Investment in to European retail property reached its highest ever levels in 2015, with €69 billion invested, up 31% on 2014. Investment levels were also up 4.6% when comparing Q4 2015 to Q4 2014.
Foreign investment accounted for 48% of retail investment in Europe in 2015, substantially higher than in previous years. In the last quarter of the year 50% of all retail investment came from cross border transactions; €8.8 billion was invested, up from 42% in Q3 2015. The rise in cross border investment has been driven by integrated intra-regional acquisitions. In 2013 and 2014 intra-regional investment accounted for around 20% of all retail investment. In 2015 the levels moved up to 29% of the total transacted.
The UK remains the largest retail CRE investment market in Europe, growing 6% in 2015 to reach €19.9 billion. The German market grew more than any other in 2015, with investment up €7 billion to reach €16.2 billion (76%) driven by growth in the shopping centre and high street retail sectors. Norway experienced exceptional investment growth, from €655 million in 2014 to €4.8 billion in 2015. The country overtook France to become the third largest market in Europe. It is worth noting that the CEE region experienced its highest level of investment since the previous peak in 2007, and at €5.1 billion was double that of 2014 figures – predominantly driven by Poland and the Czech Republic.
When looking outside of Europe, in the second half of the year, US buyers were by far the largest source of capital, accounting for 72% of all cross-regional retail investment. Chinese buyers were the second largest non-European sources of capital in H2 2015. Non-European buyers seem to be looking at locations outside of core cities, the top destinations for cross-regional investment in the last six months of the year were nationwide portfolios and secondary cities.
Collective investment vehicles were the dominant purchaser group in the second half of 2015, accounting for 43% of the retail investment market; this is up considerably compared to the first half of 2015 where levels were at 27%. On the vendor side, property companies, particularly developers, remained the largest source of retail investment in 2015. Developers have significantly increased the amount of product they have brought to market from €4.9 billion in 2014 to €7.4 billion in 2015.
John Welham, Head of European Retail Investment, CBRE, commented:
“2015 was an exceptionally strong year for retail investment in Europe. Both intra-regional and cross-regional capital was highly active, boosting many of the core markets in Europe including the UK, Germany, the Nordics and the CEE region. When compared to other commercial real estate sectors, retail property attracts a large amount of European cross-border activity and in 2016 we expect to continue seeing high levels of investment coming from on the continent.”