Property Perspectives: Conversations defining the future of real estate
Uncover the real story behind the UK real estate sector’s next chapter. NatWest hosts Ashley Toy and Tom Sharman join industry experts to share insights, trends and stories shaping the UK commercial real estate landscape.
Property Perspectives: Conversations defining the future of real estate
Finding value in retail with New River CEO Allan Lockhart
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In this episode, Allan Lockhart, Chief Executive of New River, REIT, joins NatWest hosts Ashley Toy and Tom Sharman to unpack the major forces reshaping the retail real estate landscape.
NB. This was recorded on 27 January 2026.
It's really, really important that you know when you're thinking about acquiring assets that you've got to think that's look what's this asset going to be like in five years' time and ten years time? How could the market conditions change within that capture?
SPEAKER_00Welcome back to Property Perspectives. I'm Ashley Toy. I'll be your host for this series alongside Tom Sharman, our head of research and strategy. This series will be going through the main sectors in real estate, and today we are starting with retail. And I'm really pleased today to be joined by Alan Lockheim, CEO of New River. New River are a leading listed REIT, specialising in resilient retail across the UK. I hope I've got that right. Yeah, thank you very much.
SPEAKER_02We'd like to think of our ourselves as a leading retail REIT. Yeah, but thank you.
SPEAKER_00Um so Alan, thank you for joining us today. Um if I could start, I'll give a brief CV. Correct me if I'm wrong. Um you started your career back in 1988 with Stratton Parker. A long time ago. Yeah. I wasn't gonna make any comment on the time, but uh you you've seen a few cycles, I think it's probably fair to say.
SPEAKER_02Definitely. I've seen uh I've been through growth periods and recession reperiods, and um uh yeah, it's been it's been quite a journey for sure since 1988.
SPEAKER_00Yeah, and uh in 2002 you were retail director for Hallidale PLC. Yeah. Uh with a remit to acquire acquire value add opportunities across the retail space. That's correct, yeah. Um and following their successful sale in 2007, another ominous time in the cycle, I guess. Um you co-founded New River, uh where you served as property director following their IPO in 2009, um until being appointed CEO in 2018. Correct, yeah. Um I guess it would be helpful just to start and reflect on your time at New River. Um, I guess we've talked about cycles in there. Uh there's there's a there's a couple of things that have happened, yeah, specifically in the retail sector. So yeah, just interested to get your reflections.
SPEAKER_02Yeah, I mean we you know we we've we um IPO'd New River in 2009. At the time there was just literally two of us, we didn't even have a CFO, we had no assets. Um, but we we had uh you know we had experience operating in the public equity markets. Um Hallidale was a business that was floated in in in 2001, and then we engineered the sale of that in the first quarter of 2007 and four. Our shareholders had been on that journey with us. We delivered a 31% per annum compound return. So we had that track record, and uh so we we um we felt there was uh the option to um list New River directly onto the UK uh stock market was was available to us. Notwithstanding, you know, it was a very, very you know challenging and and difficult time back in uh 2009. Um we wanted to be a sector specialist because we believed that that was the direction that uh listed real estate was going to go, more sector specialization. Um and retail was a sector where we had a lot, you know, a lot of expertise and experience on. Plus, it's a very dynamic uh sector, uh, always changing, and that we think that plays well into an active asset manager. And then finally, we you know we we we recognized the importance of of income um returns as uh as uh a key component in a in a total return. And and so we wanted to be very much a sort of like an income-focused type uh uh read. So, really from 2009, we raised a small amount of capital, um, got the show on the road, and we started to sort of build up New River from that perspective. First two to three years were really challenging uh coming out of the the great financial crisis. Um I think it was probably fair to say that we felt that there was going to be a greater buying opportunity quite quickly, uh, partly to do with a lot of the sort of um distressed um lending and loans that um that had happened during the uh sort of run-up to the financial uh crisis. And but it actually took quite a few years for that opportunity to sort of emerge into the market. Um really from about 2012 onwards, um, we were able to start to accelerate our growth, we were able to uh fund our growth um uh with the support of the uh the public equity markets by raising capital. Um so