The European retail investment market is ‘absolutely back in every way’, according to Mike Rodda, head of EMEA retail markets at Cushman & Wakefield.

The European retail investment market is ‘absolutely back in every way’, according to Mike Rodda, head of EMEA retail markets at Cushman & Wakefield.

‘Certain pockets of the market are more active than others. The global view is that Europe is underpriced on a macro level. Across the main European markets, we don’t see dark clouds anywhere.’ he said in an interview with PropertyEU. ‘Spain in particular is definitely back with a bang. Our team there is very active indeed. We have some new faces in the Madrid team and we’re growing again. One trend that we’re seeing is that there is just not enough supply to fill the appetite.’

While many international private equity investors are flocking to the south of Europe, Rodda is particularly upbeat about the Nordics. ‘On the ground we are witnessing a rebalance in the source capital. The region has traditionally been dominated by domestic capital, but we are beginning to see a noticeable and significant shift towards a greater balance of cross-border capital. Global money is now seeing the opportunities there.’

After a prolonged period of extreme risk aversion in some regions, particularly in southern Europe, the markets there are starting to normalise again, Rodda noted. The Spanish deal announced last October between Canadian Pension fund giant CPPIB and UK-based REIT Intu Properties to acquire Parque Principado shopping centre in Oviedo, Northern Spain was a catalyst, he claims. ‘That was the deal that sparked it all off and marked the start of the upturn. On the private equity side, the initial wave of opportunistic capital is beginning succeeded by cheaper money for the stronger assets.’

The trend is also becoming visible in Portugal, Rodda said. ‘We’re beginning to see that trend push into Portugal. Capital clients are asking for background information, ideas and suggestions for assets in Portugal. During the second half of this year, I think we’ll see some real activity.’

Rodda conceded that capital recovery is ahead of occupational recovery in Iberia, but added that occupational fundamentals have stabilised. ‘Capital is definitely ahead, but the two go hand in hand and we are starting to see a recovery at operating level. In Iberia generally, the decline in consumer sales has levelled out and sales growth has begun to appear in pockets since the final quarter of 2013. We’re now seeing some green shoots in consumer sales, and improving retailer confidence is improving the letting market. But it’s still very early days.’

Cross-border investors in particular are very focused on the region, he said. American capital is especially dominant and that includes South American capital, but European investors are also returning, he said. ‘There are hints of Asia-Pac investors but not in the numbers of the Americas,’ Rodda noted. ‘Supply is coming through although we’ll see a few deals coming off in the coming months. But I think there will be a lot more new product after the summer.’

Aside from traditional real estate investors, new players including hedge funds and private equity are being drawn to Iberia. A case in point is the portfolio sale of eight mid-market malls by Dutch retail REIT Vastned to a consortium including GreenOak, Baupost and Groupo Lar. The assets require active hands-on management, Rodda said. “Good managers are key, the market cycle has proven a natural weeding out and some really talented niche shops have come through providing some fantastic stock selection. Grupo Lar is a really good partner, they are geared up to do those sort of things.'