Retail deals hit record of 35% of European investment in H1

Retail transactions accounted for 35% of total European real estate investment activity in H1, compared to the last five-year average of 26%, despite the decline in total retail investment transactions in the first half of 2009, according to the new research from CB Richard Ellis. The sector's share of the H1 European market is the highest proportion on record.

CBRE said that in contrast to recent years very few large deals took place during the first half of 2009. The average transaction size for the market as a whole fell to EUR 18.4 mln in H1 2009, a 59% decline from the EUR 44.4 mln average at the peak of the market (H1 2007). At EUR 27 mln, the average retail investment transaction size is not markedly different; however, completing larger transactions is proving easier in the retail sector than in other parts of the European investment market.

Eight of the top 10 European investment transactions completed in the first half of 2009 were retail. This included Europe's largest transaction so far this year - the sale of the predominantly retail Dawnay Day portfolio in the UK for over £600 mln (EUR 669 mln). The relative strength of the market for large retail lot-sizes has helped to boost the retail sector’s share of the overall investment market and, 56% of all deals over EUR 100 mln in H1 2009 were in the retail sector.

The restrictive debt market has not yet eased significantly and difficulties in obtaining finance remain in most European markets, therefore impacting the type of retail property being purchased. The reduced number of shopping centre transactions has reflected this landscape, as larger deal sizes are difficult to finance without large equity commitments. Historically, shopping centres have constituted nearly half of total retail investment turnover; but their share fell to only 33% in the first half of 2009.

Nevertheless, the evidence suggests that when good quality centres come onto the market, there is generally strong investor demand for them. This was recently demonstrated in the sale of the Plenilunio shopping centre in Madrid, although this was introduced to the market with an assignable finance package.