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Big Increase in European Retail Investment in Q3

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United Kingdom  Europe  Germany  France  retail real estate  Adrian Peachey  retail capital markets  TIAA CREF  Meadowhall Shopping Centre  equity seeking prime product  Norges Bank  Grosvenor Festival Place Fund 

Big Increase in European Retail Investment in Q3

By - Monday 15 October 2012

According to the latest data from Jones Lang La Salle, investment in European retail real estate saw marked growth in the third quarter of the year following a weak first half.

After a preliminary analysis, the firm believes that direct investment in European retail real estate was around 6 billion Euros in the third quarter, up from 3.9 billion Euros in Q2. This leaves investment so far this year at an estimated 13 bln Euros, which is down from 23.3 bln in the first 3 quarters of last year, and also below the five year period average of 15.4 bln Euros.

The report shows that the established markets like the UK, France and Germany are still attracting the majority of the investment; indeed 75% of the total investment went into these markets. This was of course helped by a strong quarter for the UK including the 350 million Euro purchase of Festival Place in Basingstoke, which was purchased from Grosvenor Festival Place Fund by TIAA-CREF.

Adrian Peachey, Head of Retail Capital Markets UK, commented: "There is still plenty of international equity seeking prime product in the UK, which is supporting yields. Supply of prime product, however, remains limited, which is persuading equity buyers to exploit current pricing levels outside super prime.

"The evidence this quarter is that investors are starting to expand their horizons in the UK, in particular by targeting good quality schemes in regional towns. Supply may be boosted in the final quarter by some reweighing of institutional portfolios, and an increase in distressed debt sales by banks."

The Euro crisis is still hampering demand across many markets in Europe according to the report, resulting in softer yields and delayed transactions. But JLLS said Q4 has had a bright start, including the purchase of a 50% stake in the Meadowhall Shopping Centre by Norges Bank Investment Management, and several other large transactions in the pipeline. The firm is estimating between 18 and 20 billion Euros for the year, bringing us into line with the last five years when volumes in Europe have averaged 21 billion Euros according to JLLS data.

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