we had a good sort of growth period, and and then you know, we've but we've but we've also um uh had challenges that we've had to sort of overcome. Uh obviously COVID was an incredibly challenging uh time, uh particularly for us as a business, you know, being a uh very much a consumer-facing business where a lot of your tenants were were forced to to close. Um but also we could start to see how technology was also disrupting uh you know our marketplace, you know, with um you know online retailing. And of course the internet's been around a very long time, but but it's it it it was the convergence of a number of technological advances coming together at the same time, so much faster broadband speed, the explosion in smart mobile phone technology, the massive growth of the big social media platforms, which are in many ways around and out selling platforms, all of that sort of converged, you know, from I would say 2012, you know, onwards, and it started to really have an impact when um more of um consumer spending went on the onto the online channel, and you know, ultimately that had an impact on the demand for space, and of course, you know, supply remaining pretty fixed. Markets got into an imbalance position between supply and demand, and in any market where you have an imbalance, it usually leads to sort of uh challenges and and negative outcomes, and we've seen that in in the retail market. So, you know, we've had to uh come through that and and um come through COVID, uh, which we did, and we think we got through that um actually in a pretty pretty good way. We we weren't immune to it, but uh and we and we had some challenges that we had to deal with. But we came out of it, and we're arguably were um you know from about 22 onwards, probably in a much stronger position than we had been for quite some time, uh, uh, with a lot of cash in the bank and um waiting for the right opportunities for us to be able to deploy that to deliver the sort of outcomes that we wanted to uh for our shareholders. And you know, that's that then led us into doing our first public MA deal uh back in 2024 uh when we acquired uh you know capital regional uh PLC. And you know, that was in many ways a perfect transaction for us because their portfolio was very much aligned to our portfolio. It provided us with greater scale within our business because you know our gross assets and net assets went up something like 60% and 30%, and it was a very earnings-acretive transaction because we were able to absorb their six shopping centres onto our platform with very minimal costs. So a lot, you know, we're able to strip out you know a lot of cost out of that business, which went straight on to the bottom line, you know, increasing our profits and therefore delivering strong earnings per share growth for our for our shareholders. So um, and today, you know, we we completed that transaction, you know, December 24. Uh we've been delivering those benefits. Um we feel our business is in a really good place today. Um we think our marketplace is probably in the best position it's been for about 10 years. Um so we're pretty optimistic around the the future. Um I think there are there are some wider sort of uh macro challenges around the UK. Um there's some challenges around the you know the UK stock market at the moment, uh, because you know um we're a relatively small company and scale within the public markets is becoming you know more important. Um but you know I think the government's aware of that and they're looking at ways that they can you know try and improve sentiment within the UK stock market and um we'll see what happens.
SPEAKER_01Your your um your focus on convenience retail, largely. Is that something that happened kind of organically? Was that something you always was a key part of your strategy?
SPEAKER_02It was always a key part of our strategy. You know, uh we've never, for example, had department stores in our portfolio, and that's been always been very deliberate because we felt that you know department stores and being overexposed into fashion, uh you were going to be more vulnerable from the growth of online retailing. Um and uh you know that is that has you know clearly um happened and and therefore you know uh investors that own buildings led to debonums on on a long lease, you know, have you know realized that that long lease ultimately wasn't very secure. So we've always been careful to ensure that we are invested in assets where that sort of online penetration was going to be manageable. Um but equally uh we've been investing in assets where they are very those assets which are very compatible with um online, uh the online channel. And that's why we started investing in retail parks back in 2014.
SPEAKER_00So what were the signals when you were thinking about I guess what we now call omni-channel stores that what were the signals you picked up on and then and then took action on that?
