JLL: Investors switches focus to retail parks

Investors in continental Europe are targeting small to medium-sized retail parks as a defensive play in the currently challenging retail environment, according to the new European Retail Warehousing research report released by Jones Lang LaSalle.

Retail warehousing transaction volumes fell from EUR 5.5 bn in the first half of 2007 to EUR 2.7 bn in the first half of this year. However, the retail parks sector increased its share of total retail investment volume from 11% in H1 2007 to 18% in the first half of 2008. Total retail investment activity actually rose slightly in Q2 2008, including seven deals of over EUR 50 mln.

'Requirements for retail parks that can offer rental growth and prime quality product will remain strong from equity orientated buyers,' said Mike Bellhouse, associate director of European Retail Capital Markets at JLL.

Germany was the most active market in continental Europe in H1, as it was in 2007, accounting for 26% of the total volume transacted. Sweden was the second most active market (15%), closely followed by France at 12%, but with the credit crunch gripping Western Europe, investors are increasingly looking at CEE where the market fundamentals remain strong and yields have remained steady.

Neville Moss, head of Retail Research at JLL, said: 'Occupier demand has softened for secondary space in 2008, but retailers are actively seeking prime space in most markets, with more affordable rents attracting an ever increasing range of retailers out of town'. He added: 'Development activity is slightly down on last year but remains high with 77 new retail parks under construction in continental Europe. The focus is on southern Europe but development activity is also gaining pace in central and Eastern Europe with a variety of new formats emerging.'