UK dominates retail investment markets
Published: 12 January, 2011
Jones Lang LaSalle research finds UK is the hottest retail investment market in Europe
Direct investment in retail real estate in Europe during 2010 reached over €20.6bn, representing a 68 per cent uplift on 2009’s €12.3bn, according to Jones Lang LaSalle. 150 transactions worth €6.7bn were recorded in the final quarter of 2010, almost 80 per cent up on the previous quarter 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 €100m, together totalling just under €10bn, half of the annual total transacted. Twenty of these were completed in the last quarter - 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 per cent 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 €2bn mark in Q4. Adrian Peachey, head of UK retail investment at Jones Lang LaSalle, said: “In the UK retail real estate investment has been dominating performance with volumes encouragingly surpassing levels recorded in 2009 and topping the €6.5bn mark, with shopping centres accounting for almost 50 per cent 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”.
And he added: “There is a wealth of capital facing the UK retail investment market for 2011, particularly from institutional and foreign investors who are in a position to take advantage of the weak Sterling. 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.”
