of physical units.

Public Sector – can address the long-standing issue of retail oversupply in the UK. Green Street’s floorspace data helps identify locations with the largest challenge of retail space per capita but also to identify specific categories that are oversupplied within a catchment. Benchmarking similar locations using Green Street’s Health Index will help users determine the exact amount of space reduction needed to drive retail tension and support local regeneration.

chart visualization

Green Street’s floorspace model was developed using data from the Valuation Office Agency (VOA), matched with Green Street’s database via the Unique Property Reference Number (UPRN). This dataset was then enriched with Green Street’s proprietary metrics, including tenant information, business type, location, and tenant category and subcategory.

Data Accuracy: Average floorspace values were calculated for each metric using a hierarchical approach to ensure the most detailed and accurate averages. Strong outliers were excluded to enhance reliability. Vacant units were also evaulated based on their previous occupancy.

Regional Considerations: Areas with low data availability, such as Scotland and specific sectors like pubs, bars, and hotels, were modelled separately.

Retailer Comparison: The model distinguishes between multiple and independent retailers, ensuring that averages are calculated within comparable groups.

Validation: The final model was validated against VOA floorspace figures to ensure alignment within acceptable parameters. This process resulted in a robust dataset covering all GB retail floorspace, utilizing over 400,000 industry-recognised data points from the VOA combined with Green Street’s expert insights—the first dataset of its kind in the market.

floorspace-modelling-methodology

Green Street’s Retail Analytics Pro unlocks new possibilities for investors, occupiers, and public sector stakeholders, supporting data-driven decisions that enhance retail performance and local regeneration. By combining advanced data science with extensive industry expertise, Green Street continues to set new standards for real estate insights, empowering stakeholders to make smarter, more informed decisions.

Click here to learn more about Green Street’s new
Retail Analytics Pro

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Strip Centers: A Promising Outlook https://www.greenstreet.com/strip-centers-a-promising-outlook/ https://www.greenstreet.com/strip-centers-a-promising-outlook/#respond Tue, 10 Dec 2024 09:01:32 +0000 http://wordpress.greenstreetapps.com/?p=13055 The narrative around brick & mortar retail has changed dramatically over the last few years, particularly relative to the outright negativity from the late 2010s. At the time, mounting concerns that ecommerce would quickly dominate the retail industry – compounded by high-profile bankruptcies such as that of Toys R Us or Sports Authority – prompted […]

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The narrative around brick & mortar retail has changed dramatically over the last few years, particularly relative to the outright negativity from the late 2010s. At the time, mounting concerns that ecommerce would quickly dominate the retail industry – compounded by high-profile bankruptcies such as that of Toys R Us or Sports Authority – prompted retailers to aggressively scale back store opening plans and redirect resources toward investments in supply chain and technology. A secular decline in retail real estate rents was then anticipated. But the pandemic, and perhaps time itself, has reversed fortunes, bringing retail real estate back into favor.

A Turn For The Better 

The now widespread use of ecommerce delivery methods such as ‘buy online, pickup in-store’ or ‘ship-from-store’ have reintroduced physical stores as a central hub for distributing goods.

At the same time, iconic digital brands have struggled to reach profitability and have turned to physical stores as part of the solution, underscoring the importance of this traditional channel. Hybrid work-from-home schedules have also strengthened strip center fundamentals, driving increased demand from retailers seeking to serve the needs of consumers while at home. The importance of brick-and-mortar retail has been reaffirmed. 

Shovels On Hold

Despite the resurgence in demand for retail real estate, new developments have not taken off. From ’01 to ’08, prior to the Global Financial Crisis, bulging new supply averaged approximately ~2.5% of the total stock annually, more than any other traditional real estate sector. In the following decade, new supply was muted at about 0.5% of the existing stock per year, but tenant bankruptcies, particularly in the late 2010s, flooded the industry with vacant space.

Most recently, in the post-pandemic era, strip center development starts have been minimal, averaging just 0.3% of the existing stock per year. And more importantly, unlike prior cycles, the lack of new supply has coincided with strong retailer demand for space, setting off the strong backdrop we enjoy today. New supply may increase some going forward but is likely to remain a tailwind for the sector.

While strong retailer demand for space, along with stabilizing construction costs, are threatening to change the narrative, conditions required to drive new developments on a broad scale are still distant.  

