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European retail property investment surges in Q2, says RCA

Thu, 14/08/2014 - 10:08

Investment in retail-anchored properties in Europe doubled in the second quarter from a year earlier amid signs that consumer spending is picking up as the region’s economies recover from recession.

That’s according to analysis by research firm Real Capital Analytics (RCA).
 
Retail property transactions surged to EUR13.6 billion in April through June compared with EUR6.8 billion in the second quarter of 2013, according to data compiled by RCA. This lifted the volume of retail property investment to EUR22.7 billion in the first half, up 51 per cent from the same period a year earlier.
 
Simon Mallinson, RCA’s managing director for EMEA, says: “The latest economic indicators show that Europe’s economy has turned a corner and that shoppers are starting to spend more after a long bout of belt-tightening. This has made property investors more confident that we may see rental growth, which in turn supports values.”
 
The European Union’s statistics office, Eurostat, reported earlier this month that retail sales in the 18-member Eurozone rose in June by 2.4 per cent, the fastest annual rate since March 2007.
 
Large single asset shopping centre investments helped power the volume of deals in the second quarter. These included Land Securities’ EUR807 million purchase of a 30 per cent stake in the Bluewater shopping centre and Gecina’s EUR700 million sale of its 75 per cent interest in Paris’s Beaugrenelle centre to a consortium led by Apsys.
 
The jump in activity also stemmed from the sale of large portfolios. These included Intu Properties’ EUR992 million purchase of Westfield’s interests in the Merry Hill and Derby shopping centres in the UK, plus the Carrefour-led consortium’s EUR1.65 billion purchase of Klépierre’s interests in 126 retail galleries in France, Italy and Spain. 
 
Mallinson says: “While the economic outlook is improving, persistent high unemployment and wage restraints across Europe mean that real estate investors are mainly targeting properties in the best locations that attract shoppers. Dominant shopping centres in Germany and the UK regions outside London, which traded resiliently throughout the recession, are still the top pick of investors. There is intense competition for assets when they come to the market and this is reflected in pricing.”
 
Unibail-Rodamco’s purchase of a 50 per cent interest in CentrO shopping centre in Oberhausen was priced at an initial yield of 4.4 per cent, compared with the 4.6 per cent yield at which the PEP centre in Munich traded in December 2011. Land Securities’ investment in the Bluewater centre on the outskirts of London was priced at a yield of 4.1 per cent.
 
RCA expects retail transaction volumes to remain buoyant after recording EUR2.4 billion in deals in July. It has also identified another EUR4.2 billion of purchases that are pending completion, the largest of which is the reported sale of Cabot Circus in Bristol, England, for an estimated EUR650 million.
 
Mallinson says: “The economic outlook is still patchy across Europe, which is why investors are still targeting the bright spots, like venturing into the U.K. regions and dominant locations in France and Germany. This bodes well for the second half of the year and we may see retail property investment exceed the volumes of 2012 and 2013, when it lagged behind the growth in demand for offices.”


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