Taking a step back to gain momentum?
Retail investments cooled in summer
With just €5.8 billion transacted during the third quarter, this was the lowest quarterly volume in the past year. Contrary to common assumptions, this is not simply due to a holiday slowdown, as August is no longer a period when all of Europe is on break. Nor does it indicate a drop in investor interest; in fact, demand is certainly plateauing. Rather, this dip reflects the extended time required to close deals as investors adopt a more cautious approach in the current climate, particularly with growing deal sizes.
However, European retail investments over the first three quarters of the year reached €19 billion, marking a 6% increase compared to the same period last year, with over half of the countries showing annual growth due to last year’s low retail investment levels. However, when considering longer-term trends, the year-to-date investment volume remains 21% below the five-year average for the same period. This is similar to logistics investments, which are down by 20%, while the living sector has dropped by 50%, and the office sector has declined by 58% compared to their respective five-year averages.
Only five countries exceeded their five-year investment average, with Ireland (+107%) and Italy (83%) standing out. In Ireland, investment was mainly driven by the sale of The Square shopping centre for €130 million, as well as the trading of a few retail parks. Italy’s performance was bolstered by a major transaction: Kering's €1.3 billion acquisition of the Via Montenapoleone 8 in Milan. Hungary (+34%), the UK (+8%), and the Czech Republic (+1%) also showed growth, while Spain’s volume remained flat. Meanwhile, retail investment in France fell sharply (-40%), reducing the share captured by core markets (UK, Germany, and France) to 61%, down from 70% last year.
Will an Indian summer boost year-end retail investment?
The real positive story across Europe is the increasing number of retail assets coming to market, generating strong investor interest. The availability of larger lot sizes and portfolio offerings is broadening the pool of potential buyers, with institutional and international investors becoming increasingly active. Additionally, market fundamentals look promising: improved occupancy rates, a return to rental growth, and a lack of new development projects suggest that income returns should remain attractive in the near term. While some yield-driven investors may be tempted by higher-yielding asset classes, such as office properties, prime retail yields remain highly competitive and appealing.
Based on deals signed since early October and those in the pipeline, we project Q4 retail investment to reach approximately €8.5 billion, bringing total turnover for the year to just over €27.5 billion. This would represent a 15% increase compared to last year and leave volumes around 20% below the five-year average.
Looking forward to 2025, as more assets come to market and the buyer pool expands, the key challenge will be finding common ground on pricing, which continues to be a significant obstacle for deal-making. This is why we do not anticipate a rapid surge in activity but a steady growth in turnover, supported by improving investor confidence in the retail sector and a broader economic recovery. We forecast European retail investment volume to reach approximately €32 billion, marking a 16% increase on 2024 and aligning with the past five-year average.
One size does not fit all
When examining retail market subsegments, shopping centres are becoming more popular, as they accounted for 26% of total retail investment this year, up from 23% in the first three quarters of last year. This uptick is largely due to a rising number of larger deals. High street retail also maintained strong appeal, attracting 18% of total retail acquisitions, close to last year’s 19%, driven by the sales of prime trophy assets, such as Via Montenapoleone 8 in Milan or 251 rue Saint-Honoré in Paris.
Retail parks, however, continue to dominate, representing 28% of total retail investment (compared to 29% in Q1–Q3 2023) due to their resilient fundamentals. Investment in grocery stores, including supermarkets and hypermarkets, saw a decline, with their share dropping to 16% from 22% last year. This reduced activity reflects a shortage of available assets rather than a decrease in investor interest, as appetite remains high, especially for properties occupied by discount and value-focused brands.
The significance of retail formats is shifting as the market increasingly splits between large prime assets and smaller secondary assets. Prime assets, typically situated in high-traffic, affluent areas with consistent footfall and strong retailer demand, continue to attract investors focused on stability and long-term value. In contrast, secondary assets, often found in less central locations and sometimes facing competition or obsolescence, require substantial investments. For value-added investors, these assets present opportunities to enhance value through strategic upgrades, such as repositioning properties, improving facilities, reducing carbon impact, adapting spaces to meet evolving consumer preferences, or partially and entirely repurposing. This divergence is reshaping the investment landscape, where specific retail formats are becoming less central, while the strategic goals behind investments increasingly drive market trends.
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