 

A Perfect Pairing: Strong Demand, Steady Supply

Strip center occupancy for institutional quality portfolios is handily above pre-pandemic levels, at heights not seen in over 20 years. Additionally, the backlog of leases signed but not yet commenced is above historical levels and is poised to drive strong NOI growth over the next 18 months, granted tenant retention remains high. The successful backfilling of former Bed, Bath & Beyond stores in ’23 and ’24 is more evidence of strong retailer demand. The space has been retenanted faster and at a lower cost than in prior anchor bankruptcies such as that of Sports Authority in 2016.

Additionally, driven by the lack of availability of high-quality real estate, retailers have been willing to take over the leases from bankrupt tenants, allowing minimal disruption for landlords. The table is set for healthy rent growth going forward. 

 

Outlook 

The outlook for strip centers is brighter than in the past. A strong demand-supply backdrop is expected to lead to healthy rent increases of ~3% annually over the next five years and sustained high levels of occupancy. The outlook may not exactly set hearts racing but is much better than what the industry experienced in the last two decades: a rent growth CAGR of 1% during the decade from ’14 to ’23, and flat growth during the prior decade, from ’04 to ’13.

Our forecast leans conservative due to the typical cyclicality of retail – tenant failure is a constant in the industry – and the strong bargaining power still held by some national anchor tenants, including grocers. But given the strength of current fundamentals, and the resilient store opening plans of retailers despite macroeconomic uncertainties, the sector seems poised for positive surprises. 

  

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Making the Most of UK’s Golden Triangle with Niche Sectors https://www.greenstreet.com/uk-niche-sectors-in-golden-triangle/ https://www.greenstreet.com/uk-niche-sectors-in-golden-triangle/#respond Mon, 12 Aug 2024 21:40:54 +0000 http://wordpress.greenstreetapps.com/?p=12512 The industrial sector and office sector have both seen significant flux in the past year. In a global macroeconomic environment filled with shifting trends and difficult lending policies, the commercial real estate (CRE) market is filled with market participants hunting for every opportunity they can find. In the UK specifically, this – along with shifting […]

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The industrial sector and office sector have both seen significant flux in the past year. In a global macroeconomic environment filled with shifting trends and difficult lending policies, the commercial real estate (CRE) market is filled with market participants hunting for every opportunity they can find. In the UK specifically, this – along with shifting renter focus – has led to the rise of two new niche sectors in the United Kingdom. In the office sector, we’ve seen the rise of the UK Lab Space niche sector; and in the industrial sector, Industrial Outdoor Storage (IOS) is rising fast.

Overall, the past few months of UK CRE has shown that commercial assets are valued approximately 10-11% too low. This means that there is a spread of opportunity to generate unlevered returns across the market. And when real estate is cheap compared to base investments, market participants have the chance to enter the market with a low barrier to entry –that they can take advantage of to hop into investing at an opportune time.

This opens a potential window through which UK investors can look towards budding markets, such as these new niche sectors. So, let’s take a moment to examine them with a bit more of a discerning eye.

Starting with UK Lab Space, we’ll focus on the name itself. The name “lab space” is used for the niche sector as opposed to “life science” or “labs” because the spaces can be used for a wide array of purposes. Lab spaces include other scientific fields, such as innovation & tech, as well as other related activities like venture capital, legal purposes, or even government agencies. Essentially. these assets are former offices or life science spaces that are being repurposed as lab space rentals within the same location – allowing for a multitude of different uses and a wide spanning name that includes all these possibilities.

Given that the UK life science sector is significantly smaller than the US life science sector, this distinction is important. Even in the primary source of lab space assets, there is only 7M square footage in the UK golden triangle as opposed to 47M in the US.

The three cities (Cambridge, Oxford, and London) that make up the UK’s golden triangle constitute nearly 40% of the cumulative VC funding in the lab space sector. And given the projected growth in the sector through 2027, this number is only expected to increase. As the lab space sector seems to intersect with both life sciences and office, the projected growth in US life science (3.6%) and office (1.9%), both bode well for lab space investors. On top of that, the expected rent increases in London specifically should help cap supply so that demand can continue to rise ahead of the curve, further assisting asset owners.

Outside of the lab space, recent research has also brought forth new opportunities arising in the UK industrial sector. Industrial outdoor storage (IOS) is already a subset of assets already folded into many an industrial portfolio. But these days landlords are deliberately trying to segment out these workstreams given the recent spike in demand, creating the emergence of an entirely unique subsector. Under 20% of floor-to-area ratios, as opposed to the 60% in traditional industrial assets, distinguishes these assets as a new type of their own. Some are even under 2-acres in size.

