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Slowdown in European Retail Property Investment

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United Kingdom  Europe  retail properties  CB Richard Ellis  CBRE  Africa  retail property sector  Iryna Pylypchuk  retail real estate investment market 

Slowdown in European Retail Property Investment

By - Thursday 03 May 2012

The level of activity in the European retail real estate investment market slowed in the first quarter of 2012, with just EUR 4.6 billion (GBP 3.7 billion) in transactions completed during the first three months of this year. According to CB Richard Ellis (CBRE), this represents a 64 per cent drop compared to the final quarter of 2011. However, the organisation is not overly concerned about the sector, noting investor sentiment is still positive and an upturn is expected by the end of 2012.

Associate director of Europe, the Middle East and Africa research at CBRE Iryna Pylypchuk explained there are many factors that have led to a reduction in the volume of investment in retail properties across the continent. "[A] lack of core product, tight lending market and persistent gap in buyer and seller expectations when pricing secondary assets were fundamental reasons behind weak first-quarter results," she stated.

A recent Savills report revealed the trends experienced in Europe were mirrored in the UK's shopping centre investment market. The organisation described it as a "slow start" to the year, with the total capital value of all the deals at the beginning of 2012 amounting to GBP 461.55 million - down from the GBP 609 million in the final three months of 2011. However, Savills agrees with the CBRE assessment that the situation will improve as the year wears on. "We expect the second half of 2012 to see greater activity with an increase in volume of quality stock coming to the market, both direct and via stakes in major shopping centres," the report asserted.

The study highlighted the widening gap between yields for prime and super-prime assets and those in secondary and tertiary markets, noting unrealistic pricing is an issue among assets in less desirable locations. As a result of the growing disparity in the retail property sector, Savills is anticipating a hardening of yields in the secondary markets, while prime yields are expected to remain broadly stable over the coming months.

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