European retail real estate investment up by 77% in 2006
2006 a total of €26 billion was transacted in Continental European retail real estate, up by 77% on 2005 (€14.6 billion) and more than three times higher than in 2004, according to new research by Jones Lang LaSalle.
The number of transactions in 2006 was up by two thirds compared with the previous year (420 transactions compared with 249 in 2005). The last quarter of 2006 was the most active, with some €10 billion (nearly 40% of the total volume for the year) transacted between October and December. Over 200 investors bought retail property in 2006, with the top ten investors accounting for a third of the total investment volume (the biggest retail property investor in 2006 was ING Real Estate Investment Management, accounting for 6% of total volume and 9% of total shopping centre volume).
Commenting on these findings, Jeremy Eddy, Director in European Retail Capital Markets at Jones Lang LaSalle, said: "The last twelve months have witnessed no slowdown in the unrelenting demand for retail real estate across Europe, particularly in the core markets of Germany, Spain, Poland and Italy. Investor interest is moving further east and we have seen the first major transactions taking place in Turkey, Russia, Ukraine, Croatia and the new EU member states of Romania and Bulgaria. We forecast more of the same in 2007, with the market remaining as competitive as it has been over the past two years. The main drivers of this geographical diversification by investors are yield margins and asset management opportunities".
Richard Bloxam, Director in European Retail Capital Markets at Jones Lang LaSalle added: "We believe that 2007 will see the trends of 2006 becoming more pronounced: Germany will continue to be the largest volume market in Continental Europe with a number of investors profit-taking and thus releasing some stock onto the market. Core Europe will see more buyers looking for income growth and asset management opportunities and the search for yield will drive investors east and south. We expect Russia to be the fastest growing retail investment market in 2007."
What was bought and where
Jones Lang LaSalle tracked transactions in 25 European countries last year, compared with 16 in 2005. Western Europe was the main target for investors in 2006 (as it was in 2005) but the Nordic and Eastern regions have gained importance; with Germany still the prime area of activity for investors. More than €8 billion (32% of total volume) was spent there in 2006 (a 72% increase on 2005).
The second largest market was Spain (€2.5 billion), followed closely by Poland with €2.4 billion of transactions in 2006 (over double the volume seen in 2005).
Portfolio transactions were a key feature of the market in 2006, said JLL, accounting for 40% of total transaction volumes (this increases to over 50% in Germany, Poland, France and Finland). Shopping centres continue to be the most sought after product, accounting for approximately 60% of transactions by volume (totalling €15.2 billion). Another €7.5 billion was spent on retail warehousing (retail parks and solus units), €2.8 billion on supermarkets and a further €433 million on factory outlet centres in Italy, Spain, Germany and Netherlands.
UK investors were biggest spenders
Some 22% of the total capital came from the UK, mostly from private property companies who purchased shopping centres and solus retail warehouse units in Germany, Finland and Sweden. Third party managed funds, with the majority of capital coming from Europe, were the second most important group.
Overall, Europeans remain the largest investor group in their own market, but the USA and Australia are also significant investors, said JLL. Over €800 million was invested from the UAE, with a large proportion coming from St Martins Property Corporation, who spent over €600 million in Turkey and made a further acquisition in Poland.
Source: Overseas Property Professional