AXA aims to boost retail investment by 50%

AXA Real Estate is planning to boost its retail investment by 50% over the next year, Anne Kavanagh, global head of asset management, said during an investors panel at this year's ICSC European Conference in Berlin.

With fewer developments going ahead, the market is stabilising so there is no risk of oversupply, Kavanagh argued. For companies like AXA Real Estate, this opens the opportunity for a strategic programme of refurbishment of existing shopping centres, she added. 'We can invest equity in upgrading centres we own, confident in the fact that new developments won’t happen or have been shelved.'

Retail currently accounts for 19% of AXA Real Estate´s portfolio compared to 46% for offices and 12% for residential. The Paris-based real estate investment manager is the biggest player in Europe with total assets under management of some EUR 42 bn.

Investors are not flying to prime, but to sustainable rental values, the panel agreed. Risk-averse investors are also concentrating on core European markets. At the same time, the growth of e-commerce is affecting investment trends as the number of cities where retailers want to be located in is declining. Given that investors follow the trends, it is inevitable that they will put their money into the towns and cities where retailer demand is strongest.

'Retail requirements are changing and shrinking in some cities, while expanding into other areas,' Kavanagh said. 'We are looking at those trends and being careful in our decision making.'

The panel also discussed investment vehicles and concluded that those who are still investing prefer to do so through joint ventures or club deals rather than through the 'fund' model that was so popular during the property boom earlier last decade. The fund model has not recovered from the crisis and investors still want fewer partners and more control of their investments, Kavanagh pointed out.

Nevertheless, retail real estate remains a very good investment, according to Frank Billand, board member of German open-ended fund manager Union Investment. 'When my investors question a large single investment, I say: "Why? There are 80 tenants with that investment." The problem, he said, is finding the right product for such investments as development has slowed.

Matthias Boning, CEO of Mfi management fur immobilien, agreed. 'Investors are not only more careful but need a higher level of knowledge to make the right decisions.'

Eric Donnet, managing director and COO of AEW Europe, raising equity for retail investments is difficult in the current climate as investors are much more selective and opportunities that match that are thin on the ground, particularly given the decline in new developments.