Investors acquired €34.7 billion of retail properties in the first nine months of 2017, a 15% drop from the same period a year ago, RCA data show. Retail property transactions in the same period were 20% below the sector’s five-year average, while July-September was the sector’s weakest quarter for deals since the second quarter of 2013.
Tom Leahy, RCA’s Senior Director of EMEA Analytics, said: “Online commerce is polarising investment in Europe’s retail property sector and this is particularly pronounced for shopping centres. Large, dominant centres in strong catchments continue to attract buyers, whereas there’s less appetite for centres in regional locations. It’s a pattern that is playing out to dramatic effect in the U.S.; in Europe, the trend is most pronounced in the U.K., where online retailing has one of the highest levels of penetration.”
RCA pricing indicators, which are calculated from repeat-sales data, show that average transaction prices for U.K. shopping centres are currently about 40% below the peak level reached in 2006-2007, mirroring the pattern in the U.S. market. In Continental Europe, however, the weakness in pricing is less pronounced over the same period: prices that are down about 15%.
Shopping centre sales accounted for about 40% of all European retail property transactions, RCA data for the first nine months of the year show. This year’s largest shopping centre deals include the €530 million purchase of the Xanadú Madrid shopping centre by intu properties and TH Real Estate, while the latter also acquired Kauppakeskus Kamppi in Helsinki for €500 million.
There were €185 billion of investments in European commercial real estate during the first nine months of 2017, unchanged from a year earlier. The U.K. returned to first place after falling behind Germany last year in RCA’s ranking of the continent’s most active markets by value of deals.
Among Europe’s other largest real estate investment markets, Germany registered a 12% increase in investment in the first nine months, with €45.2 billion of commercial property sales. High prices in Germany’s Big Seven cities continue to persuade more investors to look for opportunities in the mid-sized cities.
Elsewhere, the Dutch and Spanish markets continued their recovery, while investment in Finland received a boost following Blackstone’s take-private acquisition of Sponda. In Central & Eastern Europe, investment picked up in Russia, Hungary, the Czech Republic, Romania and Bulgaria.
RCA’s Leahy concluded: “We’re reaching a new stage in the real estate investment cycle as high prices and strong competition combine with greater risk awareness and discipline from investors to keep volumes steady but not booming. The interest rate outlook is still broadly supportive for real estate investment, however, and this bodes well for Europe’s investment markets for the year-end and into 2018".
Source: Real Capital Analytics