Not All Retail Is Screwed: Outlet Malls Positioned To Continue To Outperform

Outlet malls are set to continue to exceed the performance not just of other retail assets but most other property sectors over the coming years, according to a report from TH Real Estate.

The U.S.-owned fund manager said in the report "Think Global: Outlets" that consumer and real estate trends are driving outlet malls to outperform in Europe and regions like Asia, where there is massive growth potential.

The sector is underpinned by constrained supply and growing demand, offering some of the most attractive risk-adjusted returns in the real estate market, TH said.

Following the global financial crisis and improved pricing transparency via the internet and heavy discounting on the high street, there has been an increase in value-conscious shoppers globally. Therefore, the outlet mall model is well-positioned to grow its share of the rising value-conscious market. 

Last year had the highest level of outlet mall transactions in Europe ever recorded — €1.7B, three times the long-term average of €548M.

According to TH Real Estate, it has been the strongest performing sector in the region over the past decade and will remain one of the best value property sectors with many prime outlets having valuation yields 75 basis points higher than their shopping centre counterparts.

TH Real Estate believe the sector is well placed to outperform in periods of strong and weak economic growth, demonstrating excellent resilience in the poor market conditions of the global financial crisis, when sales only fell by 0.5% compared to the European average of -5.4%.