JLL: European retail real estate investment increases 34% y-o-y in Q2 2011 (EU)

Direct investment in retail real estate in Europe during the second quarter of 2011 reached €4.9 billion. Total investment volumes for the year to date now stand at €13.6 billion, 34% up over the same period last year.

The majority of investment activity remained focused on the UK and Germany, accounting for 56% of total volumes over the quarter, while transactions in Sweden totaled €572 million as the region continued to attract significant interest. Sweden has already surpassed transaction volumes levels recorded for the entirety of 2010, exceeding €896 million in the first half of this year alone.

A number of growth markets saw increased activity over the quarter with volumes in Russia (€432 million) and Poland (€332 million) boosted by some key transactions, most notably the €278 million purchase of Gorbushkin Dvor and Filion Shopping Centre in Moscow by MTZ Rubin and the €171 million sale of Promenada Shopping Centre, Warsaw by Carpathian.

Jeremy Eddy, Head of EMEA Retail Capital Markets at Jones Lang LaSalle commented: "Current investor demand remains focused on the core European markets of France and Germany but we also expect Poland and CEE to witness significant investment volumes by the year end.

"Investors driven by higher returns are focusing on the growth markets of Russia and Turkey which provide prospects for rental and turnover growth as well as potential for yield compression."

Eddy continued: "Northern European markets that offer attractive fundamentals are however constrained by stock availability. It remains true across the majority of Europe that there is significant equity available for high quality assets and we expect the trend we identified of equity partnering expertise to accelerate further."

Shopping centers remained the most sought after asset type, accounting for 59% of total retail volumes traded over the quarter. This trend was less pronounced in the UK where 29 deals for retail warehouses completed over the quarter with an average deal size of €21 million.

Appetite for supermarkets remained strong as a number of significant transactions completed in Q2, including the purchase of a portfolio of 4 stores in Sweden by Unibail-Rodamco for €266 million and sale and leaseback of two Tesco supermarkets in the UK.

James Brown, Head of EMEA Retail Research at Jones Lang LaSalle commented: "Against the backdrop of a volatile European economic recovery, investment volumes in the first half of this year have continued to improve year-on-year, although a handful of significant deals have certainly flattered the numbers.

"The second quarter has been characterized by a continued growth in the geography of transactions. We enter the third quarter with significant momentum and pipeline transactions which have or will close by the end of September."

Source: Jones Lang LaSalle

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