Although investment in European retail property was down to €32.2bn in 2021, convenience retailing comprised nearly half of that, compared to the 23% that it accounted for as recently as 2013.
Conversely, the share of retail investment that shopping centres command has dropped. While this segment accounted for 41% of activity in 2013, that share fell to 17% in 2021.
These figures have been published in Savills’ latest European Retail report in which the firm looks at 13 of Europe’s markets.
The convenience sector comprises retail parks and warehouses, supermarkets and hypermarkets. Breaking the figures down further, the firm said that retail parks and retail warehouses market accounted for 30% of overall investment in 2021. Meanwhile, supermarkets and hypermarkets accounted for 17%. The figure had been 20% in 2020, but between 2013 and 2019, it had run at about 7% of investment in the retail sector.
UK, Germany and France dominate investment spend
Activity has been geographically uneven, however. The firm said that UK, Germany and France attracted 72% of all activity.
The changing fortunes of the retail sector have been reflected in yields, with retail warehouse yields falling below shopping centre yields for the first time ever, Savills said.
Prime shopping centre yields reached a 5.45% high in Q4 2021. The previous cyclical price peak was in Q3 2018 when they were 4.5%. Average prime retail warehousing yields moved in during Q3 2021 by 5bps to 5.43% and in Q4 the figure moved to 5.16%. Similarly, food sector prime yields have fallen 40 bps to 5.3% since 2019.
“Investors looking to meet higher return thresholds while managing income risk have discerned that retail parks and grocery stores are often located close to population centres, and are generally less exposed to changes in discretionary spending due to downturns or public health restrictions,” said Eri Mitsostergiou, director, Savills research.
She said that the gradual recovery from Covid19 is leading to a revival of live shopping and socialising, which should support the industry’s revival this year. “We expect more value-add opportunities to emerge and a big part of the retail stock requires active asset management, re-purposing and retrofitting to meet future decarbonisation targets.
“Convergence of buyer and seller pricing expectations will be the decisive factor to unlock opportunities,” she added.