SPEAKER_02Well, we we we we uh you know we were very focused around uh trying to utilize high-quality research in in helping us make sort of the right decisions. And also today now we are you know collecting just amazing customer spending data um on our on our assets, and we use that data, I would say arguably from almost every decision that we would make as an owner and manager of a multi-tenanted uh retail real estate asset. But our research at the time was indicating that you know click and collect um was going to be the really big growth area of the market, and and that's that has happened, you know. So if you take, for example, you know, Marks and Spencer's who are a big sort of uh omni-channel retailer, got the physical stores and they've got their online channels, about 40 to 45 percent of their customers that buy online will come to the store to pick up that order. 80 to 85 percent of returns, because returns is a big factor in in the online world, 80 to 85 percent of returns will be brought back to store by the customer. So, what that means is uh, and this is why the omnichannel retailers are doing better than pure play online and actually taking market share away from pure play online, is they're making the they're incentivizing their customers to pay for that journey. It's not that it's not it's not really the retailers. So um, and that's obviously helpful around protecting the retailers' margins, keeping the costs you know down. Um, but they're driving footfall into their stores because their research also shows that nearly 50% of the customers that come in to pick up an order or return an order will go on and make an incremental purchase at that time, at that visit. So that's driving more revenue into the top line.
SPEAKER_01So it's really good for the sort of PL. Do you think there's better collaboration now between yourselves as owners and and the retailers than there was perhaps in the early years of your career?
SPEAKER_02Definitely. Um so you know, retail real estate's become much more operational. You know, our our leasing events are much more frequent. You know, I mean when I was starting in my career in '88 and into the 90s, you know, typically you'd be uh you know, you would be doing uh leases at sort of 20, 25-year leases with five-yearly rev re reviews. You know, leases are much, much shorter now. I mean, so I think uh our weighted average lease expiry profile in our portfolio is about six years. I think in the MSCI it's probably about seven and a half years. So you have greater frequency of of events coming up. And uh I think that's uh also resulted in making sure that you uh are building relationships with with your with your tenants. Um that's really, really important. And we've always done that, we've always uh prided ourselves to make sure that we have very strong relationships with our tenants. Of course, you're gonna have sort of competitive tensions at times when you're trying to get the best rent and they're trying to pay the lowest rent. But but ultimately, um uh you know the the the our our our our tenants uh you know favor when they have a uh an owner like New River, they know are going to be very active, they know that we're gonna be focused around customers. Um you know that that um that is up they see that as a positive.
SPEAKER_01So do you think do you think is is there a world in which New River could expand more into the kind of fashion-led centers? Is is it a cyclical thing, or do you just think for now it's it's just off your radar?
SPEAKER_02Well, um I think that sort of the the sort of three key physical retail channels is you've got the big destination shopping centres. And uh those definitely not all of them, but you know, the in the right in the right locations, um, those big destination shopping centres will have a sustainable uh future. Um they're popular with customers. We know customers go there uh less frequently, but they do have longer 12 times. Um and you manage you have to sort of manage those in a s in a different different way. Um but we're not adverse to owning you know uh destination uh shopping centres. We are managing a few um currently on behalf of some investment uh partners, but selectively uh the the some of those assets will have a strong uh future in our view. Um and then you've got the what we call the sort of local community convenience uh part of the market where we're predominantly sort of positioned, and again, you know, it's making sure you have the right assets in the right locations, but those types of assets will have a good, sustainable future as well, and we're very comfortable with with uh owning those assets, and then you have the sort of out-of-town retail part format, which is you know predominantly sort of focused around omni-channel retailing, you know, and our job in terms of you know the success of our business uh will be determined by how we get our capital allocation decisions right, you know. So um, and we have a number of options around that. You know, we if we've got uh surplus capital to invest, you know, we've got options, whether that is acquiring assets in the direct real estate market, and we have those three areas that we can focus on, and we've got expertise and experience in all those three areas, and the more choice you have, I think, in terms of your uh uh allocation options, then I think you're in a better position to be able to allocate capital uh into opportunities that are going to give you um the best return with the lowest risk profile. And uh we have that, you know, so we've got those three areas that we can focus on. Um and uh you know that that's our job is to make sure that we can you know allocate capital as and when we we have surplus capital uh into the right opportunities.
SPEAKER_00You know, so I guess when you're looking at that market and other investors coming in, do you do you think there is still sensible decisions being made by others in the retail space? It's like come into favour of it.
