Retail real estate investment down in continental Europe in Q1Direct retail real estate investment in Continental Europe totalled €980 million in the first quarter of 2009, 37% down on the previous quarter (?1.5bn), according to new research from Jones Lang LaSalle. Western Europe accounted for the vast majority (89%) of transaction volumes as European investors are increasingly focusing on their home markets. The proportion of retail investment volume accounted for by domestic investors has increased from one third in 2008 to over half in Q1 2009.
Jeremy Eddy, Director European Retail Capital Markets, Jones Lang LaSalle said: “Investors continue with their ‘wait and see’ strategies in Continental Europe, with most markets seeing some fall in prices in the first quarter. At the same time, the high cost and lack of access to finance continues to restrict market liquidity, particularly for larger transactions. There is demand for prime product in the best locations and low vacancy rates in many top schemes provide the secure long-term income that investors seek. ”
Italy and Germany were the most active markets in Continental Europe, accounting for 31% and 28% respectively of total transaction volumes. In Italy two deals over ?100 million were completed: the Barberino Designer Outlet centre and the Centro Rondo shopping centre in Monza, while Germany was the most active market in terms of the number deals – nine completed in Q1. Investment into Central and Eastern Europe was quiet, due in part to the lack of domestic investors in these markets.
Shopping centres were the prime target for investors but accounted for just over one third of the total volume transacted, compared with 55% in 2008, reflecting the lack of prime product on the market and the difficulty in raising finance for funding larger transactions. Nevertheless, shopping centres with strong defensive qualities in terms of location, scale, tenant covenant and quality remain a key target for investors in 2009. Factory outlet centres, accounting for 26% of transaction volumes, were also a target in Q1, as Henderson and Neinver consolidated their outlet portfolios.
In comparison, transaction volumes in the UK totalled of ?1.3 billion in the first quarter – up 54% on Q4 2008, although the sale of a 50% stake in the Meadowhall shopping centre accounted for almost half (48%) of this volume. Investor interest in the UK market is increasing following a sharp outward movement in yields, but this re-pricing does reflect on-going concern about rising vacancy rates even in prime locations.
Turning back to Continental Europe, Jeremy Eddy concluded: “We expect that as the year progresses and buyer and seller expectations are increasingly aligned and the market moves towards fair value that transactions will be forthcoming. Two major drivers to this will be the realisation of valuation markdowns and a restricted return of liquidity from the banking sector.”
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Notes to Editors
This research considers all investment sales of shopping centres, retail warehouses and factory outlet centres in Continental Europe. Our analysis excludes the high street and any investment deal less than ?5 million in value.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $46 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008 and 2009 at the Commercial Real Estate Awards (Russia).
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