Investors Target European Real Property In 2013

By Editorial 27 February, 2014

The European retail property sector ended 2013 on a high note with quarterly volumes soaring 75 percent to their highest since 2007, according to commercial real estate service firm Cushman & Wakefield. The increase is a result of a combination of rising confidence and a increased supply of equity and debt across multiple markets.

Retail volumes totaled EUR14.7bn (USD20.2bn) in the fourth quarter versus EUR8.4bn in the third quarter. Full year retail volumes rose to a two-year high of EUR39.9bn.

Retail volumes rose 17 percent year-on-year, while office transactions rose 23 percent, and industrial premises trades rose 57 percent. The majority of investment is focused on the shopping center market which gained further ground in the fourth quarter. Private buyers and occupiers remain keen to invest in high street property, the report says.

According to Michael Rodda, head of EMEA Retail Investment at Cushman & Wakefield: "Quality supply is tight and demand is ahead of availability in what is still a vendor's market. 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."

"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. 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 center incomes."

The UK, Germany and France saw volumes rise 62 percent in Q4, with German volumes doubling and French volumes trebling. UK volumes rose at a less dramatic but still buoyant rate of 34 percent, remaining the largest retail market in Europe, accounting for 29 percent of all retail trading for the year.

Some other core markets lost out meanwhile. Volumes in the Benelux countries were down 25 percent and the Nordic region was held back by a shortage of opportunities, with activity down 16 percent despite a strong final quarter.

In Central and Eastern Europe (CEE) retail took a 32 percent market share in Q4 as volumes rose 15 percent thanks to increased demand for property in Russia as well as high demand in Poland. However it was the euro zone's previously distressed markets which showed the biggest upturn, with an 82 percent volume increase in Q4 driven by Spain and Italy but with Greece, Ireland and Portugal also picking up from a low base.

Looking forward, Cushman and Wakefield believes there is an increasingly positive consensus in the market that most markets will see growth in 2014. Retail sales volumes are forecast to increase 1.4 percent in Western Europe this year, and by 3.5 percent in CEE.

Commenting on the report's trends, David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield, said: "There should still be a note of caution in the market since not all deals are good deals, and quite fundamentally retailing across the region will remain polarized, caught between on aggregate an oversupply of space and at best an increase in cost sensitivity due to structural changes such as e-tailing. Nonetheless, a greater breadth of demand suggests volumes will rise further, with a 13 percent rise to EUR45bn easily supportable by current fundamentals but clearly dependent on investors continuing to broaden their horizons and enough stock of the right quality coming available."

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