Dominated in its early days by city centre office disposals, the corporate real estate sales market has seen some significant sectoral shifts in recent years. In 2009, the retail sector dominated this market for the first time, comprising 44% of total European corporate disposals, according to new research by CB Richard Ellis (CBRE).
Richard Holberton, Director of EMEA Research, CBRE, said: "There are two key reasons for the recent boost in retail transactions. Firstly, supermarket chains, especially in France, Finland and the UK, have been quick to recognise the opportunity to leverage their covenant strength and lock in low rents by exercising sale-and-leasebacks on their real estate. Secondly, in response to profitability issues, financial institutions have also disposed of many high street bank branches, boosting the retail share of corporate sales significantly."
Corporate real estate disposals have become an increasingly acceptable form of raising capital in recent years, demonstrated by their popularity with financial institutions in 2009.
CBRE found that real estate sales by major players in Europe's banking sector were a dominant feature of the market in 2009. In Spain, a recent example was the disposal of a nationwide portfolio of high street bank branches to RREEF / AREA for 1.15 billion in Q3 2009, which was the most prominent example of banks disposing of their corporate real estate in Europe.
Spain and Italy together accounted for 35% of the European market, with around 2.2 billion worth of corporate sales each. Three of the five 500 million plus corporate real estate sales recorded in Europe in 2009 took place in Spain and Italy. The UK's contribution to corporate disposals accounted for 26% of the European total, notably including HSBC's sale of 8 Canada Square, Canary Wharf, London, for 860 million in Q4 2009.
"Corporate real estate disposals accounted for 17 per cent of the European property investment market in 2009, with sale and leaseback transactions proving to be some of the cross-border real estate transaction highlights of the year. The bond-like characteristics of sale and leaseback transactions are attractive in the current market because they match the preferences of a range of investor types for good covenants, long leases and a fixed or indexed rent. While the market is still fragile and economic recovery is tentative across most of Europe, the income and covenant characteristics of these products will continue to remain appealing. The contribution of corporate sales to the European investment market reflect the increased acceptability of raising capital by disposing of property assets, coupled with reduced flow of product from other types of vendor," concluded Holberton.