In fact, ultra urban sites under the 2-acre mark are generating the most demand. The recent increases in demand even have active tenants currently pushing for longer leases given the lack of supply. And as local municipalities favor residential projections in development, these IOS assets are still struggling to meet demand with supply – creating even further opportunity for rents to rise. The IOS subsector is still dealing with sourcing issues, however the lower cap-ex features of assets and the much higher projected rental increases pose risk adjusted returns which should dramatically justify the investments for the right investor.

All in all, these two subsectors alone should paint the picture vividly of how certain niche investments are poised to grow – should you be able to find them. But accessing the right data and the right insights from that data will make all the difference in helping you not only identify the right opportunities – but get ahead before the market finds them as well. Be sure to watch the Green Street UK Niche Sectors Webinar to hear more about these two niche sectors and what’s to be expected from them in the larger context of UK CRE Growth.

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Industrial Sector Warehouse Rent Growth “Too Big For Its Britches” https://www.greenstreet.com/industrial-sector-warehouse-rent-growth-too-big-for-its-britches/ https://www.greenstreet.com/industrial-sector-warehouse-rent-growth-too-big-for-its-britches/#respond Wed, 12 Jun 2024 15:00:36 +0000 http://wordpress.greenstreetapps.com/?p=12371 Demand negatively surprised for the Industrial sector in 1Q24 for many reasons, but primarily for the warehouse inventory issues related to real retail sales drops. This is hardly good news for rent growth projections looking into the coming quarters – and likely into ’25. In fact, Green Street has adjusted our fundamental outlook for the […]

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Demand negatively surprised for the Industrial sector in 1Q24 for many reasons, but primarily for the warehouse inventory issues related to real retail sales drops. This is hardly good news for rent growth projections looking into the coming quarters – and likely into ’25. In fact, Green Street has adjusted our fundamental outlook for the Sector based on these factors and discussed them recently in our May Webinar: “Industrial: Tipping Point or Bump in the Road?” where we examined the downturn from previously record-breaking demand and rent growth.  

To understand what is currently happening in the warehouse space, we first need to look back a bit for a wider context. During COVID-19, we saw a massive spike in real retail sales due to the ecommerce trends in behavioral purchasing. Because of this, warehouse space became more important than ever – and more competitive to lock down. While demand spiked and supply struggled to keep up – we saw an unprecedented spike in rent growth that made sense for the economy of the time.  

But today we are looking at very different macroeconomic conditions. And now, real retail sales have declined back to ’21 levels. Which – to be clear – is not exceptionally low. ’21 was a banner year for real retail and was arguably the spark to the fire that led to the massive increase in brands picking up warehouse space.  

However, many of these companies factored in the need for warehouses to stock inventory into their business models and have not been able to adjust since. There has been a massive over-purchasing and over-building of industrial warehouses and a failure to hit the real retail sales necessary to maintain them.  

Essentially, the Industrial sector (as a whole) seems to have overinvested into the purchasing behaviors of the COVID-19 era and is now trying to adjust very quickly to new real retail trends. Retailers are carrying less inventory, consumers are purchasing less goods and focusing more on services, and overbuilding in the industry has left investors behind the curve dramatically. 

And now they’re struggling to catch up fast enough.  

Now, that’s not to say that there’s no way out of the hole that seems to have been dug for warehouse landlords. There are still several signal flags that show promise for the sector’s growth.  

For example, due to the ecommerce growth – there is still much opportunity for the warehouse needs of the sector to expand. In fact, online retail increased 8.6% in 1Q24 alone. eCommerce does require approximately 3X the footprint as traditional real retail, after all. And even though retailers are keeping their inventories cautiously low and warehouse employment continues to fall, import volumes have risen a whopping 19% YoY. This should increase even more given favorable changes in the Panama Canal 

With the above factors at play, and overbuilding across multiple markets, finding the right signal flags for the sector has never been more important. If you’re looking to find the right investment opportunities to act on, enter, or exit the market, it all depends on the research/data/news on which you rely.  

From Sales Comps, to CPPIs for the sector, and so much more, the Industrial sector is still catching up from the overcorrections to the COVID-19 retail shifts. And now it’s time to adjust back to reality.  

