Non-core European countries see rise in retail investment – Savills

15 November 2018

Belgium (+229%), Poland (+80%) and Italy (+52%) saw the greatest increase in retail property investment in the first three quarters of 2018, as total investment in the sector rose to €21bn, a 8% increase year-on-year (y-o-y), according to Savills latest Market in Minutes, European Retail Investment Report.

In the core markets, investment into France was up 23% and in Germany the figure stood at 15% (y-o-y) - the latter boasted the majority of portfolio transactions conducted, primarily in the retail warehousing and retail park sectors. Germany has now claimed first place for overall share of the investment market (24%) with the UK coming in second with 19% of market share.

With relation to specific asset classes, shopping centres, especially those in non-core markets such as Italy (+158%/€1.2bn) and Poland (+82%/€2.1bn), boasted the highest increase in investment (+11% y-o-y) due to availability of opportunities and also the dominance of this particular type of asset class. Average prime shopping centre yields have stabilised to 4.5% while they continue to compress for the rest of the sector.

Oliver Fraser-Looen, head of European retail investment at Savills, comments: “The first three quarters of 2018 have seen resounding positivity from the non-core markets across Europe. Taking a closer look at Italy and Poland in particular, it is clear that high levels of investor activity are bolstering specific sectors of the market – especially shopping centres.

“This is compared to the core markets, such as France, Germany and even the UK, where traditional retail has been struggling due to changes in consumer behaviour and higher levels of e-commerce and instead, retail warehousing and parks have become more favourable in terms of return on investment. Retailers and landlords are adjusting to the changing role of physical retailing which is bringing new investment opportunities to the market. As we look to the future, this is expected to bring about a rise in hybrid assets which serve logistics needs, such as click and collect points and last mile delivery, but are also strongly linked to retail fundamentals.”

In regard to warehouses and retail parks, Savills says that the UK and Germany took gold and silver for turnover in Q1-Q3, with the former accounting for 43% of the €2.5bn turnover figure and the latter capturing a third of the market (€1.9bn). The average achievable prime yield stood at 4.9%, 50 bps below last year. It was other markets, including Spain, however, that saw a slowdown in activity (-27% market share) as the market saw a shortage of prime product and repositioning opportunities, which have previously driven activity.

According to the report, with consumer confidence back on the rise, private consumption is set to grow by 1.5% this year and by 1.6% next year. This is particularly relevant to prime high street assets, where investment has been particularly impressive in markets such as France (50% of the total), Spain and the Netherlands (30% of the total figure).

Eri Mitsostergiou, European research analyst, adds: “What has been really interesting is that, despite a move towards e-commerce in core markets such as the UK and Germany, there are still prime high street opportunities to be had in markets such as France and Spain where online retail has not yet taken off to the same extent. Overall, quality high street units in shopping streets with strong footfall and tourist numbers are highly sought after by investors and considered to be a defensive choice against online retail.”

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Key Contacts

Oliver Fraser-Looen

Oliver Fraser-Looen

Head of European Retail Investment
European Retail Investment

Head Office London

+44 (0) 20 7409 8784

 

Eri Mitsostergiou

Eri Mitsostergiou

Director
European Research

Head Office London

+44 (0) 7970 479020