European Retail Investment at €33 Billion for First Nine Months of Year - Highest Total for Period
European retail investment reached €33 billion in the first nine months of the year, the highest total for this period since 2007, according to the latest research from CBRE. For Q3 alone, investment volumes reached €11.1 billion, a 23% increase on turnover for the same quarter in 2013.
The UK and the Iberia region have seen the strongest increase in retail investment activity so far this year. The UK recorded its highest retail investment level since 2007, with €12.2 billion transactions completed in the first nine months. Investment in Spanish retail was equally strong with €1.6 billion transacted in Q3, the highest quarterly total since 2007.
Investor sentiment is also improving for retail properties in Central and Eastern Europe (CEE), despite the current political situation and following two quarters of relatively muted activity. Romania saw one of CEE’s largest retail deals in Q3 2014; the Immochan acquisition of a €261 million retail portfolio. Russia also saw an uptick in investment over the same period, albeit from a very low base.
nvestor interest in retail, across most of Europe, continues to strengthen and there has been a notable increase in the type and nationality of the investors. This, in turn, is generating further growth in competition. As a result, the CBRE EU-28 High Street and Shopping Centre Yield Indices reported significant quarterly compressions at 11bps and 13 bps respectively, for the quarter. Average weighted prime yields now stand at 4.42% for high street and 5.28% for shopping centres, their keenest since Q3 2007 (4.41%) and Q2 2008 (5.13%), respectively.
John Welham, Head of European Retail Investment at CBRE, commented:
“We have a wider range of investors from more countries targeting retail investment in Europe than even before the global financial crisis. Most investors are using low levels of debt, if any, but we do see loan to values in transactions gradually increasing. In all likelihood the amount of capital -- debt and equity -- targeting European retail investment will soon exceed 2007 levels. This is putting increased downward pressure on yields.”
Iryna Pylypchuk, Director of EMEA Research and Consulting, CBRE added:
“So far this year we have seen strong investor sentiment towards European retail and a growing investor pool, which is translating into a notable increase of international capital flows targeting the sector, as well as a steady stream of larger deals. With that in mind we expect strong investor competition to continue in Q4, with significant prospects of further yield compression and possibly a record high in terms of European retail investment market activity.”