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Germany’s Q1 retail volumes fall but food dominates: CBRE

Investment in German retail property fell to €1.9 billion in the first quarter of 2021, a 59% year-on-year decline according to CBRE.

The firm said that the “notable downturn” needs to be seen in the context of the exceptional first quarter of 2020. However, the latest figures are also significantly below the 10-year first-quarter average of €2.7 billion.

Q1 Retail investment volumes in Germany by type [Source: CBRE]

CBRE Germany co-head of retail investment Jan Schönherr said that in tandem with the effects of the ongoing lockdown recent retail property investment trends have persisted.

“Investor appetite for food markets and food-anchored retail properties is particularly strong as these properties are little affected by the restrictions imposed by the coronavirus,” Schönherr said. “In the case of shopping centres, however, investors have adopted a wait-and-see position until rents have settled down. As regards high street retail properties, super-prime properties are meanwhile especially in demand.”

Co-Head of Retail Investment Jan Dirk Poppinga added that there is currently a lack of adequate product.

Retail warehouses, food markets, retail parks and neighbourhood centres accounted for 44% of investment activity; high street retail, 32%; shopping centres, 7%.

Yields have fallen in some segments. Food market prime yields have fallen from 5.2% a year ago to 4.50% at the end of the first quarter, while DIY store yields have dropped from 5.2% to 5.1%. The prime yield for retail parks was stable at 4.15%.

Yields rise for shopping centres and high streets

However, yields rose for shopping centres and high street properties. Prime high street yields in the top seven cities have risen an average of 18 basis points to 3.3% since the first quarter of 2020, while prime shopping centre yields increased by up to 85 basis points. Those in A locations are now 5.1% and in B locations, 6.1%.

“As the year progresses, the food market segment will increasingly close the yield gap with other asset classes as ever more investors are reviewing their risk evaluation of these properties on the back of strong performance and are comparing them with good logistics properties,” Schönherr said.

The firm said that investment volumes will also continue to be determined both by supply shortage and by investors waiting to see how the pandemic situation develops.