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European Retail Real Estate Investment Volumes Reach €20.6bn in 2010, up 68 percent year-on-year

Direct investment in retail real estate in Europe during 2010 reached over €20.6 billion, representing a 68 percent uplift on 2009 (€12.3 billion), according to Jones Lang LaSalle


Amsterdam, 20 January 2011 - Direct investment in retail real estate in Europe during 2010 reached over €20.6 billion, representing a 68 percent uplift on 2009 (€12.3 billion), according to Jones Lang LaSalle. 150 transactions were recorded in Q4, accelerating total volumes to €6.7 billion, almost 80 percent up on Q3 and comfortably the busiest period of the year.

Over the course of the year, the European retail real estate market saw approximately fifty deals of at least €100 million, together totalling just under €10 billion, half of the annual total transacted. Twenty of these were completed in Q4 - most notably the British Land acquisition of Drake Circus shopping centre in Plymouth, UK, for over €275 million in December and Rockspring’s €224 million purchase at the end of October of a 51 percent stake in O’Parinor shopping centre, Paris; Jones Lang LaSalle advised on both transactions.

The UK closed 2010 as strongly as Germany started, enjoying its busiest period since the end of 2007 with investment volumes surpassing the €2 billion mark in Q4. Overall the UK accounted for 31 percent of Europe’s total volume in 2010, with Germany adding a further 23 percent. The Netherlands and France together transacted €1.4 billion during Q4 bringing their combined total for the year to €4 billion, with both markets maintaining their momentum throughout the year. Poland continued its strong performance from Q3, transacting €677 million during the final quarter of the year and cementing its place as the fifth largest retail investment market in Europe during 2010.

Speaking about the strong performance of the UK during 2010, Ruben Langbroek, Head of Research at Jones Lang LaSalle The Netherlands, said: “In the UK retail real estate investment has been dominating performance with volumes encouragingly surpassing levels recorded in 2009 and topping the €6.5 billion mark, with shopping centres accounting for almost 50 percent of all retail investments. Prime assets continued to be the most coveted, with demand for the best stock typically outstripping supply. For other assets investors paid increasing attention to retailer performance to ascertain the quality of potential tenants to ensure rent flows. The key investment trend in the UK was the 'flight to quality' for all retail assets which forced a strong rebound in prices at this end of the market. As a result values for secondary assets outside of key towns and cities are recovering at a slower rate. The interesting factor is that all stock of varying qualities has attracted a good number of equity and leveraged buyers at competitive rates .There was a bubble of stock in October but everything is now firmly under offer or sold”.

Richard Dallinga, Director Retail at Jones Lang LaSalle The Netherlands, commented: “A steadily improving retail real estate investment market during 2010 has been punctuated by uncertainty around sovereign debt and greater consumer caution. As a result, the market has evolved into multi-speed geographies and increasing polarisation between prime and secondary. We have seen some major transactions led by European REITs seeking to expand and consolidate their platform as well as landmark transactions from liability driven investors locking into long term real estate returns alongside sector specialists, providing the compelling marriage of equity and expertise”.

 

Langbroek added:  “In The Netherlands, institutional investors were active on the buy-side, as well as on the sell-side. In total, the retail investment volume of €2.0 billion (including retail unit shops and deals smaller than US$5 million) meant an 85 percent increase when compared to 2009 volumes. Furthermore, the share of retail investments in the total Dutch commercial property investment volume increased to 34 percent, mainly at the expense of office investments. The outlook for the European retail investment market is quite positive. There is a wealth of capital facing the retail investment market for 2011, particularly from institutional investors. With the forecast for inflation increasing, retail property still looks a very attractive option. While the market will likely witness further polarisation between prime and secondary retail stock over the next 12 months, the steady flow of supply and healthy levels of demand for the best retail assets should result in another strong year. “