According to Savills latest European shopping centre investment benchmark*, Germany ranks number one as a core destination for shopping centre investment, followed closely by the UK, France, Norway and Sweden.
According to Savills latest European shopping centre investment benchmark*, Germany ranks number one as a core destination for shopping centre investment, followed closely by the UK, France, Norway and Sweden. Strong economic fundamentals, consumer spending and low unemployment have all helped these five countries stay on top of Savills ranking for two consecutive years.
The research, which analyses 16 markets, finds that investors renewed focus on prime assets in 2013 has caused average shopping centre yields to move in by 15 basis points between Q3 2012 and Q3 2013 to stand at 6.30%. In contrast to last years report, the prime yield gap between core and peripheral countries has stabilised as indicated by a yield gap that has held from 151 bps in Q3 2012 compared to 150 in Q3 this year. Savills predicts from next year the prime yield gap between core and non-core countries will start slowly narrowing.
Nick Hart, head of UK and European shopping centre investment at Savills, comments: “Since the start of the economic crisis there has been a clear flight to core dominant retail markets and pricing has increased in some cases 100 basis points in the last nine months. We are also seeing a huge weight of money enter the sector across the purchaser spectrum and in 2014 we predict we will see investors continue to look to core countries, although some of these may consider secondary schemes in those markets. The more risk embracing investor will seek out opportunities in non-core markets.”
Savills reports that the broadening of shopping centre investment activity to the whole of Europe will create opportunities in several markets. Some CEE countries will offer good investment potential thanks to strong retail sales prospects as well as increasing development activity. Romania, Poland, Hungary, the Czech Republic and Austria have made Savills top five ranking of opportunistic destinations. Other peripheral countries such as Spain and Italy will offer attractively priced opportunities arising from distressed sales as suggested by the recent revival in activity recorded in these two countries.
Lydia Brissy, director of European research at Savills, adds: “We expect the non-core countries to become more popular with investors who are seeking prime opportunities, because of their scarcity and pricing in the core markets.”
Consumer confidence is growing in all areas surveyed by Savills helping to spur on a positive outlook for the retail trade. However, substantial differences between countries will persist. Lydia Brissy explains: “Those with good economic growth, high savings ratios and strong consumer cultures will lead the trend. At the other end of the spectrum over-indebted governments and weak labour markets will continue to drag on spending in the troubled fringe countries. Overall retail sales in the surveyed area are expected to grow at a slow pace in 2014.”
* Savills European shopping centre investment report is compiled from an analysis of 16 countries including Austria, Belgium, Czech Republic, France, Germany, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden and the UK.