DEALS Q1: France stands out in retail shopping list

Investors revealed their faith in French retail by announcing a string of big-ticket transactions in the first quarter of 2014 amid cautious optimism about a return to growth in consumer spending.

After a decline of 0.3% in Q1, consumer spending is expected to increase by 0.6% in Q2, according to Cushman & Wakefield. 'While headline inflation is likely to be pushed upwards, consumer spending will be sustained thanks to a stable unemployment rate, a modest increase in purchasing power and a decline in savings,' the broker said in its latest Marketbeat Retail Snapshot report on the French market.

Cushman & Wakefield said several indicators reveal a retail market that is still in a recovery phase. Consumer spending on textiles and clothing items fell by 0.3% year-on-year but furniture sales grew by 1.2%. Winter sales figures are also mixed: although positive for the shopping centre industry, they were generally disappointing for Parisian retailers.

An upturn in consumer spending will, however, not benefit the entire French retail real estate market in 2014, the report warned. 'Secondary sites and retail units and developments that lack optimum configuration will, therefore, continue to suffer from retailers’ wait-and-see stance.'

Despite the fragile state of the Retail sector in France investors continued with plans to pour equity into brick-and-mortar retail units. The largest announcements concerned the €2.7 bn invested by a joint venture between Carrefour and eight institutional investors which allows the French retail giant to get two big portfolios off its balance sheet.

Another French-led consortium, this time by listed developer-investor Apsys, carried out a €700 mln deal to take control of the Beaugrenelle shopping centre in Paris.

But both these transaction have yet to close. Adding up the volume of completed deals, Cushman & Wakefield estimates 'only' €514 mln was invested in the retail market in Q1 2014, half of that recorded over the same period in 2013.

COMPLETED DEALS
The only two retail transactions above €100 mln that completed in Q1 were Hammerson's acquisition of 75% of Saint-Sébastien shopping centre in Nancy from AXA Real Estate for €132 mln, and US private equity firm KKR's acquisition of four assets from Amsterdam-listed Corio for €104 mln.

The completed retail deals accounted for 15% of the all-property volume for France in Q1. Cushman & Wakefield predicted, however, that the retail volumes will move closer to the five-year average of 26% as the big Carrefour and Beaugrenelle deals close.

A round-up of the top European real estate investment deals in Q1 2014 appears in the May edition of PropertyEU Magazine.

Click on the link for Cushman & Wakefield's Marketbeat Retail Snapshot