Frasers Group’s recent acquisition of the Frenchgate shopping center signals a growing trend among retailers investing in real estate assets.
- The Frenchgate center, covering 770,000 sq ft, is Frasers Group’s third major shopping center purchase in the UK.
- Retail property prices are a significant motivator, having dropped substantially between 2015 and 2023.
- Retail giants like Ikea and Frasers aim to use their own brands as anchor tenants to enhance the value of these properties.
- This trend reflects a strategic effort to reinvigorate local high streets and adapt to evolving consumer needs.
Frasers Group’s acquisition of the Frenchgate shopping center in Doncaster is its third major investment in UK shopping centers, following purchases in Luton and Dundee. The Frenchgate center, initially listed for £35 million, expands Frasers’ real estate portfolio to encompass 770,000 square feet. Despite not disclosing the purchase price, Frasers’ strategy aligns with a broader industry trend of acquiring retail properties at reduced prices.
Retail insiders attribute Frasers’ shopping center investments to a significant decline in retail property prices, estimated by Knight Frank to have fallen by 60% to 90% over recent years. This depreciation presents a lucrative opportunity for retailers to acquire assets at a bargain and utilize their brands, such as Sports Direct and House of Fraser, to increase the properties’ value. “Frasers Group will anchor the shopping centers with their brands, aiming to create prime retail destinations,” said an industry source.
The acquisition plans for Frenchgate involve expanding the Sports Direct store to over 35,000 sq ft, including new outlets for USC, Game, and Evans Cycles. This expansion is part of a longstanding strategy initiated by Mike Ashley, emphasizing real estate acquisition to house Frasers’ brands and subsequently enhancing the asset’s market value.
Notably, Ikea follows a similar real estate strategy. Ingka Centres, Ikea’s real estate arm, recently acquired the Churchill Square shopping center in Brighton for an estimated £145 million. Ikea’s approach focuses on occupying strategic locations where they can become anchor tenants, thereby boosting the retail landscape and drawing in complementary retailers. One real estate agent observed that if major brands like Ikea or Frasers become anchor tenants, the entire shopping center’s value can increase, benefiting from higher foot traffic and rental income.
This trend of retailers acquiring shopping centers is perceived as advantageous for regional town centers, which often necessitate redevelopment. Cindy Andersen of Ingka Centres and Frasers Group’s CEO, Michael Murray, emphasized their commitment to revitalizing high streets, adapting them to meet contemporary consumer demands.
The strategic real estate investments by retailers like Frasers and Ikea highlight a commitment to rejuvenating local high streets while optimizing their brand assets.
