OUTLOOK RETAIL: Investment yields set to fall further in 2016

Retail real estate yields are set to fall further in 2016, according to Nicolas Petit, head of retail asset management at AEW Europe, France.

‘2015 has been one of the best years for investment,' he said. 'It will be difficult to match this performance next year but appetite for investment is very strong so yields will be very low.’

Petit was speaking at PropertyEU’s Retail Outlook Briefing at Mapic in Cannes in late November. Earlier this year, AEW Europe acquired the Celsius portfolio from CBRE Global Investors together with CIC for €1.2 bn. A big deal like this does not come along every year, he pointed out.

Bas Tiemstra, head of asset management retail EMEA at CBRE Global Investors, agreed that investor appetite for retail assets would remain strong in the next 12 months. ‘We are relatively positive that there will be much more money in 2016 and lots of liquidity. We also see more appetite for value-added assets in Europe. A lot of the focus will be on refurbishment, especially in saturated markets.’

While the investment outlook is positive, the situation with regard to rental levels is a different story, Petit said. ‘There’s still a lot of pressure on turnover, it’s still very difficult for some retailers. The market is polarised and we’re only seeing rental growth potential in good locations.’

At the same time, consumer spending is on the rise, countered Jaap Gillis, CEO Bouwfonds Investment Management. ‘We’re seeing an increase in consumer spending again for the first time in a long time,’ he noted.

Gillis is particularly upbeat on prospects for the non-food sector. ‘Spending here will increase more in 2016. I’m less confident on the luxury front due to more restrictive tax rules in some areas.’