Nov 18, 2013
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Stronger investments in European commercial real estate but prime locations scarce

Nov 18, 2013

Investment volumes in the retail sector reached 30 billion euros in the second quarter of 2013, up 16% compared to the same period in 2012. At the same time, the retail sector increased by 24% in overall commercial real estate investments. "The retail sector in Western Europe is staying attractive to investors and only scarcity of 'prime' supply curbed investors’ appetite," according to BNP Paribas Real Estate, the author of a study conducted across Europe.

Aeroville Shopping Center (France) - Pixelformula

The study also shows new increases in rents for prime locations in the seven major markets of Western Europe (Paris, London, Berlin, Frankfurt, Hamburg, Munich and Madrid): up 4% between the second quarters of 2012 and 2013, with the average rent now at 6,553 euros per square meter. "The competition between retailers has become fiercer (dip in consumption, consumers increasingly selective, expansion of e-business) overall," according to the BNP Paribas study. "But premises are still at the heart of retailers’ strategy especially for international brands."

In France, retail real estate investment rose slightly in the second quarter. Paris reported worse results than the rest of France, the majority of transactions being less than 5 million euros. "However the few large transactions that took place ensured solid results still," said the study. "Quality regional shopping centres look like good alternatives for investors."

In Germany, only Munich showed a downturn in investments. In city centers, international companies are increasingly involved in negotiations for "prime" locations. "As a result of the shortage of supply and the virtual absence of vacant 'prime' high street locations, investors are struggling to find suitable properties," notes the study.

But BNP Paribas views Great Britain as the most "liquid" market, with a significant increase over the year. And while London is still so popular, investors also now appear to be more attracted to regional markets, "where price-adjusted properties attract investors’ interest because of their asset management potential."

In the Nordic countries, very large deals in late 2012 pushed up investments a whole 61%. By comparison, smaller transactions were handled in the beginning 2013, representing an increase of 31%. In the rest of Western Europe, sales remained low and the three-digit growth recorded in some markets is based on low volumes. "Despite offering good pricing and more supply of quality premises, these riskier retail markets are not close to a bounce back yet."

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