SPEAKER_02Well, I mean we we don't spend much time thinking about what others are doing. You know, it's it for us it's about what's right for us, and different investors have different risk tolerance, uh, they have different target returns. So uh and that could be a factor that's driving their attitude or where they are in terms of pricing. I think the key around retail real estate is um in terms of around getting the pricing right, you need to understand what is the underlying risk profile that you're buying into. And uh I think to be able to evaluate risk properly, you need to have high quality data, you need to have real expertise and experience because retail real estate is a very operational asset class. And you've got to think about not just today, you've got to think about this asset in in potentially five years' time. Because when you're buying an asset, unless you're buying it in a corporate wrapper, you know, your day one costs are not far off 7%. So theoretically, day one, you're minus 7%, you've you've lost money day one. So you need to own it uh for a period of time to pull back that day one, 7% deficit before you move into positive return territory. And then you've got to own it a bit longer to build up your returns. And so duration is extending out, and with duration, as you guys know, being bankers, uh risks increase. Uh longer duration periods carry a higher risk from market conditions sort of changing. So it's really, really important that you know when you're thinking about acquiring assets, that you've got to think that sort of what's this asset gonna be like in in five years' time and ten years' time? How could the market conditions change within that catchment? Because we've seen how retail has been quite disrupted over the last sort of 15 years from technology. Yeah, of all the commercial real estate sectors, it's probably been the sector that's been most disrupted by technology. Um, and that ultimately has affected the demand for space and and you know markets getting into an imbalance. So uh, you know, it's really important that you know you you you one evaluates risk properly, then you can price it properly, you know. And I think we're you know we're in a strong position, we're we we feel confident uh about our ability to to do that.
SPEAKER_01Yeah, for for a long time, you know, as you say, you know, for us as as lenders, for a long time retail was tricky because you didn't feel like you had confidence in where the rent level was or where the ERV was. Yep. Um now it seems to me from my um perspective that there's a lot more confidence in where that rent level is. Um do you do you think that largely a lot of that kind of overrenting has flown flowed through the system now in the in the market you're in?
SPEAKER_02Yeah, I think I I think it has. Um I mean I said earlier that I think we feel our marketplace is probably in the best position it's been for 10, 10 years, decade. Um, you know, it starts with the consumer. There's no doubt the consumer has been way more resilient than financial markets had anticipated. Unemployment levels have been low from a historical perspective. I know they're creeping up a bit, but they're still pretty low. Job vacancies have been pretty elevated. So if you wanted a job, you can generally go and get one. Um wage growth has been tracking higher than inflation, and that is supportive around rising living standards. Uh house prices have been broadly stable, and that's important because it feeds into consumer confidence, because most most consumers, their net worth is tied up in the value of the house, and if that's going up, people feel better about themselves. And you can see it in the consumer confidence numbers. Consumers' uh confidence around their personal finances over the next 12 months is strong, and and that's been trending up. So they feel confident about their their economic position. And then, and you guys will know this more than anyone else, is um, but from what we're getting told um is consumers are sitting on a ton of cash on a deposit in you know, probably a lot of it in your bank, and um you know that uh means that consumers are in quite a quite a decent sort of financial position, and this is feeding through to spending. So, you know, spending has you know been increasing. We have seen year-on-year spending growth. So that we think that's positive for the market, um, and we think that that consumer resilience is is likely to continue into this year.
SPEAKER_01It's an interesting dynamic, isn't it? You mentioned kind of consumer sentiment, and when you look at the servers, there's there's often two questions, isn't there? One question is how do you think the country is doing what the economy is doing, and the attitude is it's doomed, you know, it's terrible. And then how are you doing? Well, I'm okay, actually. Yeah, yeah. There's often that kind of and then as you say, you know, I was looking back at at 1988 because of because of you, you know, starting out at that time and end of the kind of loss and boom years, and and at the end of that boom of massive economic growth, unemployment was at, I think, 5.8. It was actually higher than it is today. And and you mentioned um in your end of year results, you know, earnings growth was is uh growing real terms. So there's a lot of kind of positive factors that often I think get get ignored.
