The retail real estate investment landscape is set to change quite significantly in 2017, according to Herman Kok, head of research at Multi Corporation.
Speaking during a PropertyEU investment briefing hosted by Immofinanz at the Mapic real estate fair in Cannes on Thursday, Kok pointed out that a growing number of international investors have been targeting European retail real estate in recent years on the back of low interest rates and falling bond yields. The question is how long that trend will last given recent political events such as the Brexit vote in the UK and the recent election of Donald Trump as president of the US, Kok said.
‘Interest rates are now rising and bond yields are doing the same,’ he pointed out. ‘The parameters for retail real estate investment may change in 2017.’
That said, retail real estate remains a safe bet, noted Jeremy Eddy, head of retail capital markets at JLL. ‘Safety is paramount for investors, it remains a defensive asset class. That’s where investors want to be. Retail real estate has continued to generate consistent returns in an uncertain political climate despite the economic challenges.’
Asked where the retail real estate investment cycle is at present, Eddy said the fundamentals remained positive. ‘It’s still a pretty good place to be right now.’ He added, however, that occupier trends may well challenge the investment paradigm in the coming years. ‘A huge amount of capital is also continuing to target many geographies and all sub-sectors within the asset class.’
In recent years, the European market has seen a significant number of newcomers from the US, Asia and other regions in the world, but Eddy does not expect to see the same number of new entrants in the coming years. ‘We may see some new entrants from the US and we are also likely to see some M&A activity. But the chips are on the table, we know pretty well now who the major buyers are.’
Another trend that Eddy expects to continue is the marriage of capital and expertise. In the past five to six years, institutional investors including pension funds and other liability driven players have teamed up with specialist REITs and other operators, he pointed out. ‘That trend will continue,’ he predicted.
