According to the latest European shopping centre investment report from Savills, Germany, the UK, France, Norway and Sweden have emerged as the top five core destinations for shopping centre investment.
According to the latest European shopping centre investment report* from Savills, Germany, the UK, France, Norway and Sweden have emerged as the top five core destinations for shopping centre investment. The firm notes that market size, economic stability and sustained consumer spend has distinguished these markets and expects them to remain at the forefront for investors into 2013.
Savills also names the top five opportunistic shopping centre investment locations which sees Romania ranking first as a result of its fast growing consumer spend and expected increase in retail sales over the next five years. Poland, Hungary, the Czech Republic and Austria respectively follow closely behind.
Lydia Brissy, European Research director at Savills, comments: “The catchment area for shopping centre investors is gently widening. Countries with proven consumer spending resilience or prospects remain the preferred destinations although trophy assets located elsewhere are becoming popular.”
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Savills notes that across the 16 countries covered in this report, the retail turnover totalled €11.3 billion in H1 2012, a decrease of 31% compared to the previous six months, according to Real Capital Analytics (RCA). Shopping centre investment in the same period and same countries totalled €3.9 billion, representing over 35% of retail investments. Germany, Poland and the UK accounted for almost three-quarters of this turnover.
In terms of yields, the international real estate advisor finds that the average prime European shopping centre yield across the 16 countries analysed in the report barely changed over the last 12 months and currently stands at 6.43%. However, prime yields have remained stable in the five core countries which could be partly attributed to a lack of prime product. Average prime yields have softened by 50bps in periphery countries and hardened by 5bps in CEE and by 40pbs in the Nordics. Growing investor confidence in cities such as Berlin, Munich, Stockholm, Oslo and Warsaw has led to this hardening in yields.
Institutional investors have been the key purchasers of European shopping centre investments and public funds who were the predominant sellers last year are also starting to buy again.
Danny Kinnoch, European retail director at Savills, says: “Prime shopping centre interest remains strong with sovereign wealth funds, North American pension funds and European listed property companies all actively seeking such product. In peripheral European countries we expect some of these investors to take advantage of pricing contraction by buying rarely available, best in class centres. In addition, opportunistic investors are weighing up deals in these peripheral countries but asking prices need to allow them to achieve their risk-adjusted return requirements.”
*Savills European shopping centre investment report is compiled from analysis of 16 countries including Austria, Belgium, Czech Republic, France, Germany, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden and the UK.