SPEAKER_02I I agree, and and um, you know, so but we take you know we've taken quite a bit of confidence from that, and then that feeds into the occupational markets because if they're spending money in in the shops, you know, that's good for our occupational markets. But again, you know, retail's so high profile that it's written about a lot in the newspapers, it's always on TV. So any you know, retailer that runs into uh a CVA or administration um will will be on the 10 o'clock news. Yeah uh it will be all over the newspapers um because you know the broadcasters uh and the journalists like to write about it because they know these brands are recognized by their listeners and and readers. So it carries a lot of profile, and therefore there has been a view like you know, Death of the High Street and all this sort of stuff, and that's all been overdone. You know, we just feel our occupational markets are are in a pretty good place. Um, you know, we uh we can see that um you know demand has been improving. Our occupancy and our portfolio has been consistently like 95, 96 sort of percent for good four odd years, five years. Years we have an incredibly high tenant retention rate, so well over 90% of our tenants choose to remain in our assets, and that's because they're trading well and and and you know making uh you know making profits in in our portfolio, which is really positive. But you know, rents have been rebased in the market to a much more sustainable level. Um business rates have come down. So, like from April this year, notwithstanding our rateable values are rising 7%, but because of the reduction in the uniform business rate for retail hospitality and leisure for units under half a million rateable value, our tenants are going to be paying uh less business rates uh in our portfolios. Mine is going down 13%. It's really helpful. And we so we can see in our occupational cost ratios, when you add in rent, business rates, service charge, insurance premiums, they all in cost, occupational cost relative to in our portfolio uh in terms of total sales is just over 8%. It's really, really sustainable. Yeah. Um and um so we're really confident around our you know underlying occupational markets. And now that's feeding into better confidence in the in the in the capital markets. So we're starting to see more liquidity and investor demand flowing through. Um that definitely started in retail parks about you know three, four years ago. Uh, we've seen yields compress on the back of that flow capital for retail parks, but it's now coming through on shopping centers, which is which is really encouraging. So I think investors are are basically saying uh we have to look at retail um because we're all underweight in retail. Other sectors arguably could look quite expensive, and and maybe some of the risk profile in other sectors, you know, that they that the they're a little bit nervous about. Uh, but retail looks on a relative basis looks really good value, you know, because the income returns are are higher. And the prospects now for uh rental growth coming through are probably been the best that it's been for quite some time. And and so that's what's drawing that investor demand in on the equity side. And you guys on the credit side are I I think also are getting more comfortable around uh retail from a credit risk perspective, so which is which is also uh supporting our marketplace. So and last year, you know, just on the MSCI numbers, retail was top performing uh sort of subsector. And I think if you talk to most most of the sort of analysts uh you know in the in the real estate market, they would they would say that retail is probably likely to be top performing sector this year as well. On a total return basis. On a total return basis, yeah.
SPEAKER_01Yeah. Yeah, I mean we we you know as lenders obviously we we would go for a stable, you know, high yield, stable, predictable sector in a way over one that perhaps is um more aggressively priced and higher growth.
SPEAKER_02Yeah, I mean you know, so typically on a shopping centre you've got you've got the benefit of really good diversification through your rental cash flows. You know, we as a business have always uh placed uh you know importance on having low concentration to any single tenant. So like we've you know our policy is never to have one single tenant owning more than five percent. And and you know, we've never really been close to that. I think our top tenant today is is boots uh probably just over three percent.
SPEAKER_01It surprised me that the supermarkets weren't a bigger part when I looked at your numbers.
SPEAKER_02Well, um uh yeah, I mean, because um over 75% of our assets are anchored by food retailers, but in quite a lot of our assets the food retailer owns the store.
SPEAKER_01Right, okay.
SPEAKER_02You know, because actual freehold ownership within in the supermarkets is is still pretty high. You know, Tesco's uh own a large part of their estate, as does Sainsbury's, you know. So um so we don't necessarily need to own it, but we just need to be, you know, it's good to be uh adjacent to it because you know they are uh underpinning and driving you know football.
SPEAKER_01Uh it's it's interesting. I I noticed the other day I was looking at yields from various uh agencies, yield sheets, and one of them has given the view that your supermarket benchmark yield is basically the same as your retail part benchmark yield, despite the fact that supermarkets typically have you know RPI linked or CPI linked leases. Is that is is there a point where you would look at the market and say, okay, we love our retail parks, they've done great for us, but they've re-rated to the point where you know you recycle that capital somewhere else?
