Europe's 'Big 5' set to recoup retail market share in 2009

The 'Big Five' countries of core Europe - France, Germany, Italy, Spain and the UK - are set to recapture their retail investment market share in 2009, according to new research released by Jones Lang LaSalle at the Mapic retail property fair on Thursday.

Shopping centre investment in the Big Five made up just 45% of the total European volume traded so far this year, down from 80% in 2004, JLL said. The property adviser believes current market conditions provide an opportunity for the Big Five to take back some market share.

Neville Moss, head of European Retail Research at JLL said: 'Investors are now focusing on real estate with strong defensive qualities and are increasingly considering fundamentals such as market, location, scale, tenant covenant, merchandising and quality, and we believe that shopping centres in the more mature and larger western European economies offer these qualities.'

Looking ahead to 2009, Jeremy Eddy, director and head of European Retail Capital Markets, JLL said: 'As we move into 2009 we hope that the shocks experienced during the second half of 2008 will diminish and liquidity will improve. Fragile economies are introducing additional drag on rents and returns and no markets in Europe will be immune, so the Big Five will be affected. That said, we fully expect a further softening of yields, a process currently well underway in the UK and gaining momentum in Continental Europe, and this price correction will open up significant opportunities for equity-rich investors as price adjustments filter through.'

According to Eddy, the aggressive investment market seen between 2003 and 2007 resulted in the convergence and harmonisation of yields across Europe. This yield convergence was witnessed across sub-sectors as the market failed to adequately price the differing risk profile of prime and secondary retail product. ‘We therefore expect to see a return to polarisation of yields across both geographies and indeed sub-sectors and risk profiles. We fully expect that there will be a focus on mature markets as the revised pricing attainable in the market will result in reduced appetite or need for significant risk,' he concluded.