European retail property volumes fall 60% in Q1

European retail real estate volumes during the first three months of 2012 fell 60% compared with the same period the year before, according to Jones Lang LaSalle.

Following 'exceptional' volumes in 2011, JLL's preliminary analysis suggests that direct investment in retail real estate for the first quarter of 2012 is likely to be in the region of EUR 3.8 bn, representing a significant decrease on total volumes in Q1 2011 and Q4 2012 of EUR 9.9 bn and EUR 8.4 bn.

JLL said that the quarter was characterised by a lack of large transactions, which boosted volumes in Q1 2011. The first thee months of 2011 saw five transactions over EUR 500 mln, including the EUR 1.8 bn Trafford Centre deal. The figures from Q4 2011 were helped by the sale of the EUR 824m Galleria in St Petersburg.

Despite volumes being down across the board, geographically the majority of activity remains focused on Germany and the UK. Allianz's purchase of the remaining 45% stake in Europa Passage in Hamburg from HSH Nordbank for around EUR 200 mln was the major transaction in the German market. The largest shopping centre deal in the UK market was the purchase of Ocean Terminal in Edinburgh by Resolution from Forth Ports for EUR 108 mln. JLL was an adviser in that deal.

Shelley Matthews, European retail capital markets director, commented, 'A couple of factors are in play. Firstly, the sustained economic pressures are restricting the availability of debt finance, especially for new borrowing, which when combined with narrowing investor requirements, is limiting transactions.

'Secondly, the uncertainty caused by the ongoing Eurozone crisis has slowed down the transaction process in some markets, which in conjunction with the lower levels of deal origination witnessed in the second half of 2011, has resulted in fewer deals reaching completion in Q1 2012. However, we expect volumes to pick up in Q2 and over the remainder of the year, in particular in Germany, Poland and the Nordics due to more solid fundamentals and a greater depth to the investment market.'