European retail investment up 27% in Q1 2014

Direct investment in retail real estate reached €6.6 bn in the first quarter of 2014, up 27% from the Q1 2013 volume of €5.2 bn, and 20% above the five-year quarterly average, according to a new research report issued by Jones Lang LaSalle.

Geographically, the majority of activity remains focused on the large, liquid markets of the UK and Germany, which together accounted for 63% of total volumes, JLL said.

The UK market remains buoyant with Q1 volumes of €2.3 bn, 27% above the five-year quarterly average, while in Germany, several major deals boosted volumes to €1.8 bn, 56% above the five-year quarterly average. Elsewhere, there has been a significant increase in activity in the recovery markets of Italy, Spain and Ireland, in addition to the Netherlands, which indicates the continuing broadening of investor appetite for geographical expansion.

'In the UK, we are seeing high levels of demand for dominant secondary to super prime,' commented Adrian Peachey, head of Retail Capital Markets UK. 'Lesser quality stock when packaged as a portfolio is also keenly sought after. We are experiencing an increasing number of new requests for investment opportunities in our market from a wide spectrum of overseas and domestic capital, reinforcing our view that the strong appetite for stock will be sustained for a considerable period.'

The quarter was characterised by several large transactions in the core markets. The largest of these was Unibail Rodamco’s purchase of a 50% stake in CentrO in Oberhausen, Germany, for €535 mln. In the UK, Intu Properties purchased a 50% stake in Westfield Merry Hill £407.7 mln (€492 mln) and 100% of Westfield Derby for (£390.3 mln (€471 mln). Meanwhile, in France, Fonciere Aspys is acquiring the Beaugrenelle Shopping Center in Paris for a price in the region of €700 mln.

'The ‘mega deals’ that we are witnessing both in the UK and Europe, at keen yields, demonstrate the ongoing attractiveness of prime shopping centres to investors, and also reflect the strengthening demand from national, and particularly international retailers, for space within the best dominant, regional centres across Europe,' added James Brown, head of European Retail Research and Consulting. 'Looking forward, given improved economic sentiment, a continued increase in the weight of capital and the broadening of investment targets both in terms of geography and typology of assets, we expect to see an increase in 2014 volumes on the €26.6 bn in 2013. The potential dampener on this momentum remains the availability of prime stock, which may not keep up with this demand.'