Prospects for the European retail real estate sector are looking brighter, experts agreed at PropertyEU’s European Retail Trends briefing at Mapic in Cannes in late November.

Prospects for the European retail real estate sector are looking brighter, experts agreed at PropertyEU’s European Retail Trends briefing at Mapic in Cannes in late November.

European retail real estate investment levels for 2015 have reached a level not seen since 2006, with figures for the final quarter yet to come, Marije Braam-Mesken, senior investment analyst retail at CBRE Global Investors, said during a presentation.

The strong appetite for the asset class will continue into 2016 due to persistently low interest rate levels and the likelihood of further quantitative easing by the ECB, she predicted. ‘Investment volumes have
rocketed and I think investor interest for retail real estate will continue.’

In investment volume terms, the UK and Germany account for the biggest figures, but interestingly other regions are contributing as well, Braam-Mesken said. ‘In the final quarter of 2014, investment came back in Iberia and the Nordics. More recently investment in the Benelux countries is also really increasing.’

Prospects for retail sales are positive now as well. House prices are increasing and that is having a knock-on effect on the DIY (do-it-yourself ed.) market, she said. ‘In the past year, we recorded sales growth in most countries in our portfolios across Europe. We see consumer confidence improving and are very positive about prospects for 2016. We are monitoring developments closely to ensure that our centres remain attractive and relevant, but sales are growing and prospects are relatively favourable.’

In terms of retail destinations, London and Paris continue to score well, but new retail locations are emerging, Braam-Mesken said. Recent research conducted by CBRE Global Investors into the attractiveness of cities shows that the urbanisation trend is strong in a large number of German cities. The tool which has emerged from this research looks at different factors that make a city attractive such as demographics, affluence, retail offering, the number of international brands, tourism and the volume of pipeline projects.

Braam-Mesken: ‘Our tool enables us to judge cities on catchment and spending capacity in that catchment area. Many investors tend to focus on London and Paris, but the availability of products in these cities is decreasing. At the same time, there are new products in other cities that may be attractive. That is why we created our tool to guide investors and help them find new retail destinations in Europe.’

The city attractiveness tool also filters key factors such as liquidity, which is particularly important to international investors, she continued. ‘Investors may have different needs so different factors may be important to them. A city that is very attractive on a number of criteria may not necessarily be liquid.’

Andrew Phipps, head of retail research EMEA at CBRE, agreed that 2016 will likely be a strong year for retail. ‘The economic story is improving and investors are becoming more confident. There’s a growing belief that things are not getting worse and we’re seeing that some markets on the continent are moving. There are investors with money to spend.’

Phipps sees a growing focus beyond core cities and core locations on secular locations around cities with young populations. ‘We see some brands looking around the periphery and expanding into less popular areas. If the brand is strong enough, it will draw people. We’re now seeing that growth trend in Spain, Italy and part of the Nordics as well.’