Investment in Continental European retail property hits EUR 28 bn

Investment in retail property in Continental Europe rose 7% to EUR 27.7 bn in 2007 compared with the previous year, according to research published on Tuesday by property adviser Jones Lang LaSalle.

Higher financing costs and uncertainty about pricing resulted in lower investment volumes in the final quarter of the year. In total, some EUR 6.6 bn was invested in retail premises in the fourth quarter, down from EUR 10.1 bn in the year-earlier period. Nonetheless, the investment volume for the period is still the fourth highest ever recorded, JLL said.

A total of 437 retail transactions was recorded in 25 Continental European countries last year, an increase of 4% compared with 2006. The German market accounted for EUR 7.3 bn or 26% of total investments. The top five deals accounted for more than 20% of the total retail volume in Germany.

As predicted, Russia was one of the most active markets in 2007, benefiting from investors’ shift eastwards in search of product and higher returns. Investment volumes also swelled in Turkey, to a total of EUR 940 mln, while in Romania they more than doubled to EUR 1.1 bn.

Commenting on the figures, Jeremy Eddy, director of European retail capital markets at JLL, said: ‘Up to now it looks like the returns on retail properties in A1 locations in Continental Europe have been able to stave off the effects of the credit crisis. We see this across mainland Europe and it is also in line with the views of investors we speak to daily.’

For 2008, JLL expects price corrections based on risks for secondary investment assets and for more financially oriented products and portfolios. ‘Geographically, we expect substantial volumes to be traded in Germany and Northern Europe, and later in the year we expect more retail investment properties to come to market in Spain. We also predict continuing strong growth in the development markets of Russia and Turkey,’ Eddy said.