European Retail Investment Highest in Six Years
Investment volumes in the European retail sector skyrocketed 75 percent to their highest quarterly volume since 2007 during the final quarter of 2013, due to a combination of higher confidence, more supply of equity and debt and increasing demand across multiple markets.
Retail volumes increased 17 percent year-over-year to their highest since 2011, according to research firm Cushman & Wakefield.
However, the overall retail market share for 2013 fell to 23 percent from 25 percent in 2012 as office investment volumes increased 23 percent year-over-year and industrial grew a more notable 57 percent for the same time period. A report from DTZ research last week
showed the European retail market enjoyed the largest year-end rush, with investments totaling €12.3 billion in the final quarter, a 74 percent increase from the previous quarter -- led by strong volumes in the U.K. and Germany.
The C&W report showed the bulk of European retail investment is focused on the shopping center market, with private buyers and occupiers remaining keen investors in the core high street market, the firm reports.
"Quality supply is tight and demand is ahead of availability in what is still a vendor's market," Michael Rodda, head of EMEA Retail Investment at Cushman & Wakefield, said in the report. "As a result we continue to see buyers look further afield to find quality stock, with Southern Europe buoyant in late 2013 and likely to be an even stronger focus for many players this year."
The overall market is flooded with foreign investors with more Asian players looking at retail, while North and South American capital increasing, C&W states.
"What's been particularly interesting of late has been the amount of capital we have seen being diverted from other areas of the world towards Europe," Mr. Rodda said. "Obviously a renewed faith in the euro is a key part of this, but with some emerging markets in other regions proving hard or expensive to access, investors are also clearly being attracted to Southern Europe by the quality of schemes, the availability of experienced managers to work with and the transparency of shopping centre incomes."
Investment volumes in the big three markets -- U.K., Germany and France -- increased 62 percent during the fourth quarter. German volumes doubled, while French volumes tripled. U.K. volumes increased by 34 percent and account for 29 percent of all retail trading for the year.
On the other hand, investment volumes in the Benelux fell 25 percent and dropped 16 percent in the Nordics.
The Central and Eastern European retail market accounted for 32 percent of the market share in the fourth quarter, as volumes grew 15 percent in Russia and demand increased in Poland. However, the biggest growth was in the euro zone's previously distressed markets, as volumes grew 82 percent in the final quarter driven by Spain and Italy, with investments picking up in Greece, Ireland and Italy as well.
Looking ahead, retail volumes are forecast to grow by 1.4 percent in Western Europe in 2014 and by 3.5 percent in CEE after gains of 0.1 percent and 2.3 percent respectively in 2013.
However, the firm suggests caution in the market as quite fundamentally retailing across the region will remain polarized.
"Nonetheless, a greater breadth of demand suggests volumes will rise further, with a 13 percent rise to €45 billion easily supportable by current fundamentals but clearly dependent on investors continuing to broaden their horizons and enough stock of the right quality coming available," David Hutchings, head of EMEA investment strategy at Cushman & Wakefield, said in the report.