SPEAKER_02Well, um, yeah, I mean we we we're very disciplined around um uh how we um review our assets. So, you know, currently we're we're updating all of our business plans, which we do on a on an annual basis. It's a very bottom-up approach, tenant by tenant, and and we're forecasting, re-forecasting um our our views of our assets on you know, particularly around the rental cash flows, you know, when it comes to the expiry, what's the tenant going to do? What do we think the rent's gonna be, etc.? All of that gets fed in. And then when we when we'll get our valuations at the at the end of March, um we will plug those numbers in, then we can recalibrate the forward-looking returns and we'll look at an asset and go, this is what we're expecting it to to deliver, this is the return. Uh, do we think we can get a better return by uh recycling our capital out of that asset into something new? Um, do we think that return is compensating us for the risk within that asset? So that's how we we we we operate, and that and that will form what we will sell. Um, because generally every year we would probably sell around about 50 million of assets. This year it's going to be higher. We did 70 million in our first half of the financial year, uh, with a further 40 million that was either under offer or exchange. So we're we're gonna do about 110 million of disposals this year. Um uh but that's the right approach, so it's all about you know returns and risk, and you know, so you know there will be uh some of our retail parts will get sold because we just think that we can get a better return by reinvesting back into the market or indeed buying our own shares. Um uh uh so um and there will be some shopping centre sales, but that that's just you know being operating with financial discipline, you know. I'm sure most companies operate like that.
SPEAKER_00So we've talked we've talked a lot about today, I guess. Um we've talked a bit about the disruption that's happening at the moment, online changes. What what risk do you see going into the future with I guess the continued changes of online and the omnichannel stores?
SPEAKER_02Well, I think the big thing is around is AI, isn't it? And um I think to answering that question is a lot more difficult, and it's something that we are looking at, and it's born out of our experience being in the retail sector, because we've seen how technology can change your marketplace, and that's something that we're looking at is to how this how AI and and what it could do in terms of accelerating other technological advances, how could that impact the way people shop and live and work um and have fun? Um, so we we're definitely thinking about that. What what's sort of clear to me is from all the reading and uh I'm doing and and and and sort of podcasts that I'm watching with people that are in in you know at the forefront of all of this technological change is the key thing everybody's saying is look the change is gonna be profound, which I think it is, um, and it's and it's coming down the line quicker than most people expect. Um so I I I think that's that's definitely gonna be the case, and and so we are trying to really sort of try to get a handle on how we think it could impact, you know, both positively and negatively, so that we can get ahead of the curve. But I think in terms of retail, look, it's gonna be uh consumers in the future are gonna have way more choice, everything's gonna be way cheaper because of the uh technological balances. You just think like robotics and everything is all changing. Um and everything's gonna be more personalized. And I think it's gonna, you're gonna have a you're gonna have a personal concierge on your mobile phone, yeah uh, an AI type agent, and you'll be having a conversation and you'll go something like this week I uh you know I really want to lose about three pounds of weight, which is what I try and do every week and fail miserably. Um can you just make sure that I have a week of healthy meals? And that'll be the instruction. And your concierge will know you so well that it will then just go and order healthy meals, and you know, the next thing is you you've got it all delivered to you and it will be in your in your fridge. You can definitely see a lot more that of that coming through. And you've got to think through what does that mean for demand for space and where your assets are positioned. I do think though, you know, from our perspective in terms of our assets, because we're so local, I I do think there will be hyper-local fulfillment one way or the other. So having these strategically important assets in the middle of where tons of people live, uh, we're gonna we're gonna have a lot of optionality around that going forward, you know, whether that is people still using stores and coming to stores or that local fulfillment. I think fulfillment is going to be done locally in the in the future.
SPEAKER_00So geography and chimney pots remain very important. Correct.
SPEAKER_02Yeah.
SPEAKER_00Thank you very much, Alan. I enjoyed having you here today. Um he's been Tom, I've been Ashley. Uh that's been another episode of Property Perspectives. Please click like and subscribe.