Retail investment continues to rise in Europe. In the period Q1-Q3 2013 it increased by 6.8%. Significant increases have been recorded in Italy (36%) and Spain (35%). Although core markets continue to dominate activity accounting for 89% of total, the peripheral markets have doubled their share to 10% compared to last year.
Confidence in the prime retail segment is supported by healthy retailer demand for the best performing high streets and shopping centres in Europe and the positive performance of prime rents.
The average yield gap between prime core and prime peripheral retail product reached a historic high in 2012 (200 bps). As economic prospects and market perception improves for peripheral markets, investors are gradually developing an appetite for risk. This yield gap is gradually narrowing (188 bps) and the average deal yield has moved out from 6.4% in Q1-Q3 2012 to 6.7% in the same period this year.
Limited supply of prime investment opportunities in core markets is likely to maintain competition and keen yield levels. We expect investors to seek for better returns in prime segments of peripheral markets and secondary segments of core markets, with a positive impact on yields.
Source : Savills