According to JLL, retail real estate investment in Europe had a great quarter in Q2, with a volume of €9.6 billion, up 86 percent from €5.2 billion in Q2. The €16.4 billion in first-half revenue is 44% higher than the same period last year and 35% more than the five-year average. lusail marina
In Europe's major capitals of London and Paris, the second quarter was marked by significant transactions. The largest acquisition was Land Securities' €805 million (£656 million) purchase of a 30% share in Bluewater, Kent (plus €49 million (£40 million) for full asset management rights and 110 acres of surrounding land, valuing the plan at c€2.7 billion (c£2.2 billion). Meanwhile, in Paris, a group of private investors led by Fonciere Apsys purchased the Beaugrenelle Shopping Center for roughly €700 million.
These two deals demonstrate the continued appeal of large, dominant schemes in Europe's megacities, which benefit from solid economic fundamentals, owing in part to global urbanization, which is growing populations and catchments. The future for this type of dominant product in Europe remains good, as evidenced by the fact that over 20 schemes worth over €400 million have traded across Europe (outright or stakes) since the financial crisis.
According to Adrian Peachey, Head of JLL's UK Retail Capital Markets, "Bluewater's investor demand was substantial, with roughly ten parties expressing significant interest. The final reported yield of 4.1 percent reflects the asset's market attractiveness as well as the significant additional value associated with the management of the 100 percent stake. When investors engage in this type of product, they are purchasing enhanced levels of confidence. Bluewater's durability is due to a combination of strong local economic fundamentals, connection, variety and vibrancy, identity, and dynamic and proactive management."
Assets in the large, liquid markets of the United Kingdom, Germany, and France continue to be in demand; these three markets represented for over 70% of total volumes in the quarter. In addition to the continued focus on core markets, there was a continuation of the widening of regional investment targets that had been seen in recent quarters. Signs of economic recovery and growing consumer confidence in the recovery markets of Italy and Spain, in particular, have inspired significant investor interest and activity, particularly as some investors seek value outside of the core markets. In the first half of 2014, Spain saw the most substantial year-on-year growth, followed by Hungary and Ireland.
JLL's Retail Capital Markets in Spain's David Brown remarked, "The H1 retail investment volume in Spain was close to €1 billion, more than double the overall volume in 2013, as owners responded to strong investor demand by offering properties to the market. Investor confidence has strengthened throughout the year as indicators of a clear pattern of improved sales in prime and good secondary centers have fueled positive investor sentiment and propelled pricing upwards. We foresee a very busy H2 with an additional €750 million of deals on the market, or set to come to market in September, and that total retail investment volumes in Spain may top €2 billion for the first time since 2006."
Given improved economic sentiment, continued increases in the weight of capital, and the number of transactions in the pipeline, we expect European volumes to exceed €30 billion for the full year, as predicted in our European Retail Investment Market Review at the start of the year, and possibly to set a new high since 2011.