VIDEO: Internet sales no longer deters retail property investment

The biggest change in the retail property market over the last few years is that the rise of online shopping is no longer deterring investors from buying bricks and mortar assets, according to CBRE's John Welham. Investors are also becoming more adventurous, leading to a move beyond prime, defensive markets.

'In 2012-2013 most of our investor clients were asking us whether they needed to be in retail property at all. The major concern was the effect of retailing on the internet: whether retailers were going to need shops; and if they were going to need shops, were they going to need them in shopping centres or high street or retail parks.'

That debate has to a large extent now receded into the background and most of CBRE's investor clients want to expand their exposure to retail property, Welham said.

Welham, head of European retail investment at CBRE, made the comments during an interview at PropertyEU's European Retail Investment Briefing this month.

While there has been a 'bit of a sort out' and consolidation in the retail world, Welham said, retailers across the sector still require real estate.

The more pertinent question among investors currently relates to which markets and which sub-segments of retail offer the best performance.

Welham: 'Back in 2013 people were more defensive and very focused on the really prime, defensive markets, particularly London and some of the German cities. Now we are seeing investors being much more adventurous.'

This has already led to significant yield compression in Spain as investors realise the market there is turning. 'Rents have been rebased and now is a good time to get into the market. So in 18 months we have probably seen 200 basis points of yield compression in Spain. It has started in Portugal and really there is pressure on yields throughout the markets.'

Welham said there are a number of areas investors could look at when looking for markets where they can get outperformance. 'One which I think is worth looking at is Italy where yields are considerably higher than in Spain. He also singled out the Nordics as a good market for retail investors.

Watch the full interview with John Welham on ProeprtyEU's YouTube channel