Further value appreciation for prime likely in 2012

Retail property was the best performing commercial real estate sector in Europe in 2011, according to CBRE's European Valuation Monitor (EVM).

Despite a slight contraction in capital values in the final quarter of 2011 (-0.2%), retail real estate delivered a 1.5% increase in capital values for the full year. This is the tenth time since the peak of the market (16 quarters in total) that retail has outperformed other sectors at the pan-European level.

'In aggregate retail was, for the third consecutive year, the best performing real estate sector in Europe,' said Andrew Barber, senior director, Valuation & Valuation Services, at CBRE. 'Appetite for this sector throughout the year was driven by retail's defensive characteristics, and investor strategies focused on the German and Central and Eastern European markets in particular.'

This saw European retail investment volumes grow by 4.9% year-on-year to reach almost EUR 38 bn in 2011.

'The defensive characteristic of good-quality retail will continue to be favoured by risk-averse investors. This, combined with a growing interest in prime high-street retail units - pricing competition for which has accelerated towards the year-end in markets such as London and Paris - gives reason to believe that further value appreciation can be expected as the evidence feeds into valuations,' Barber added.

The 1.5% annual increase in retail values across Europe compares to a flat result at the All Property level, 0.5% growth for offices and -4.5% for industrial.