Nelia Vateva from Local Data Company has analysed the Oaktree portfolio using LDC Online. It is an important blog since it helps further the discussion on how to make sense of the recent deluge of retail property data now available to us. Only by suggesting complex narratives can we begin to debate and understand which of the relationships most affect value.
There is plenty to draw from and talk about from Nelia’s blog but I will concentrate on just one: Isochrones i.e. the drive time say 10, 20 and 30 minutes from a given centre. Nelia uses LDC data to show the population caught within these drive time distances (catchments) around each of the three shopping centres in the Oaktree portfolio.
Drive time Isochrones for the Oaktree portfolio
Source: LDC, Nelia Vateva blog 31st March 2017
The first thing to note is that if a 10 minute isochrone is densely populated, this will have a relative impact on its outer isochrones. This is because, as observed in a plethora of early 20th century theories, density tends to be attracted to density. It is therefore not surprising to see the following in the above chart i.e. the larger the core local catchment the more dramatic is the increase in the 20 and 30 minute catchments.
The most densely populated, Loughborough Rushes Shopping Centre, is in the middle of three major centres, Leicester, Derby and Nottingham. This position profoundly affects its 30 minute isochrone by taking in these three cities.
Location of Loughborough and competing centres
Source: Google Maps 2nd April 2017
The Kingsgate Shopping Centre 30 minute isochrone, flung around the commuter town of Dunfermline, takes in Stirling and clips Edinburgh, making its catchment, as Nelia suggests, still fairly substantial.
Kings Lynn’s Vancouver Quarter Shopping Centre on the other hand is not only more than an hour away from another major centre (Peterborough or Norwich) it is also cut off one side by the sea. Therefore all of its 10, 20 and 30 minute Isochrones are rather more modest. Peterborough is still a choice shopping destination but it requires a particularly large shopping centre, the Queensgate, in order to effect any gravitational pull on Kings Lynn.
Location of Kings Lynn
Source: Google Maps 2nd April 2017
Yet despite the smaller catchments Kings Lynn appears to have the greatest amount of retail floorspace on a per person basis. LDC data suggests that the town appears overbuilt relative to other retail centres in the UK.
Whether a centre is really overbuilt will depend to a great extent on whether the 20 minute and 30 minute isochrones ‘belong’ to the retail centre. In Kings Lynn 20 minutes and 30 minutes can still be considered local whereas 20 minutes outside of Loughborough, the catchment is likely already lost to another. All things being equal this makes a large shopping centre in Kings Lynn and a small local centre in Loughborough both attractive propositions. In fact precisely what is on offer in the Oaktree portfolio.
However ‘all things being equal’ in the case of shopping centres is a sizeable caveat. The tenant mix has to be right for the catchment and other modes of transport need to be taken into account. Building obsolescence and business risk also require analysis. As Nelia suggests, and the LDC data shows, many of the portfolio’s KPIs have improved since the current owners purchased the portfolio in 2013. And yet the data also shows that active management opportunities remain.
Perhaps I will get the opportunity to review more aspects of and insights from LDC data when Nelia analyses her next portfolio ????
You can read Nelia’s @NeliaVateva blog here:
http://blog.localdatacompany.com/an-overview-of-the-oaktree-portfolio-up-for-sale
More about the Oaktree portfolio here:
http://www.costar.co.uk/en/assets/news/2017/March/OaktreeLAP-put-shopping-centre-portfolio-up-for-sale-for-120m/
Why not enrol on our Retail Property Investment (RPI) School here:
http://www.bayfieldtraining.com/courses/retail-property-investment-school
Author: Natalie Bayfield @NatalieBayfield is lecturer in Real Estate Finance at the University of Cambridge and Chairwoman of Bayfield Training.