European retail investment turnover reached 7.3 billion in the third quarter (Q3) of 2010 and was heavily concentrated in only a small number of markets, according to the latest research from CB Richard Ellis (CBRE). The top five markets Germany, Poland, France, Spain and the United Kingdom accounted for 90% of the quarter's total activity, and perhaps more remarkably are also an exact match for the top five countries being targeted by retailers in the Europe, Middle East and Africa (EMEA) region for expansion in 2011.
Historically more liquid markets, the UK and Germany dominated the retail investment market in Q3 2010, reporting quarterly increases of 22% and 30% respectively. The German market continues to see a significant revival in retail investment activity, having seen both local and international demand picking up over the last few quarters. Notably, CBRE's newly-released report, How Active are Retailers in EMEA?, also highlights Germany as the number one target market for retailer expansion plans in 2011, with 41% of retailers surveyed looking to expand there. Strong economic growth and low retail floor space per capita are amongst the factors that attract interest from both local and international retailers. This, in turn, should lure even more investor interest to the market, which on the back of a growing and improved retailer mix would anticipate strong capital value growth.
In contrast to the first half of 2010, there were only a few large retail investment transactions in the UK in Q3 2010. The 1 billion+ sale-and-leaseback of Tesco supermarkets was the most significant deal, as well as the 110 million purchase of Stratford Shopping Centre by Catalyst Capital.
France, Poland and Spain were the second tier of markets to see robust activity levels, each reporting over 450 million worth of retail investment in Q3. Retail investment in France fell in the quarter, whilst both the Polish and Spanish results bore a significant improvement on Q2 2010. However, these increases were heavily influenced by a small number of deals: the sale of the last tranche of the BBVA bank branches in Spain and the Unibail-Rodamco acquisition of the Arkadia and Wilenska shopping centres in Poland.
John Welham, Head of European Retail Investment, CB Richard Ellis, said: "Whilst the latest activity figures show investor demand remains robust, it is significantly concentrated on the core products and markets, with little interest for more secondary assets. It is true to say that investor interest in Spain has improved since the summer as investors take the opportunity to secure good buildings in a relatively weak market."