Retail outlet malls have come of age from an investor and retailer perspective according to new research from Cushman & Wakefield, underlined by two concurrent pan-European sales by the IRUS European Retail Property Fund.
The deals, logged in November, comprised ten centres sold for a reported €1.28 bn and represent the largest European retail transaction of 2016.
IRUS, one of the largest pan-European private-capital property investment funds specialising in outlet centres, owns a total of 11 outlet properties and is sponsored and managed by Neinver Group. In one transaction, Cushman & Wakefield advised TH Real Estate on the acquisition of six outlet centres located in major cities in Spain, Italy and Poland worth over €700 mln, on behalf of a Joint Venture between Neinver and TIAA.
Separately, VIA Outlets (Hammerson, APG, Meyer Bergman and Value Retail), agreed to buy four European outlet centres, located close to major cities in Germany, Portugal, Spain and Poland, for a total gross asset value of €587 mln.
Not only was this one of the largest transactions of any sector in 2016 – it also, in a single day, eclipsed the entire outlet centre transaction volume for 2015, according to Cushman & Wakefield.
'The European sector has come of age and is no longer a specialist, niche market. This has been demonstrated by the most recent deals which are significant by any measure,' commented Richard Ching, partner in Cushman & Wakefield’s outlet valuation team.
'Over the past three years, sales turnover has risen broadly by 8% per annum, an income growth rarely seen in other sectors, raising the demand for market-wide performance data which until now was notable by its absence. Having tracked the outlet market in insolation for the past three years we have witnessed the exceptional performance of the sector, and the resulting move towards institutional acceptance,' Ching added.
According to Cushman & Wakefield, outlet floor space has grown by 6.4% per annum over the past five years – almost double the rate of traditional shopping centres. Sales growth has increased by around 8% per annum over the past three years while European outlet rents have increased by more than 10% in the past 12 months alone.
The most recent data shows that growth on year-to-date sales up to the third quarter is around 4% for occupied space with turnover growing by nearly 7% due to increased floor space.
'This sector is not without risks. Any new entrants to the market would be advised to form a partnership with an established outlet operator. As supply continues to remain constricted alongside increased investor appetite, those armed with accurate market knowledge and a risk-mitigating operating plan will be best placed to take advantage of the exceptional returns witnessed,' concluded Ching.
