The strong start to the year for the European retail real estate investment market continued into Q2, according to research by Jones Lang LaSalle. Investment volumes reached €5.1 billion in Q2, in line with the previous quarter, and up from €4.1 billion recorded in Q2 2012.
Half year investment volumes, at €10.3 billion, are up by over 40% from the €7.3 billion recorded in the first half of 2012. Increased transaction volume is being driven primarily by the increased availability of stock on the market, which is helping to satisfy the latent investor demand for European retail assets.
Whilst the traditional powerhouse markets of the UK, France and in particular Germany, continue to see healthy investment activity, we are witnessing a broadening of investor horizons across Europe. Sweden, Poland, Italy, Portugal, Slovenia and Austria, as well as Russia and Turkey, all had active quarters. Investment volumes into Russian retail market (under construction assets weren’t included in calculations) reached €1 billion (45.6% of total), while in H1 2012 retail investment volumes accounted for €0.7 billion (36% of total).
It is not just the capital cities that are attracting investor interest; demand is becoming increasingly diversified, and focussing on regional locations as investors place a greater appreciation on property fundamentals. This is highlighted by the purchase of Silesia City Center in Katowice by an international consortium led by Allianz Real Estate, for €412 million. This is one of several large transactions in the Polish market which were signed during the quarter, but which are expected to complete in Quarter 3.
Elsewhere, one of the biggest transactions of the quarter was also made by Allianz Real Estate who purchased a 50% stake in a portfolio of seven shopping centres across Austria, Slovenia and Northern Italy, in a new joint venture with SES Spar European Shopping Centers.
Other key deals exchanged during quarter include the first foray into the UK retail warehouse market by North American investor, KKR, through the acquisition of a 40,000 m² retail park portfolio from Resolution Property for €130 million, in alliance with asset manager, Quadrant Estates. Both deals reinforce the continuing trend of joint venture partnerships in the retail sector.
Jeremy Eddy, Director, European Retail Capital Markets at Jones Lang LaSalle commented: “We are seeing a greater presence in the market of opportunistic investors, as underlined by the first acquisition by KKR. With an increase in the amount of debt available to the property market, we expect further activity by these investors in the second half of the year. Looking at the geographic trend there are a number of transactions in the pipeline in Southern Europe, which will provide much needed signposts, and greater confidence to investors creating momentum in the market as we move forward.”
Source: Jones Lang LaSalle