If you want to get access to the deeper insights, more signifiers of change within the sector, and the overall insights and projections for the coming months, be sure to request a sample report to learn more and download the full Industrial Update report straight from Green Street’s research library.  

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Nature’s Toll: Texas Industrial Sector Fights Through ESG Ups & Downs https://www.greenstreet.com/natures-toll-texas-industrial-sector-fights-through-esg-ups-downs/ https://www.greenstreet.com/natures-toll-texas-industrial-sector-fights-through-esg-ups-downs/#respond Mon, 20 May 2024 21:00:51 +0000 http://wordpress.greenstreetapps.com/?p=12319 Recent ESG changes – and changes in Nature in general – have been challenging the Industrial sector in certain states. But, always known for its toughness and tenacity, Texas is rising above the rest and showing multiple markets with promising growth.   Despite these ESG regulations limiting performance in multiple commercial real estate sectors, the Longhorn […]

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Recent ESG changes – and changes in Nature in general – have been challenging the Industrial sector in certain states. But, always known for its toughness and tenacity, Texas is rising above the rest and showing multiple markets with promising growth.  

Despite these ESG regulations limiting performance in multiple commercial real estate sectors, the Longhorn state’s Industrial sector is showing growth in multiple markets. Texas has been fighting – successfully – through the barbed wire, and with other separate ESG changes in its favor, the Texas Industrial Sector may be set up for continued growth opportunities in the coming months.  

In April, Prologis (PLD), the world’s largest industrial REIT, reported slowing warehouse demand nationally. And while new Green Street data is always oncoming, Texas specifically seems less impacted from these harsh weathers. Markets such as Dallas/Fort Worth (DFW), as well as Houston, should see rent levels mostly hold this year while strong demand drivers should allow for future growth potential.  

New Green Street data in our Dallas / Fort Worth & Houston Industrial Illumination report outlines how DFW is showing relatively stronger growth versus other major industrial markets in 1Q24. Vacancy rates have continued to rise along with elevated supply. On an even more promising note, Houston has seen radical increases in import volume over the past several years. 

The active under construction pipeline has dropped significantly due to a lack of resources (potentially due to these former ESG limitations). And yet still, Houston and DFW continue to show signs of steady growth in the Industrial Sector despite the odds. The toughness of the Longhorn state is truly shining strong in Commercial real estate. And that isn’t the only thing the gritty state of Texas has had to fight through.  

As we’ve noted in our recent ESG: Fund Flow Bifurcation report, there has been a notable backlash to recent ESG policy in the United States due to feelings of overregulation and reporting. This has caused a serious fund flow limitation for sustainably themed funds. And despite economic reactions to the recent regulatory policies, the SEC has continued to pass rulings that the CRE space – and economy as a whole – are less than pleased with.  

In fact, a recent ruling from the SEC has been met with several lawsuits from Republican states, and even some Democrat states, in a mass pushback against this overregulation and reporting. We cover more of this ruling in a report, Green Street’s ESG: News Roundup. Texas is only one of more than a dozen states joined in a coalition against the SEC in these lawsuits.  

The new SEC ruling from March – which we dive into in more depth in our ESG: SEC Climate Disclosure Rule Highlights report – mandates that companies disclose climate-regulated risks which have a material impact on their businesses. It introduces such ruling in three scopes:  

  1. Reporting on emissions from direct company activities  
  2. Reporting on emissions from energy usage in storage or production  
  3. Reporting on emissions from complexity of supply chain  

Scope #3 is considered the real deal breaker here for most companies as it is highly expensive just to track these emissions well. Let alone reoptimize the entire supply chain of a product/brand/service in alignment with ESG policies as opposed to profit or functionality.  

We dive into the lawsuits the SEC is currently facing from all directions in our ESG: News Roundup report. Opponents to this ruling were also assured that Scope #3 would be watered down in the final redrafting process before it was passed – but they were sorely mistaken. This has led to the flurry of lawsuits brought against the SEC that Texas has joined in on 

However, not all ESG tides are turning against the longhorn state. Recent limitations on the number of ships allowed through the Panama Canal will soon be raised given new research showing that recent drought conditions in the Canal were a result of El Niño instead of climate change issues. We also dive into this ESG update in our recent report on the Industrial ESG Panama Canal Prognosis. Given these transit limitations, many cargo ships have been rerouted to coastal ports as of late and away from the Gulf.  

