Despite an overall decrease in retail real estate investment in Europe in the first half of 2016, volumes remain above five-year average levels and the flow of institutional equity targeting exposure to the sector continues to increase year-on-year, according to data compiled by broker JLL.
'We are seeing healthy levels of investment across Europe in historical terms. There is a wall of institutional money targeting the retail sector and with more to go round, more geographies are benefitting. European retail remains a defensive, safe haven investment destination particularly for those with longer investment horizons because it is less susceptible to short-term setbacks, and prime assets in particular offer a stable income,' said Jeremy Eddy, European retail capital markets director at JLL.
Direct investment in retail real estate for the half-year reached €20.7 bn, representing a 19% decrease on the 'exceptional' performance witnessed during H1 2015 when volumes reached €25.5 bn, driven in part by five transactions in excess of €500 mln and 17 transactions in excess of €300 mln.
The latest fall in volumes was largely driven by a slowdown in the UK and Germany. However, volumes increased by 14% outside these top two markets, with notable growth in countries such as Austria, Ireland, Italy, Switzerland, Romania, Hungary and Poland. France has likewise seen a significant jump with a 40% increase year-on-year.
The largest investment deals of H1 involved urban retail assets, benefitting from robust economic fundamentals and good connectivity. Forum Block in Helsinki, Finland, which was bought by Sponda Oyj for €576 mln, was the largest transaction of the first quarter, followed by Grand Central in Birmingham, UK, bought by Hammerson and Canada Pension Plan Investment Board (CPPIB) for €441 mln.
In the second quarter, the transactions list is dominated by Blackstone’s purchase of the Blanchardstown Centre in Dublin from Green Property.
James Brown, head of European research at JLL, commented 'While investment volumes in the full year are expected to be down on the record levels reached in 2015, they are likely to be above the five-year average levels. For the most part, declining volumes are predominantly a result of a lack of liquidity, rather than any underlying weakness in market fundamentals.'
