- Retail volumes totalled €8.1bn in Q3, 9% down on the previous quarter
- Retail market share fell as a result, standing at 21.8% versus 25.4% in Q2
- Shopping centre activity rose but shops and retail warehouses fell back.
- Year-on-year volumes are still rising however, up 28% compared to the year to Q3 2012
- Indeed, with supply shortages now easing, annual volumes are forecast to rise 7% to €36bn
“Retail property investment markets face a busy year-end,” believes Michael Rodda, head of EMEA Retail Investment at Cushman & Wakefield. “The more upbeat mood of MAPIC perfectly reflects the current trend of the direct market, with more liquidity and sharper pricing bringing stock to the market and making buyers more eager to get deals done.”
Stock is coming from a range of sources, with bank-led sales but also approaching fund redemptions and even some recent buyers prepared to re-trade stock, typically reinvesting higher up the risk curve. “We started to see more stock coming to the market in Q3 and the pipeline is certainly now more interesting,” commented Rodda. “What’s more, with a broader spread of buyers and a better flow of debt, there will be a quicker knock on effect on pricing than many expect as well as more activity, with €36bn now looking within reach for this year, a 7% increase on 2012.”
As in the market at large, retail demand continues to spread further afield as investors seek out large modern schemes and top trading streets. Often this is focusing attention on what had been overlooked markets – either by geography or property quality. Commenting on these patterns, David Hutchings, Head of EMEA Research at Cushman & Wakefield, said: “The Q3 drop in activity does not reflect the strength or depth of demand for retail property around Europe and is likely to have been a temporary lull as investors reviewed their strategy given the continuing tightness of supply in the core. Germany and Nordic cities continue to face very high demand but with stock limited, investors have had to look further afield with both southern and eastern Europe seeing a bounce in activity in the last few months for example”.
In Central & Eastern Europe retail took a 33% market share in Q3 as volumes rose 7% thanks largely to activity in Poland but with a bounce in some smaller markets such as Romania and Slovakia as well. However it was southern Europe which showed the biggest upturn, with volumes up 259% between the second and third quarters and retail taking a 57% market share. This has been driven by Italy and Spain and is set to continue with more shopping centres and retail parks in the pipeline in Italy and a more realistic view on sustainable rents underpinning positive views on Spanish assets.
“Increased demand from cross border players is set to drive the market higher and with a wider universe being considered, investors are coming to their own conclusions about what are the best risks to take and which markets are most favourable. Some prefer to bid up prices in core markets like the UK while others are ready to target new areas, as shown by the first significant Chinese investment in Poland and the first major Canadian purchase in Spain,” concluded Hutchings.
The majority of retail investment remains focussed on the shopping centre market which actually gained ground in Q3 while other retail sectors fell back. Shopping centre volumes rose 18% in the quarter to €3.95bn, a market share of 49% compared to 41% on average over the last 5 years. High street shops meanwhile, while down on the quarter, have also made steady advances over recent years - doubling their market share in the downturn (from 10.8% in 2007 to 22.8% in 2009) as high net worth investors and funds turned to the relative security and liquidity of this market. It has maintained a high market share since – 23% in Q3 versus a 5 year average of 20.7% - with growth in the luxury and cross border retailer markets boosting top streets across the region.
The gains of these two sectors have not been matched by the retail warehouse market meanwhile, which saw a 22.6% drop in activity in Q3 which took its market share down to less than 18% compared to a 5 year average of 28.5%. The UK is the largest retail warehouse market in Europe and is seeing better demand for top schemes but in general around the region, retailer demand is shallower and cost sensitive, making some investors nervous about the outlook for the average retail warehouse scheme.
For more information, please contact:
Cushman & Wakefield Tel: +44 (0)7793 808 110 / +44 (0)20 7152 5110
Notes to editors
About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 253 offices in 60 countries and nearly 15,000 employees. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $3.7 billion in assets under management globally. A recognised leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.