European retail real estate investment grew to 36.2 billion in 2010, representing a 60% increase year-on-year, and well above the 47% increase for the investment market as a whole, according to the latest research by CB Richard Ellis (CBRE).
European retail investment activity was heavily concentrated on core assets and markets, reflecting the risk-averse strategies and the type of investors active. Geographically, the UK and Germany together accounted for 63% of total retail investment, with France and the Netherlands being the next most liquid markets last year. The growing influence of institutional, core capital, translated into a further spike in shopping center demand, also boosting liquidity for large transactions. A total of 63 100-million-plus deals were completed in 2010, which have been either shopping centers or long-term sale-and-leaseback deals - another bi-product of the downturn.
Although retail investment activity in Europe has been mainly focused on core assets and markets, there is now a clear shift towards more value-add opportunities in the retail sector. Germany, in particular, is expected to see broader recovery sooner than most other European markets. Taking into account its size and liquidity, combined with robust economic and occupier fundamentals, Germany is expected to see investor demand spill into non-core territory faster than in the most of the rest of Europe.
John Welham, Head of European Retail Investment, CBRE, commented: "Recent years have seen a significant surge of investor demand for prime, good quality retail. However, over the last few months there has been notably more evidence of investors actively looking for value-add opportunities across many European locations. There are number of reasons for this. One is the significant yield premiums on offer for investors prepared to move away from prime. Also the shortage of new development, combined with limited capital investment in existing assets in recent years, makes asset repositioning strategies particularly attractive in the retail sector."