European retail property investment passes €7.1bn
European retail property investment passed €7 billion in the third quarter of 2012, according to CBRE. Investment in the sector hit €7.1 billion in the three months to September, a 12 per cent increase upon the second quarter and the highest quarterly total so far this year.
Despite the surge, the figure remains 18 per cent below investment during the same period last year, with activity mainly held back by a lack of product on the market.
The United Kingdom (UK) and the Benelux region were the two areas that saw strong increases in activity this quarter. The UK result was boosted by 17 transactions of more than €50 million, the largest being TIAA-CREF's €354 million purchase of Festival Place shopping Centre in Basingstoke. In the Benelux region, investment volumes recovered following weak activity in previous quarters, mainly due to the completion of a few large transactions in Belgium and the Netherlands.
In today's risk-averse market, investors have shied away from economically underperforming Southern Europe. This shows through clearly in the latest results as the already weak investment activity levels declined further. With only around €200 million in retail investment in Q3 2012 for Italy, Spain and Portugal combined, this is 75% below the last three-year quarterly average of €734 million.
Recent years have seen a remarkable level of retail investment in markets such as Germany and Poland, but 2012 looks set to fall short of performance in 2011 and 2010. After record retail investment levels and with little new development completions, lack of product is proving to be the main stumbling block to further uplift in retail investment activity in these two markets. In Germany, for example, the €1.6 billion of retail investment reported in Q3 2012 was 25% below the last three-year quarterly average, even with the extra boost from the Hamburg Trust's 78% share acquisition of Shopping Center Milaneo in Stuttgart for circa €400 million.
Iryna Pylypchuk, Associate Director, EMEA Research, CBRE, commented:
"Many core assets that have traded in the market in recent years now sit in the hands of long-term holders. This, combined with limited development completions, means that near-term opportunities to access the European retail investment market are increasingly limited. For investors looking to commit new capital this means one of two things: partnering with a local specialist who is better placed to source product, and/or exploring markets that fall outside the tightly defined core assets and market."
John Welham, Head of European Retail Investment, CBRE, added:
"There is strong demand for prime and core retail property in all the stronger European economies and in particular Germany, the Nordics, France and Poland. That demand is coming from within Europe but also increasingly from outside Europe, in particular from the USA and Canada. The weaker European countries are seeing dramatically lower levels of trading. This is partly due to less capital looking at these markets overall, but also to the fact that vendors are generally still not prepared to accept the re-pricing levels demanded by the potential investors that are actively pursuing opportunities."