Retail investment in Europe 'dives 25%' - BNP Paribas research

Retail investment has dropped for the fourth year in a row, but remains the second largest asset class in Europe after offices, according to new research.

Investment levels across Europe in retail have plunged 25% in the past 12 months to €41 bn, found BNP Paribas, in its new market report. Total property investment was €256 bn.

Indeed, prime high street was the sole segment to fail to maintain stable yields.

In the high street category, there remains strong pressure on prime high streets yields in France (2.50 %), Germany (2.80%), Spain (3.00 %) and Italy (3.10%).

The German prime high street yield is not expected to fall further by the end of year, whereas the French yield may yet decline below 2.50%, preducts BNP Paribas' research.

Meanwhile, in the UK, prime high street yield rose by 25bp to 2.85% at the end of this September.

In the prime shopping centre segment, yields have been stable since the beginning 2019 in most European countries except France, where a transaction is expected to reach its lowest 10-year level (4.00%).

Elsewhere, retail investment in Germany dropped by 31% over the past 12 months, but it remains the leading retail property market in Europe, with 24% of the total.

In the UK, the investment market slowed down over the past 12 months (-34%), due to investors over-cautiousness as a result of an increase in CVA procedures, the rising number of retailer failures, and fundamental structural issues inherent to the UK shopping centre market. This is further exacerbated by Brexit uncertainty.

In the UK, prime shopping centre yields continued to follow an upward trend and grew to 6% as at Q3 2019.

Following a slow start to the year, France has remained overall stable (-2%). Several major deals are expected by the end of the year.

Following the high levels recorded last year, retail investment in Spain and Poland declined in 2019.

Patrick Delcol, head of pan-European retail at BNP Paribas Real Estate, said there are bright possibilities amid the present gloom.

‘Retail investment in general is now offering an attractive premium via-a-vis other asset classes, to a point which should re-attract more and more investors’ attention over the coming months,' he said.

'This is partly due to some upwards shift of yields, but mainly due to the downwards shift of yields from the other sectors, such as offices and logistics.'

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