European retail investment jumped to €15.5 billion in Q4 2013 – the highest quarterly total since Q4 2006 and almost double the Q3 2013 total, according to the latest research from CBRE.
Investors continue to move up the risk spectrum in the face of improved economic sentiment in Europe. Overall, 2013 was by far the strongest year for retail investment in Europe since 2007 with €41.3 billion transacted, compared to €34.3 billion in 2012 – a 20.4 percent increase.
Retail investment activity continues to broaden both geographically and in terms of asset quality. Q4 2013 saw a pronounced revival in Southern Europe, Ireland and also a growing number of deals in fringe Central and Eastern Europe (CEE) markets. The diversity of investors is also growing with North American, Asian and Middle Eastern capital active across a wide range of retail segments and markets.
John Welham, Head of EMEA Retail Investment, CBRE, commented: “Early autumn 2013 saw the first major wave of investors looking beyond core-assets in major markets and toward non-core opportunities. This trend accelerated in the last quarter, exceeding expectations in many markets, including those most affected by the eurozone crisis such as Spain, Italy and Ireland. The most significant push factors behind this trend continue to be relative pricing, with investors increasingly looking for better yields, and constrained product availability at the core end of the market.”
The economic growth story is clearly benefiting the UK, making it one of the few mature markets to see a significant increase in retail investment in 2013. Investor interest is broadly based and spread well beyond core assets and markets, significantly boosting liquidity within retail warehouse and supermarket segments.
Iberia recorded the strongest improvement in retail investment in 2013, with a 129 percent increase year-on-year. This revival was led by the Spanish market that was influenced by a small number of large transactions by international buyers. The Spanish retail investment market was dominated by North American investors in 2013 with €1.3 billion of investment out of the €2 billion total.
Italy also saw significant retail investment activity in 2013 at €2.2 billion. International capital dominated the market, accounting for 87 percent of the total, with North American buyers contributing the largest share.
The diversity of the investors active – both in terms of type and nationality – is another notable trend of 2013 and of H2 2013 in particular. Cross-border investment grew from 36 percent of the total in H1 2013 to 46 percent in the second half of the year. It is cross-border investors who tend to feature on the buy-side of the majority of large retail transactions in almost every market. 2013 was also the first year to record a higher level of cross-regional investment than of intra-European cross-border buyers, with €8.8 billion and €7.7 billion respectively.
Iryna Pylypchuk, EMEA Research and Consulting, CBRE, commented: “North American, Asian and Middle Eastern capital is increasingly active across a wide range of retail segments and markets. They are already a driving force in Southern European markets. Spanish retail, for example, recorded the highest influx of North American capital in history in 2013 with €1.3 billion invested – up on the previous record of €1.2 billion back in 2009. Back then it was driven by a small number of particularly large transactions, but current activity is more broadly based and should be seen as a trend. Among all cross-regional investors, North American buyers are the most active outside the core retail segments, particularly in the UK, contributing to a notable increase in last year investment activity This is expected to continue into the near term, but broadening across more markets, with Germany and France set to be the next main beneficiaries.”
Valentin Gavrilov, Director, Research Department in CBRE, Russia, said: “The increase in investment volumes in Europe reflects growing optimism, fueled by positive macroeconomic statistics from the eurozone. As a result, investors are ready to consider opportunities in secondary assets and even in peripheral countries. Russia is a bit of a different story. In 2014 we might see a combination of decreased growth rates in retail sales and strong new delivery of retail schemes. In this situation investors tend to be more conservative, focusing on the core assets. There is quite a low probability that this trend will change in the nearest couple of quarters.”