Retail volumes down by half on 2007 level - JLL

The total volume of retail real estate transactions in the first three quarters of 2008 was EUR 11 bn, a little more than half the EUR 21 bn recorded in the same period last year, Jones Lang LaSalle has said in a new report.

The broker said that the lack of available finance and the worsening economic outlook have clearly reduced investment activity. Some 59 deals were completed in the third quarter (89 in Q2), including six over EUR 100 mln. Transaction volumes in retail real estate investment in Continental Europe (excluding UK and Ireland) totalled EUR 3 bn in the third quarter of this year, compared with EUR 3.9 bn in the previous quarter.

Jeremy Eddy, director of European Retail Capital Markets at Jones Lang LaSalle, said the indicators were not all negative. 'Market fundamentals held up relatively well in the third quarter, with occupier demand remaining strong for the best space and consumer confidence actually increasing slightly, although retailers are less confident about their short-term prospects.'

'Uncertainty in the financial markets and the continuing lack of available finance means that investors are likely to remain cautious for the remainder of the year, although 2009 should present increased opportunities as pricing becomes more realistic and stability returns to the capital markets.'

Germany remains the prime area of activity for investors, with a total volume of EUR 2 bn transacted in the first three quarters of 2008, representing 19% of the total, This is considerably less than its 29% market share in the same period last year. JLL said that although occupier demand for the best locations in Germany remains solid, retail sales have not grown as much as expected. Spain (EUR 1.074 bn) is some way behind in second place, followed by Finland (EUR 1.024 bn) and Russia (EUR 913 mln).

Shopping centres were the prime target for investors in the first nine months of 2008, accounting for EUR 6.7 bn and 61 % of volumes. But JLL said that the defensive qualities of retail warehousing have also proved popular, with investment in solus units and retail parks accounting for almost 30% of transaction volumes. The supermarket sector, which was dominated by leveraged buyers in 2006-2007, has been hit the hardest, with transaction volumes representing just 9% of the total traded so far this year.