Investment in European retail property reached €21 bn in the first three quarters of the year, reflecting an annual increase of 8%, new data from Savills shows.
The year-on-year increase is still 23% below the current cycle peak at 2015. According to the broker, activity was driven by some sizeable portfolio deals across markets.
Savills said that Germany has overtaken UK as the largest investment market, accounting for 24% of the activity compared to the UK, which has dropped from 24% last year to 19% in the first three quarters of 2018. Poland and Italy increased their shares from 6% to 10%.
Switching asset focus
Investment in shopping centres increased by 11% year-on-year, though this is still 40% down from the high levels of 2014. This result was driven by the non-core markets which are still catching up with the cycle. For example, in Italy, total shopping centre turnover increased by 158% in the first three quarters of the year to almost €1.2 bn, while Poland saw a 82% rise to €2.1 bn. Belgium also reached an impressive €1 bn of shopping centre deals.
The role of high street transactions has been notable in a number of markets, such as France, Savills said, where they account for over 50% of the total, as well as Spain and the Netherlands, at about 30%, while in Italy and Belgium they represent about one fifth of the total.
Overall, quality high street units in shopping streets with strong footfall and rising tourist numbers are highly sought after by investors, considered to be a defensive choice against the disruption caused by online retailing to secondary retail destinations.
About one-third of the deals involved retail warehousing and retail park portfolios, with 10 such deals in Germany and four in Sweden.
Industry in evolution
Savills said that the market's rebound 'may have come as a suprise' but added that this year's activity has been underpinned by the need for 'adjustment' and 'consolidation' by an industry in evolution.
However, the broker warned that this as this year's turnover is still 38% above the ten year average, it may need to normalise further under the rising pressure of online sales. At the same time, some existing formats may be able to convert to service the increasing property needs of e-commerce.
