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Europe Watch

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Europe Watch

As temperatures drop across the continent, we reflect on a summer that has delivered great weather, a World Cup winner, and a third successive Ryder Cup victory – but also – disappointing economic news. While a stuttering economic recovery means that unemployment is gradually coming down from elevated levels, consumers, may be led by celebratory sports fans, are feeling much better about life than they were this time last year. This does not necessarily mean they are feeling good enough to open their wallets, however. Retail sales are growing across Europe in aggregate, but the pace of growth is subdued with considerable variation between countries. From a retail property perspective, variation comes not just at the national level, but at a localised level with prime outperforming as retailers are targeting the best high street and shopping centre locations for expansion.

Consequently prime retail rents have seen a strong run of growth over the past two years, although they paused for breath in Q2. Prime yields are also now on the move, with yield compression implying that they are much closer to their cycle lows in a number of locations. Even if consumers remain cautious, property investors certainly have the confidence to spend.

Source : CBRE Global Investors

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