Retail property: investment in Europe set to reach 40 billion

The ‘Cinderella’ of asset classes is regaining ground, banking on a structural recovery and looking towards a future in which Italy – alongside the UK, France, Spain and, to some extent, Germany – returns to the centre of investors’ attention. However, these investors are proceeding with a selective approach.

This is the picture emerging from the 30th edition of Mapic, which is taking place in Cannes until 6 November. On shopping centres, retail parks and luxury high streets in 2024 – as explained by Chris Gardener, Managing Director, Retail Capital Markets, Europe — “Investment volumes in retail property in Europe stood at 36 billion euros at the end of 2024, and in the third quarter of this year alone they grew by 10 per cent compared with the same period last year”. Analysts estimate that 2025 will close at 40 billion. That is half the record 70 billion seen in 2015, but still an increase on the just over 25 billion recorded in 2023. “There is a mix of factors at play,” explains Gardener. The market has been illiquid for years, and this squeeze is now coinciding with both the fall in the cost of capital and the need to restructure and revitalise many assets, with a focus on ESG and by digitising processes and experiences. But even the conversion to alternative uses is, in fact, an investment opportunity. Whilst shopping centres offer yields of between 6.5 per cent and 8 per cent, and logistics, residential and office properties are trading at much lower levels, the arbitrage is clear. With an all-in cost of capital of between 4.5 per cent and 5 per cent, buyers today are enjoying more generous returns. Finally, in a sector that traditionally attracts value-add investors, interest from institutional investors is growing.’

added Sally Bruer, head of EMEA logistics & industrial and retail research, Cushman & Wakefield. It is not so much a competition between countries or cities, but often within the same neighbourhood or street there are locations that are better than others. Locations with a strong ability to attract high-spending tourists are more appealing than some major capitals. However, we have noticed a resurgence of high-value deals in the 200 to 400 million range. Certainly, the UK, France, Spain and Italia are among the most attractive destinations.”
According to Mark Smith, Head of EMEA Cross-Border & UK Retail Occupier at JLL, the winning trend is deep penetration into global urban areas. The Champs-Élysées, Regent Street and all those prime high streets where a presence is not just about retail sales, but also a symbolic representation of the brand. You need to be where it matters – not only for your target customer base, but also where your brand image is defined.”

“We are selective but clearly focused on investing in Europe,” said Marta Costa, Commercial Director, Europe & New Markets at Sonae Sierra, “and we are positively inclined towards Italia, where repricing, operating levers and capex for decarbonisation can translate into growth in net operating profit – by which we mean rental income and ancillary income net of non-recoverable operating expenses, before capex, tax, interest and depreciation. In Germany, following the completion of the acquisition of REM from Unibail-Rodamco-Westfield, we have become the second-largest property management operator for third-party shopping centres in the country, managing 19 assets. In Italia, operational performance remained solid in 2024, with an occupancy of 99.7 per cent across 7 assets”.
In terms of investment volumes, Savills’ latest analysis explains that ‘in the first nine months, with over 2.2 billion invested in retail property, Italia achieved its best result in the last 10 years. Four of the year’s most significant transactions took place in this sector, which ranked first in terms of volume with a 29 per cent share. Shopping centres contributed significantly to this result, with around 800 million euros invested, including the largest single shopping centre transaction of the last decade (the acquisition of Oriocenter by Generali Re and Percassi for half a billion). Factory outlets have returned to the limelight after years of absence from the market, thanks to the sale of two portfolios. The high street segment accounted for around 21 per cent of total transaction volumes, confirming the interest of investors and brands; three of the deals recorded involved the city of Florence.

“We have carried out a study into retail trends,” said Francesco Pupillo, managing director of Mapic, “which shows that retailers’ desire to expand is very real, with 60 per cent planning to open more than 10 shops over the next two years and over a fifth aiming to open at least 50 shops. In terms of ideal premises, the majority of respondents cited shopping centres (37 per cent) and shopping streets (22 per cent) as their preferred locations for new openings.