Commentators often look to Continental Europe as being at least six months behind the UK in terms of the investment market. The news that investment activity in the retail sector has seen an increase in average lot size from €52m in Q1 to €77m in Q2, reflecting the rising number of larger deals in the second quarter, is a positive sign
France, Spain, Germany, Italy and Netherlands accounted for more than 85% of the investment activity in the first half of 2009, following a more active second quarter for France and Spain with some larger deals that took place, such as the purchase of Plenilunio shopping centre in Madrid by Orion Columba for around €235m and a yield of 7.5% and the purchase of 'Le 31' shopping centre in Lille by Pramerica for around €150m and a yield of 6.0%. Shopping centres continue to dominate the investment activity accounting for about 35% of the number of deals, followed by a large number of department store transactions (21%) that took place mainly in the first quarter of the year in Germany. A significant share (18%) of the deals belongs to hypermarket and supermarket deals, which are considered a good cyclical play and in good locations relatively unexposed to tenant risk.
Achievable prime yields have moved out by 142 basis points for shopping centres and by 135 basis points for retail warehouses on average compared to last year. However, we have noticed that yields have started stabilising in the second quarter of 2009, with almost no yield movement in the shopping centre sector and only 6 basis points shift for retail warehouses in a quarterly basis.
Achievable average prime yields in the survey area are at 6.4% for shopping centres and 7.1% for retail warehouses (Q2 2009, preliminary data). Almost one third of the recorded yield levels were in the region of 6.0%, with the majority of deals (42%) between 6.1% and 7.5%.
The retail investment market has slowed down considerably in the first half of 2009 with the total retail investment volume in our survey area reaching around €2.6 bn, which is 61% lower compared to the same period in 2008.
View the breakdown of Savills retail investment deals by country
