Stability of retail investment in 2017
The Eurozone economy continues to perform robustly and is set to continue in 2018 and 2019. GDP is expected to reach 2.4% in 2018 thanks to global growth and ongoing accommodative monetary policy that should boost domestic demand. Consumer confidence is being supported by the exceptional strength of employment growth. Consumption growth should rise at around 2% in coming years.
Retail sales within the Eurozone are forecast to remain at a good level in 2018 (+2.1%), despite a lower growth in some European markets (Germany: +1.9% vs +2.9% in 2017; France: +2.6% vs +3.4% in 2017). In the UK (+2.2%), it may rise at the same pace in spite of weaker household disposal income and inflation. As in 2017, the strongest growth should be registered in Ireland (+5.7%) and in Eastern Europe. In Italy (+0.9%) and Spain (+2.2%), retail sales should continue to increase as recorded since 2014 despite high unemployment levels.
Online sales in Europe are expected to grow by around 10% in 2018 (source: E-commerce Europe). The growth rate of each country depends on the degree of e-commerce market’s maturity with Southern and Eastern European markets outpacing most developed in the UK.
With nearly €260 bn (+11% vs 16) European commercial real estate investment set a new record in 2017 led by office (+8%) and logistics (+56%) through big corporate deals. The retail investment market, the second largest sector (€56 bn) is stable compared to 2016. Germany (+7%) remains the main driver in Europe. A decreasing volume of more than 20% is recorded in the two other key countries. In France, it is mainly due to a lack of products. In the UK, because of some uncertainties (occupier intentions, macro-economic pressures), investors are adopting a wait-and-see attitude. In contrast, several big retail deals boosted the Dutch and the Finnish markets. The Czech Republic’s retail investment volume also increased thanks to several large shopping centre transactions.
Retail prime yields remain under pressure in most European markets. In Germany, high street prime yields fell to 3% in Q4 17. Only the UK shows a slight increase in shopping centre prime yields which moved out in Q4 2017 from 4.50% to 4.75%.