Knight Frank: French retail investment volumes slump in H1 but H2 could be brighter

Shopping centres and galleries represented most bulk of investment volumes (42% in H1 2019) due to the sale of a portfolio of 26 hypermarket and Casino supermarket properties for almost €400 million to Fortress at the turn of the year. Overall, this market segment remained virtually flat in the second quarter, while high street and retail park assets saw a slight increase in activity, according to Knight Frank.

In the retail park market, the mid-year results were mixed: volumes were down 19% year-on-year, while in the high street sector, a few portfolio sales and rare acquisitions of prime Parisian assets offset the Q1 slowdown, pending the imminent completion of Nike’s flagship Parisian outlet at 79 avenue des Champs-Elysées for more than €600 million to Norges Bank.

Following an opposite trend to that of offices, the amounts invested in the French retail market decreased by 30% between the 1st and 2nd quarters of 2019, from 725 to 500 million euros. “Since January, the retail sector saw investment volumes of €1.2 billion, a 25% decrease compared to the first half of 2018, which benefited in particular from the sale to BVK of the new Apple Store on the Champs-Elysées for almost €600 million,” explains

Antoine Grignon, Head of Retail at Knight Frank France, explains:

“The retail market results should improve in the coming months, within a more favourable context due to the expected increase in consumption and the slowdown in the Yellow Jackets movement. If this economic upturn is confirmed, it could help to reduce investor mistrust, as investors are always watchful and very attentive to the rent to turnover ratios borne by retailers.

“Furthermore, the current slowdown in developments, with fewer new centres being created and a political and regulatory context that is less favourable to the increase in the number of new sq m of retail parks, could help to stabilise the market to the benefit of existing sites.

“In addition, the discounts that are now available should eventually allow greater market liquidity outside the prime sector, to the main benefit of assets with strong fundamentals (quality of access, competitive surroundings, etc.) and value-add potential.”

Elsewhere, France’s industrial sector experienced a “temporary pause” in H1, according to Knight Frank, with investment activity of a little above €1.1 billion invested in H1, down 40% year-on-year.

Vincent Bollaert, Head of Investment at Knight Frank France, explains:

“This decrease needs to be put into perspective: the first half of 2018 was exceptional due to the high number of sales of warehouse portfolios. Furthermore, the first half of 2019’s result remains 24% higher than the average for the last ten years, confirming investors’ appetite for logistics platforms.”

Knight Frank’s review of H1 2019 continues tomorrow.

james.wallace@realassetmedia.com