The fast changing high street is still a hot property...

THE high street may be in meltdown with many retailers either going into administration or seeking to do deals with creditors – so-called company voluntary arrangements.

But it does not mean investors should shun commercial property as an asset class. Far from it, says Calum Bruce, manager of Ediston Property Investment Company. He says that commercial property – embracing everything from industrial units to office and retail space – can still provide investors with a tidy sum of regular income. The key, he argues, is that investment managers specialising in this area must acknowledge the market is changing fast and adapt accordingly.

Ediston is a property trust that invests in 17 properties currently valued by the stock market at £330 million. It pays shareholders a regular monthly income of 0.4792p a share – 5.75p a year – equivalent to an annual dividend of 5.4 per cent. The dividend payments are more than covered by the rent that the trust receives from its tenants. The trust has no exposure to the high street or to shopping centres. Bruce says: ‘There is too much supply, not enough demand and current rents are too high. Also the service charges that some tenants in shopping centres are paying are hideously expensive.’

Instead, the portfolio is skewed to out-of-town retail parks (nearly three quarters of the trust’s assets) where there is plenty of parking, good access by road and a diverse mix of tenants. Key holdings include Pallion Retail Park in Sunderland where there is a convenient metro stop for shoppers; Widnes Shopping Park with easy access to the M62 and M56 motorways and a Gala Bingo centre on site; and Prestatyn Shopping Park that is anchored by Tesco and located adjacent to the town centre.

Bruce says that once they make a property investment in a retail park they do all they can to encourage custom – and to get customers to stay for longer. It might be through the building of drive-through coffee shops (a Costa Coffee is currently being built on the Plas Coch Retail Park in Wrexham) or by encouraging retailers to allow customers to pick up items they have ordered online. It also means allowing customers to return unwanted items purchased online. Of the retail parks Ediston owns, some 56 per cent of tenants now offer this click and collect service.

Ediston is also not afraid to manage its properties aggressively if it believes its actions will result in greater through traffic at the retail parks. For example, at Abbey Retail Park in Daventry, it shuffled its tenants around to accommodate B&M – a ‘variety’ retailer that sells everything from electricals to wallpaper and toys and games. The result is a busier park as customers are drawn in by B&M’s presence – and the park is 100 per cent let.

The trust has had its hiccups, with rent reductions as a result of company voluntary arrangements at tenants Carpetright and fashion chain New Look. But Bruce says the current dividend payments are not imperilled. For investors in search of a steady income, this trust is an attractive proposition. It also represents a solid diversifier sitting alongside a share portfolio.

But prospects for share price growth are limited. Since launch in October 2014, the trust’s shares have traded between a narrow band – a high of 115p (mid-2017) and a low of 99p (in the wake of the European Union referendum vote in June 2016). The trust’s assets are also not fully reflected in the share price, with the shares trading at a 10 per cent discount. The ongoing charge is 1.3 per cent.

Offices and shops will only provide investors with a tidy income if they adapt