In the first three quarters of 2018, retail investment across Europe rose by 8 per cent year-on-year (YOY) to a total of €21 billion. 

However, it was the non-core markets including Belgium, Poland and Italy that saw the biggest growth as secondary European countries continue to attract retail investment. Seeing increases of 229 per cent, 80 per cent and 66 per cent respectively, it is clear that there is still appetite in these countries for prime retail – especially in the shopping centre sector which saw an 11 per cent increase YOY.

One of the main trends behind these figures is the game of 'e-commerce catch-up'. If we compare the likes of Poland and Italy, where physical retail is still the mainstay of the sector, with core markets such Germany and the UK, where e-commerce has already taken off in force, it is clear that there is still plenty of investor interest in traditional assets.

The availability of opportunities in Poland and Italy, relatively attractive pricing and, in the case of Poland, the dominance of the shopping centre asset class as the main retail and leisure destination for the consumer, are some of the main drivers behind this trend.

With e-commerce standing at 18 per cent of all retail sales in the UK and 15 per cent in Germany, investor interest has significantly increased for retail warehousing and parks which have become recognised as more favourable in terms of return on investment.

In fact, in regard to these asset classes, the UK and Germany took gold and silver for turnover in Q1-Q3, with the former accounting for 43 per cent of the €2.5bn turnover figure and the latter capturing a third of the market (€1.9 billion).

So, what does the future hold for retail investment across Europe? While traditional assets are expected to remain favourable across non-core markets, this year’s activity has been underpinned by the need for adjustment to an era where the role of physical retail is changing; consolidation, sale and leasebacks, repositioning of existing retail schemes and the emergence of new concepts have already offered new opportunities to investors and are expected to continue to do so.

Investors will continue to look for retail formats that service the rising property needs of e-commerce brands/operators and therefore we can expect to see a new hybrid format which serves logistics needs but is simultaneously linked to strong retail fundamentals.

Further information

Read more: Non-core European countries see rise in retail investment