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Outlet Centre Valuation

Outlet centre valuations: a retail Destination

Outlet centres are outlets for the sale of unsold items from past collections at discounted prices (at least 30%). Factory shops are essentially destination stores: consumers are ready to go there specifically. Formerly located mainly in industrial areas or on the outskirts of major conurbations, they are nowadays more and more present in the vicinity of sites with high tourist potential. The location and quality of signage are key criteria in the valuation of an outlet centre.

This niche market, where the products are profitable, has significant potential for development. Outlet centres are seldom available for sale and are highly sought after by investors as part of portfolio diversification strategies.

  • < 30

    Number of factory stores in France (185 en Europe pour 16 pays)

  • Panier moyen entre
    150 € et 300 €

    High range of average sales per m² of outlet centre

  • 5.00 % / 6.50 %

    Expected level of return on outlet centre assets

2018 - Research - BNP Paribas Real Estate

Our Expert's Perspective

Aurore Cormier

MRICS, Deputy Director of the international department

What are the special features of the outlet centre asset?

Outlet centres developed strongly between the 1980s and the 2000s, first in the United Kingdom and then in the rest of Europe. The boom was caused by a favourable economic context: In times of crisis, individuals are inclined to consume at a lower price. As a destination store “par excellence”, the factory outlet is distinguished from other retail assets by its conversion rate and a larger shopping cart: customers go there less often than shopping centres but almost always spend much more. They most often include the same major international brands. Investors and developers alike are paying greater attention to the aesthetics of outlet centres and environmental quality. While the first outlet centres were mainly located in industrial zones or on the outskirts of major urban areas, new-generation outlet centres are set up close to sites with high tourist potential that maximise the influx of customers. Often dedicated to luxury brands, they become real stops in the circuits offered by tour operators.

 

What are the market trends?

The outlet centre asset is in demand and vacancy rates are relatively low. The market is characterised by strong growth potential, particularly in the South of France. Some target the mass market, others are more oriented towards high-end retailers. The top 3 revenue centres in France are located in the northern half of France: La Vallée Village in Disneyland Paris, followed by Marques Avenue in L' Île-St-Denis and Marques Avenue in Corbeil Essonne. In Europe, Bicester Village in London, Kildare Village in Dublin, La Roca Village in Barcelona, Wertheim Village in Frankfurt and Fidenza Village in Milan attract the most tourists.

 

What do investors expect from outlet centres?

The outlet centre derives its profitability from the fact that it is a niche product. It is often sought out as a part of portfolio diversification strategies. Investors generally entrust the management of this specific asset to specialised operators such as Concept & Distribution, Value Retail, etc. There are only few transactions. The expected yield on factory shops is between 5.25 and 6.50%.

What are the main valuation criteria for an outlet centre?

In addition to understanding the intrinsic qualities of the property, our experts analyse the quality of its location and rental situation to value outlet centres. This allows them to assess the growth potential of the turnover.

Relevance of the implementation

Access, catchment area, tourist potential, size of the car park...

Brand attractiveness

National or international brands, mass or high-end mass market, locomotives, presence of the brands in competing factory stores.

Rental situation

Duration of leases, specific clauses, analysis of rent levels and variable rents (often rent is structured around revenue clauses).

Revenue Analysis

History, turnover / m², rate of effort, growth potential.

Our experts use discounted cash flow (DCF) and capitalisation methods to value outlet centres. They are based on the use of data provided by BNP Paribas Real Estate's Research and Data Analysis services. Our experience/track record allows us to analyse the key points related to the smooth running of outlet centres and compare turnover performance and rent from one centre to another.

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