Demonstrating the continued demand for prime supermarket assets, Knight Frank Investment Management (KFIM) has sold a 50,599 sq ft Sainsbury’s investment in Chesham to CBRE Global Investors for £31.6m.

James Watson of Colliers International – who advised on the sale – commented: “The problems of the supermarket sector have been well-documented, but maybe have been exaggerated in respect of the sector’s property market. This sale - at a yield of 4.29% - shows the strength of demand there still is for prime assets.
“The Chesham Sainsbury’s is a well-configured, modern store in a very affluent town and attracted substantial investor interest.”

Let to Sainsbury’s Supermarkets for 24 years with limited assignability, the store’s lease has annual RPI-linked rent reviews ‘collared & capped’ at 2% and 4% respectively. The current passing rent is £1.435m pa which reflects £28.36 per sq ft.

James Watson comments: “We now have a two-tier supermarket investment sector: the top tier is prime, healthy stores like Chesham let on long, RPI-linked leases. Demand for this product remains strong.

“Then there are secondary, stores with flaws such as over provision of supermarket space in the location, a weaker demographic etc. These may still have the benefit of long leases, but generally yields are moving out fairly rapidly for anything that isn’t prime.

“This type of secondary asset is increasingly a target for debt-backed private equity buyers.”

Knight Frank Investment Management sold the asset on behalf of Lancashire County Council Pension Fund and were advised by Colliers International.