The UK has retained its position as the largest retail investment market in Europe for the third sucessive quarter, after registering €3.5 bn of investment in Q2 2016.
According to CBRE’s EMEA Retail MarketView, the UK attracted 27% of all European retail investment volumes, which totalled €12.8 bn for the quarter. Germany was the second largest market, although activity in both countries was down 21% and 23% respectively on Q2 2015. CBRE said the slump was due largely to a lack of investible stock and subdued investor confidence amidst market volatility.
'We have seen consumer confidence begin to recover in Q2 2016 from the downward trend we saw in Q1 and prime retail space is very much in demand. However, occupier demand for secondary retail space remains weaker and therefore is not seeing the uplift in rents that we are beginning to see for core and prime assets,' commented John Welham, Head of European Retail Investment at CBRE. 'This situation is also reflected in the investment market, where demand for prime and core retail space is much stronger than for secondary assets.'
Data showed that a short supply of core assets in the UK and Germany brought high levels of investment into regional centres. In the UK, around 79% of retail investment targeted markets outside of London, whilst in Germany the top six cities accounted for just 22% of total retail investment.
The CEE region displayed a robust performance with €1.9 bn transacted - more than three times the same period last year - largely due to Redfine’s acquisition of 75% shares in the Echo Investments portfolio in Poland.
Funds represented 28% of all European retail investment, while foreign buyers accounted for 44% of total volumes. 20% of these buyers came from beyond Europe, with Middle Eastern and US-based investors particularly active.
Despite market uncertainty, prime retail assets in EMEA continue to attract investment and yields are still trending downwards.
CBRE said that the low yielding bond market is further compounding the yield compression in prime retail and that the CBRE EMEA Prime Shopping Centre weighted average yield fell below 5% for the first time.
