?? Mark's Favourites- The Return of Investor Interest in Retail
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Whisper it quietly, but investor interest in retail is beginning to pick-up again.
It’s something that I have heard when speaking anecdotally to investors, developers, agents and tenants over the past 12 months. That talk has been cautious and prefaced with the fact that assets have to be well priced in order to attract potential buyers.
There is also a general acceptance that the rent rolls and high demand of the past are largely just that, of the past.
There is no doubt that any retail asset will need managing, careful positioning and a lot of blood, sweat and tears to make work. That’s the name of the game.
But just as retail was arguably the first real estate asset class to experience a technology disruption (online buying), so it seems to be the first where sellers have been realistic about the prices they can achieve.
While the office sector still wrestles with the longer term impact of remote working and repricing, retail is already there.
Advisor 第一太平戴维斯 recently noted renewed interest in retail as a major trend “that seems to be slowly gaining traction is renewed investor interest in retail assets.”
It said that in Q1 2023, retail investment recorded the slowest decline of all sectors, with €6 billion transacted, accounting for 20% of total investment transactions, the highest share recorded since 2015.
According to Savills’ preliminary results, another €6–7 billion was transacted during the second quarter of the year. This will bring the H1 result to approximately €12–13 billion, with some large retail portfolios being signed in Q1 and Q2, notably the Signa AT Retail Portfolio 2023 in Austria for €400 million and the Sainsbury’s Reversion Supermarket Portfolio 2023 in the UK, worth €960 million.
In Ireland, the repositioned €700 million Blanchardstown Centre has been put up for sale and in late July Madrid-based pan-European real estate investment and development company Eurofund Group and London-based private equity firm Signal Capital Partners confirmed they had signed a purchase agreement for the 200,000 sq m RheinRuhr-Zentrum in Essen, Germany.
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The partners will invest a total of around €180 million in the scheme over the next few years.
"We want to restore the Rhein-Ruhr-Zentrum in Mülheim to its former stature as a regionally dominant and innovative community hub. With this project, we aim to realise the first ‘shopping resort’ in Germany," Ian Sandford , President of Eurofund Group , said of the acquisition.
And London’s Oxford Street has just launched a major retail-led initiative executed by Someday Studios to offer rent-free pop-up stores in a bid to rejuvenate the UK’s most important retail high street.
The uncertainty in the retail sector has led investors to reduce their exposure to retail over the past decade. Concurrently, the escalating distribution requirements have generated increased demand for logistics warehouses, which has attracted more capital investment.
As a result, the share of retail and logistics investments, which stood at 19% and 10%, respectively, in 2014, has now achieved a more balanced distribution at 20% and 17% in Q1 2023.
Savills noted: “Retail has certainly fared well this year, considering the current climate. Positively, this may signal that retail, albeit limited due to the current economic landscape, may become a top pick for investors as there has been a less dramatic shift in retail values given a large proportion of the pricing correction had already taken place.”
Such sentiment comes as a welcome boost for a sector that many multi-asset investors had largely washed their hands off after the global financial crisis.
With residential development costs uncertain, logistics having matured as an asset class and offices in flux, perhaps 2023 might be retail’s year.