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European retail real estate investment volumes in Q1 2012 reach €3.8 billion, a decrease of 60 percent on Q1 2011

Jones Lang LaSalle reports retail real estate investment reduced in the first quarter of 2012, following the exceptional volumes experienced in 2011. Preliminary analysis suggests that direct investment in retail real estate for the quarter is likely to be in the region of €3.8bn, representing a significant decrease on total volumes in Q1 2011 and Q4 2011 of €9.9bn and €8.4bn respectively.

The quarter was characterised by a lack of large transactions, which boosted volumes in Q1 2011 (which saw five transactions over €500m, including the €1.8bn Trafford Centre) and Q4 2011 (which included the sale of the €824m Galleria in St Petersburg).

Despite volumes being down across the board, geographically the majority of activity remains focused on Germany and the UK. Allianz’s purchase of the remaining 45 percent stake in Europa Passage in Hamburg from HSH Nordbank for around €200m was the major transaction in the German market. The largest shopping centre deal in the UK market was the purchase of Ocean Terminal in Edinburgh by Resolution from Forth Ports (advised by Jones Lang La Salle) for €108m.

Shelley Matthews, European Retail Capital Markets Director, commented, “A couple of factors are in play. Firstly, the sustained economic pressures are restricting the availability of debt finance, especially for new borrowing, which when combined with narrowing investor requirements, is limiting transactions. Secondly, the uncertainty caused by the on-going Eurozone crisis has slowed down the transaction process in some markets, which in conjunction with the lower levels of deal origination witnessed in the second half of 2011, has resulted in fewer deals reaching completion in Q1 2012.  However, we expect volumes to pick up in Q2 and over the remainder of the year, in particular in Germany, Poland and the Nordics due to more solid fundamentals and a greater depth to the investment market.”

Agnieszka Kołat, Associate Director in Retail Investment Department at Jones Lang LaSalle added: “In respect of Poland, the first quarter of year 2012 recorded incredibly high investment turnovers totalling €728m, which was over two times more than in corresponding quarter of 2011 (€312m).

Q1 2012 very strong results were largely attributable to three transactions, of which two were retail and one mixed-use. These were the take-over of Zlote Tarasy complex (including a shopping gallery and two office buildings) by two General Partners, AXA Real Estate and CBRE Property Fund Central Europe LP (PFCE) and in which Unibail – Rodamco is a limited partner, from ING Real Estate for a reported value of €475m for 77 percent stake and the acquisition of Alfa Centrum shopping centre in Olsztyn by Rockspring from Arka Fund for approximately €84m. The retail sector in Poland has seen one more transaction – Galeria Tęcza, sold by Rank Progress to Blackstone for ca. €37m. Throughout Q1 2012 prime retail yields remained at 6.00 percent and compressed to 5.75 percent in Q2.  We expect them to remain stable in the short term.”

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