British Land continues to look for retail park acquisitions across the UK, although the property giant believes that the London and south-east markets are overheated, according to Head of Retail Parks Asset Management Matt Reed.

Speaking as the company offered an update on its retail park strategy at its Nugent Shopping Park in Orpington, Reed said a growing number of funds was circling the sector because of its high occupier demand and low vacancy rates.

However, he said that with the cost to build remaining higher than the cost to acquire, British Land continued to seek opportunities to buy parks with strong trading performance and good catchments away from the south-east.

“With tight planning restrictions as they are, it is almost certain that few if any further retail parks will be given planning permission in the future,” he said. “Our estimate is that less than 5% of the current retail park stock has been built in the past decade and future supply will be severely restricted.”

British Land estimates that the entire retail park stock across the UK is around 120M SF, but removing standalone bulky goods units and smaller schemes of just two or three units, that total falls to around 80M SF.

The company owns 25 schemes nationally, which it divides among retail warehousing, hybrid retail parks such as Nugent, which mix fashion and do-it-yourself, and shopping parks like Fort Kinnaird in Edinburgh, ranked fourth nationally by sector specialist Trevor Wood Associates.

Reed said the lack of new supply and average vacancy rates of 1% across its estate meant that “rental tension” was high, with a growing number of retailers seeking sites within prime retail parks and aware that little new supply is in the pipeline.

“Because of that, there is increasing competition to acquire well-located retail parks, and while most of the funds seem to be focused on the south-east, we are geographically agnostic, so long as any possible acquisition site meets our investment criteria,” he said.

Traditional retail park tenants such as the DIY and furniture and homewares retailers have been joined by a wide range of retailers, from fashion to food. Reed also pointed to a growing interest from healthcare providers such as testing specialists and dental practices, typically looking for 2,500 SF to 5K SF units.

Trevor Wood Associates in its recent report on the sector said that Pure Gym, Home Bargains, B&M, Poundland and Lidl were the top five lessees in 2023, with B&M now second only to DIY giant B&Q for total space occupied in retail parks.

“In addition, as most schemes are circa £25M to £50M in lot size, they are a liquid and very tradeable asset class,” Reed said.