Retail real estate, towards 40 billion investments in Europe

The "Cinderella" of asset classes is taking back its space, betting on a structural recovery and looking to a future in which Italy - along with the UK, France, Spain and, to some extent, Germany - returns to the centre of investors' interests. Which, however, move with the compass of selectivity.

This is the picture coming out of the 30th edition of Mapic, running until 6 November in Cannes. About shopping centres, retail parks and luxury streets, in 2024 - as Chris Gardener, managing director, retail capital markets, Europe explains - "Investment volumes in retail real estate in Europe closed 2024 at EUR 36 billion and in the third quarter of this year alone grew by 10% compared to the same period last year. The analysts' estimate is that 2025 will close at 40 billion. That is half the record 70 billion of 2015, but still up from just over 25 billion in 2023. "At the base there is a mix of factors," Gardener explains. "The market has been illiquid for years and this compression now meets both the drop in the cost of money and the need to restructure and relaunch, in an ESG key and digitising processes and experiences, many assets. But conversion to other uses is also, in fact, an investment opportunity. If shopping centres offer returns of between 6.5 and 8 per cent, while logistics, residential and offices move at much more compressed levels, the arbitrage is evident. With an all-in cost of capital between 4.5% and 5%, buyers today have more generous returns. Finally, on a sector that traditionally attracts value-add investors, there is growing interest from institutional capital."

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 section or street there are better locations than others. Locations with a high capacity to attract high-end tourism are more attractive than some large capital cities. However, we have noticed a return of high ticket deals between 200 and 400 million. Certainly, the UK, France, Spain, Italy are among the most attractive destinations.
According to Mark Smith, lead Emea Cross Border & UK Retail Occupier of Jll, the winning trend is a deep penetration into global urban areas. Champs-Élysées, Regent Street and all those prime streets where presence is not just retail, but symbolic brand representation. You have to be where it is relevant to be, not only for the target clientele, but where you define your image

"We are selective but clearly oriented towards investing in Europe - said Marta Costa, director Commercial, Europe & New Markets of Sonae Sierra - and positively inclined towards Italy where repricing, operating leverage and capex for decarbonisation can translate into growth in net operating profit, meaning rental income and ancillary income net of non-recoverable operating expenses, before capex, taxes, interest and depreciation. In Germany, following the completion of the acquisition of REM from Unibail-Rodamco-Westfield, we became the second largest operator of shopping centre property management for third parties in the country, managing 19 assets. In Italy, operating performance remained solid in 2024 with an occupancy of 99.7% on 7 assets".
In terms of investment volumes, Savills' latest analysis explains, "in the first 9 months with over 2.2 billion invested in retail real estate, Italy posted its best result in 10 years. Four of the most important transactions of the year were recorded in this sector, which ranked first in terms of volume with a 29% share. Shopping centres contributed significantly to this result with some EUR 800 million 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). The factory outlets are back in the limelight after years of absence from the market, thanks to the purchase of two portfolios. The high street component garnered around 21% of total volumes, confirming the interest of investors and brands; three of the deals recorded concerned the city of Florence.

"We conducted a study on retailer trends," said Francesco Pupillo, managing director of Mapic, "according to which the desire for expansion of the brands is real, with 60% planning to open more than 10 shops in the next two years and more than a fifth aiming to open at least 50 stores. In terms of ideal spaces, the majority of those surveyed indicate shopping centres (37%) and shopping streets (22%) as their preferred locations for new openings