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At a Glance - European retail market - H1 2018

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Retail investment remains stable in H1 2018

Economic growth within the Eurozone will remain above potential: +2.2% in 2018 followed by +1.7% in 2019. Private consumption is forecast to increase by 1.3% in 2018 (+1.5% in 2019). Unemployment rates in all European countries are expected to be stable or to decrease. An accommodative monetary policy should also continue to drive domestic demand.

In the Eurozone, retail trade will stand at +1.7% in 2018 and should reach +2.1% in 2019. In the major markets, compared to 2017 weaker growth is expected for this year: Germany +1.2% (vs 3.0%), France +2.8% (vs +3.7%) and the UK +1.7% (vs +2.1%). As observed over the last few years, thanks to dynamic economy, retail sales growth in CEE countries remain strong in 2018: Poland (+6.0%), Czech Republic (+5.3%).

Retail is facing structural changes. Physical stores really need to continue to adapt their strategy to the changes of consumer preferences. European online sales are still increasing (+13.6% in 2017, source: E-commerce Foundation), but at a lower pace compared to 2016 (+15.4%) and previous years. There are now particularly driven by growing Internet penetration from Southern and Eastern countries.

On a rolling year basis, at €268 bn, the commercial real estate investment volume rose by 9% vs 17 driven by office (+13%) and logistics (+20%).

Retail investment, the 2nd largest sector (€58 bn) remained stable over the last 12 months. On half-year, even thought its share of total investment is decreasing (22% vs 23% in H1 17), retail property volumes remain higher than the 10-year average. Among the major markets, in H1 18, lower investment in Germany (-16%) can be linked to an inadequate supply of larger portfolios. Decreasing volume was also recorded in the UK (-10%), but especially in Q1 18. Several large transactions have occurred in Q2 18. Retail property in France (+57%) was up thanks mainly to the sale of the Apple Store on the Champs Élysées. Portfolio retail deals boosted the Polish market. In Italy, big deals brought H1 2018 in line with results registered in 2017, a record year. In Spain, retail assets still represent the major part of total investment (42%).

Retail prime yields are still under pressure in most European markets. In Paris, the prime high street yield fell to 2.50%. Prime shopping centre yields were stable in major countries except in the UK where they have been increasing over the last few quarters.

 

At a Glance - European retail market H1 2018
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