Extensions of existing shopping centres in peripheral areas in core countries offer greater income potential than buying prime assets in core locations in the current market, according to Florencio Beccar, director retail investments EMEA & fund manager at CBRE Global Investors (CBRE GI).
Speaking at a PropertyEU retail investment briefing at the Mapic real estate fair in Cannes this week, Beccar said redeveloping and extending existing space was a much better strategy given the current record-low yields for prime assets. Yields have move inward 'dramatically, he noted. 'There's more capital flowing in and investment pressure has definitely increased around Europe.'
CBRE GI is currently looking at repositioning assets in more peripheral areas in the countries where it is active, he added. 'Hypermarkets are all downsizing from 10,000 to 5,000 m2. There are lots of opportunities to bring in new tenants and generate a lot of value there. We’re looking at locations in the periphery where we can buy nice assets with good fundamentals and a good income return.'
CBRE GI is primarily active in the core European countries including the UK, France, Germany, the Benelux and southern Europe. While the fund manager is also active in Central and Eastern Europe, it won’t be moving further east to countries like Serbia or Montenegro, despite higher yields in these markets. 'These countries are not in our portfolio,' Beccar said. 'We are active in the main countries like Czech Republic and Poland, but we are not actively searching investment opportunities further out.'
Beccar said that CBRE GI's focus in the current low-yielding environment is on NOI - or net operating income. 'That is our focus today, how to get NOI. We don’t see any potential for yield compression anymore.'
Vienna-listed Immofinanz is also focusing on NOI, its head of development Phillipp Gansch said. ‘There are still some great opportunities, but you can't just develop a scheme and think it will work. You constantly need to invest in retail, and you need to do that extra work when interest rates are higher so that the shopping centre continues to deliver a good return.'
