Investment in European retail shrinks, but gains in overall weighting - research

Investment in retail properties across Europe has declined 41% year-on-year, on the basis of Q3 figures for 2023, according to new research from BNP Paribas Real Estate.

Investment in retail premises in Europe came to €28.9 bn year-on-year, down 41% versus Q3 2022 on a rolling year basis.

However, the decline in retail property investment is less pronounced than for other asset classes, according to the firm.

Patrick Delcol, head of pan-European coverage of retail, logistics and hotels for BNP Paribas Real Estate, said: 'The last 12 months have seen investment being rebalanced between the different commercial real estate categories.

'This kind of shift hasn’t been seen in Europe for many years, and retail in particular is benefiting.'

The data shows that the sector is gaining market share in relative terms, rising from 15% to 19% of overall investment between Q3 2022 and Q3 2023. In comparison, offices have slipped from 37% to 31% and logistics from 24% to 20%.

Even though the broader context is still challenging, retail is once again the second most popular asset category in Germany and France for the first time since 2018.

The UK, Germany and France alone accounted for 60% of investment. The UK is also back in the pole position it relinquished to Germany in Q3 2022, thanks to swifter price adjustments and more opportunistic investors.

Retail warehousing and high streets
Investment in the retail warehousing segment in Europe (France, Germany, United Kingdom, Italy, Spain and Poland) came to € 9.9 bn year-on-year.

This segment, down 31% vs Q3 2022, remains the most stable of the retail sub-segments. It accounts for half (50%) of overall investment in retail assets and is increasingly attractive to investors in all European countries.

The high street segment (France, Germany, UK, Italy and Spain) has seen the biggest year-on-year decline (-49%) with investment standing at € 5.4 bn.

However, this fall should be seen in perspective given the exceptional Q3 2022 figures. These even exceeded pre-pandemic levels, thanks mainly to major deals in Spain and Italy.

Moreover, this figure did not include € 1.6 bn in owner-occupier deals in France; these were deals by luxury giants seeking to invest in the most prestigious avenues in Paris to establish their brands.

Lastly, the shopping centre segment (France, Germany, UK, Italy, Spain and Poland) has seen a fall of 42% vs. Q3 2022, with investment of € 4.4 bn.

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