This new rise in capacity could potentially benefit port markets such as Houston as they welcome old cargo shipments back.  

Now, whether you can blend these different stories and research insights into solid forecasting is up to you. If you’re looking to stay ahead of the curve in the Industrial sector – especially in the Sun Belt region – you should consider subscribing to Green Street’s industry-leading products for actionable intelligence.

This is your chance to blend both Green Street’s News and Research insights to see what a two “horned” approach can do to empower your investment decisions.

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Understanding The Value Of International CRE Data In The Micro-Macro Scale https://www.greenstreet.com/understanding-the-value-of-international-cre-data-in-the-micro-and-macro-scale/ https://www.greenstreet.com/understanding-the-value-of-international-cre-data-in-the-micro-and-macro-scale/#respond Wed, 15 May 2024 21:57:02 +0000 http://wordpress.greenstreetapps.com/?p=12300 There is a myriad of different levels and layers of data that go into commercial real estate analysis – almost too many if you’re looking to insert the value of international data in CRE. But rest assured, even on the smallest scale, international data can play a significant role. Depending on your individual goals, data […]

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There is a myriad of different levels and layers of data that go into commercial real estate analysis – almost too many if you’re looking to insert the value of international data in CRE. But rest assured, even on the smallest scale, international data can play a significant role. Depending on your individual goals, data suite, and investment strategy, you have the option to take pieces of your CRE data and examine it at the sector, industry, region, market, or even investigate individual properties themselves. And that’s just to start. But what role does international CRE data play in all these different viewpoints? We’ll dive deeper into answering that question in this blog.  

While the value of leveraging international CRE data on the macroeconomic scale is obvious, using its insights in your underwriting can give you an edge over the market (if used properly and timed right). For starters, this new data input gives you another opportunity to identify signals in the wider market to access new trends and new moves. It also gives you a different set of inputs: cultural values regarding investing and underwriting. For example, changes in tenant demand in one geographic region provides helpful readthrough for potential changes elsewhere. Further, monitoring changing environmental regulations provides readthrough for how local market regulations may evolve. 

Below are a few examples of insights focused on discrepancies between different countries/markets that may very well affect an investment strategy focused on international data inputs:  

  1. Deceptive Optimism In CRE Office Vacancy
  2. Energy In The Economy: Energy Is The Economy
  3. Diving Into The Golden Age Of Data Centers
 More than that, these international differences or trends can lead to shifts in the market that you can take advantage of if you’re well-read enough on the international data. Comparing different countries and regions against one another can help you identify winning investment opportunities and where to bail out of certain markets.  

Consider the example of market specific density of data centers, where certain cities are already developing heavily with the booming sector ahead of other cities that are playing catch up as fast as they can. This can lead to shifts in your strategy regarding investing in certain supporting businesses related to data centers that have already been built as opposed to investing directly in the development of new data centers in other cities.  

You can check out our Global Property Allocator to see just how certain property sectors stack up against one another in terms of these varying investment opportunities.  

Green Street’s Global Property Allocator assesses the relative attractiveness of a wide variety of property types in the United States, United Kingdom, and Continental Europe across both private and public markets. The analysis, which is geared toward long-term, buy-and-hold investors, incorporates lessons learned about the big cross-sector differences that exist regarding growth potential and the true, long-term costs of ownership 

Just think of how much more informed your strategy would be by shaping a market-level strategy with additional insights from the surrounding region, or shaping a regional strategy with insights from the broader continent, or shaping your national strategy with expanded insights across international borders. 

Lastly, widening your data view to an international level comes with the usual investment benefits:  

  • Portfolio diversification that can lower risk
  • Broader set of opportunity that raises potential 
  • More agility that can increase investment access  

In closing, the more thoughtfully comprehensive your CRE data inputs are for informing your investment strategy, the more prepared you are to drive returns and mitigate risk. Are you thinking about the broader macroeconomic drivers of CRE and how they flow down to the property-level, or do you currently have tunnel vision on your particular market of interest? Taking a multipronged approach to your investment strategy will give you insights that you may not have considered with just the micro focused eye. And the more empowered you are to see the trends, the more prepared you are to act on them.  

Green Street is waiting to show you how you can empower your strategies with CRE data, research, and news. When will you act on the opportunity? Join the other Green Street clients who are leveraging our industry-leading insights to drive alpha-generating returns. Read our testimonials and let our clients tell you for themselves. 

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