Southern Markets Boost European Retail Investment
Investment Reaches €8.3bn in Q3 2013; Highest Quarterly Total of 2013
Southern European retail investment markets are on the rise with Italy and Spain seeing significant growth in Q3 2013, according to the latest research from global property advisor CBRE.
Total European retail investment grew to €8.3 billion in Q3 2013 - an 11.5% increase on the previous quarter and the highest quarterly total to date this year. Investment activity is broadening, both geographically and in terms of asset quality, with the Southern European markets of Italy (+128%) and Spain (+472%) seeing significant increases on the previous quarter.
While Southern Europe has seen more investors bidding on opportunities this year, Q3 2013 is the first quarter to turn this uplift into investor activity. Investment in the region is spread across the different segments and markets, with both local and international players active. Blackstone’s circa €130 million purchase of Franciacorta Outlet Village in Brescia, Italy is just one of the larger deals to complete this quarter. Demand for high street retail in Southern Europe is also strong, with Italy one of the few markets to see prime rental growth in Q3 2013.
Italy has seen a significant improvement in investor sentiment following the ECB’s defence of the eurozone, the on-going reforms’ plan of the new Italian Government, and market re-pricing in course. The growth in retail investment is expected to continue in Q4 2013 with MSREF’s 60% stake in an Italian retail portfolio. This includes 15 shopping malls (anchored by Auchan) and is by far the largest transaction to complete in Italy this year at €635 million.
Paolo Bellacosa, Head of Capital Markets, CBRE Italy, commented:
“The conditions to make Italy more appealing to investors are currently in place and appetite for retail in particular is dominating commercial real estate volumes, with foreign investors now tempted by the attractive risk-return opportunities. The largest private equity groups are the most active players, but we are also seeing some core, GDP-based investors looking at Iong-term retail investments.”
In Spain, there were several significant acquisitions of core retail assets by global investors in Q3 2013. These include the purchase of Parque Principado shopping centre in Oviedo by Intu Capital/CPPIB for €161 million, while Orion Capital acquired whole ownership of Puerto Venecia shopping centre in Zaragoza following the purchase of a further 50% stake for €144.5 million.
Adolfo Ramirez-Escudero, Managing Director, Capital Markets, CBRE Spain, commented:
"The Spanish market has completely changed in the space of a year. A total of €1.5 billion has been transacted in commercial real estate in the last four months - more than half of the total volume last year. We have expected retail investors to move further along the risk spectrum for some time, but this is the first quarter to provide substantial evidence of this. The foreign money is returning to Iberia and we will see more retail deals of size before the year end.”
In Western Europe, retail investment activity is notably down on the three-year average in most markets, including the UK, Germany, Benelux and the Nordics, but in-line with recent quarters.
France is the only exception due to a couple of large transactions, including the €250 million sale-and-leaseback of the Metro cash-and-carry portfolio. Supply constraints, combined with high prices, are starting to encourage investment into second-tier markets and towards more value-add, secondary product.