The retail sector is proving to be "the most resilient" of all property asset classes during 2022, Savills reveals. So far, €26.9bn has been invested in the European retail sector by 2022.
In the third quarter of this year, retail investment volumes declined by 15% compared to the decline in investment activity recorded in the multifamily (-70%), office (-27%) and industrial (-17%) sectors, the consultancy indicates.
Savills found that investment volumes in the retail sector increased through September most notably for Romania (+2421%), Spain (484%), Finland (177%) and Portugal (170%). In shopping centres, investment accounted for 27% of all retail investment activity, compared with 14% in the same period last year.
"In recent months, rapidly rising debt costs have generated upward pressure on yields and, in the third quarter of this year, prime shopping centre yields hit a new high of 5.52% (on average) across Europe, (...) warehouse retail yields have moved to an average of 5.27% across Europe and high street yields have slipped 18bps to a European average of 3.75%," reveals the consultancy.
Lydia Brissy, Director of Savills European research, said, "Given the rising cost of debt and the cost of living crisis affecting consumers' wallets, we anticipate a further rise in yields over the next 6 months, particularly for high street and retail warehouse assets.
Marie Hickey, Director, Savills Retail Research, points out that "we expect to see more non-European brands preparing for their European debut in 2023, particularly premium fashion brands originating from North America and Australia."
According to Savills, post-pandemic, there has been an increase in city-centric strategies and new markets such as Dublin, Hamburg and Oslo. Southern Europe has also moved up the agenda for a number of aspirational brands.
On average, high street rents on prime arterials across Europe are 34% below Q4 2019 levels, and -29% in London, the consultancy reveals.
Larry Brennan, Head of Retail, Savills EMEA, says "we are of the view that demand should remain relatively resilient in the coming year as operators look to embrace their post-covid strategies, but market headwinds such as the rising cost of debt, energy costs and reduced consumer spending will challenge the profitability of many occupiers."
José Galvão, Retail Associate Director, Savills Portugal, stresses that: "the retail sector has been impacted, in the last 3 years, by several conjunctural factors that challenge the resilience of investors and operators. On the operator side, business adaptation to new consumer trends has been exemplary, especially in the restaurant sector. Despite the macroeconomic uncertainty there are activity sectors that intend to expand, increase area and grow in 2023". Translated with www.DeepL.com/Translator (free version)