Strong start to 2013 for European retail real estate investment continues

…it’s a shame we had to wait for the England Cricket team’s results to get stronger

The strong start to the year we have seen for the European retail real estate investment market has continued into Q2.

The same could not be said for the England cricket team when touring India and New Zealand in Q1, but change may be on the horizon as they have performed strongly against a poor Australian side and are set to retain the Ashes today.

Across, the continent, investment volumes have performed strongly reaching €5.1bn in Q2, which in line with the previous quarter, and up from €4.1bn recorded in Q2 2012.

Half year retail investment volumes, at €10.3bn, are up by over 40% from the €7.3bn recorded in the first half of 2012.  Increased transaction volume is being driven primarily by the increased availability of retail stock on the market, which is helping to satisfy the latent investor demand for European retail assets.

Unsurprisingly, the traditional powerhouse markets of the UK, France and in particular Germany, continue to see healthy real estate investment activity, however, for the first time post-recession we are witnessing a broadening of investor horizons across Europe.  Sweden, Poland, Italy, Portugal, Slovenia and Austria, as well as Russia and Turkey, all had active quarters.

It is interesting to see that it is not just the European capital cities that are attracting investor interest; demand is becoming increasingly diversified and focussing on regional locations as investors place a greater appreciation on property fundamentals.

This is highlighted by the purchase of  Silesia City Center in Katowice by an international consortium led by Allianz Real Estate, for €412m.  The Silesia Centre has been open for nearly 10 years now and is one of the biggest shopping malls in Poland. Like most future proofed schemes, I like that it has a strong leisure offering, a staggering 33 cinema screens are built into the scheme.

Elsewhere, one of the biggest retail real estate transactions of the quarter was also made by Allianz Real Estate who purchased a 50% stake in a portfolio of seven shopping centres across Austria, Slovenia and Northern Italy, in a new joint venture with SES Spar European Shopping Centers.

Other key deals exchanged during the quarter include the first foray into the UK retail warehouse market by North American investor, KKR, through the acquisition of a 40,000 sq m retail park portfolio from Resolution Property for €130m, in alliance with asset manager, Quadrant Estates.  Both deals reinforce the continuing trend of joint venture partnerships in the retail sector.

As the luck of the England Cricket team has changed let’s hope both England and the Europe retail investment market’s performance remains strong in Q3 and Q4 as England look to win the Ashes down under for the second time in a row.