Retail property was the best performing commercial real estate sector in Europe in 2011, according to CBRE's European Valuation Monitor (EVM), which is based on regular valuations of standing investment portfolios carried out by CBRE's international and national valuation teams.
Despite a slight contraction in capital values in the final quarter of 2011 (-0.2%), retail real estate delivered a 1.5% increase in capital values for the full year. This is the 10th time since the peak of the market (16 quarters in total) that retail has outperformed other sectors at the pan-European level.
Andrew Barber, Senior Director, Valuation & Valuation Services, CBRE, commented: "In aggregate retail was, for the third consecutive year, the best performing real estate sector in Europe. Appetite for this sector throughout the year was driven by retail's defensive characteristics, and investor strategies focused on the German and Central and Eastern European markets in particular. This saw European retail investment volumes grow by 4.9% year-on-year to reach almost 38 billion in 2011.
"The defensive characteristic of good quality retail will continue to be favored by risk-averse investors. This, combined with a growing interest in prime high street retail units - pricing competition for which has accelerated towards the year-end in markets such as London and Paris - gives reason to believe that further value appreciation can be expected as the evidence feeds into valuations."
The 1.5% annual increase in retail values across Europe compares to a flat result at the All Property level, 0.5% growth for offices and -4.5% for industrial. Overall, the year-end values were impacted by the increase in the number of transactions for secondary and tertiary assets in the sample assessed by CBRE.
A lack of transactional evidence at this end of the asset spectrum had previously prevented genuine price discovery. The dislocation between prime and the rest has been particularly notable in the industrial sector, where light industrials saw significant value falls while, in contrast the value of prime logistics assets held up well in the final quarter.