Investment activity in real estate markets has dropped to 2004/05 levels, according to Nick Axford, head of EMEA Research and Consulting at CB Richard Ellis. Axford was speaking at the 2008 International Council of Shopping Centres' Research Conference in Rome last week, attended by a record number of delegates from across Europe.

Investment activity in real estate markets has dropped to 2004/05 levels, according to Nick Axford, head of EMEA Research and Consulting at CB Richard Ellis. Axford was speaking at the 2008 International Council of Shopping Centres' Research Conference in Rome last week, attended by a record number of delegates from across Europe.

Whilst retail investment turnover in Europe has halved relative to the activity seen in 2006 and 2007, owner/occupier sales remain a significant feature of the market as retailers undertake sale and leaseback deals to liberate capital tied up in their real estate portfolios, he said.

And with the turmoil in the financial markets spreading fast to the real economy, consumer spending, which has accounted for almost half of all economic growth in Europe over the last few years, has also taken a big dive. About the only things rising right across Europe are the fear of unemployment, the combined inflationary pressures of high food, fuel and transport costs, and property yields.

'Capital values are now falling in many markets, and we believe there is still a further round of pricing adjustments to come as the European economy continues to weaken,' Axford said.

For the shopping centre industry, however, there is some comfort. 'Prime shopping centres are still going to be attractive as investments, although secondary property will continue to be hit harder than the best sites. The fact that shopping centres are multi-let, coupled with the unwillingness of most retail tenants to downsize or relocate even in a tougher market, makes them a relatively good defensive sector,' he said.

With the best shopping centres only traded very infrequently, those investors currently adopting a 'wait and see' attitude will have some interesting choices to make if prime shopping centres are put up for sale for the first time in many years. Even if they believe that values may have further to fall, there is no guarantee that the specific centres that a particular investor is looking to purchase will be available in the future, Axford noted.