Direct retail real estate investment in Continental Europe totalled €980m in the first quarter of 2009, 37% down on the previous quarter (€1.5bn), according to new research from Jones Lang LaSalle.

Western Europe accounted for the vast majority (89%) of transaction volumes as European investors are focusing on home markets, says the research. The proportion of retail investment volume accounted for by domestic investors has increased from one third in 2008 to over half in the first quarter of 2009.

Jones Lang LaSalle director of European Retail Capital Markets, Jeremy Eddy, says “Investors continue with their ’wait and see’ strategies in Continental Europe, with most markets seeing some fall in prices in the first quarter. At the same time, the high cost and lack of access to finance continues to restrict market liquidity, particularly for larger transactions.”

“There is demand for prime product in the best locations and low vacancy rates in many top schemes provide the secure long-term income that investors seek, ” adds Eddy.

The report shows that Italy and Germany were the most active markets in Continental Europe during the quarter, accounting for 31% and 28% respectively of total transaction volumes. In Italy two deals over €100 million were completed: the Barberino Designer Outlet centre and the Centro Rondo shopping centre in Monza. Germany was the most active market in terms of the number of transactions. Investment into Central and Eastern Europe was quiet, due in part to the lack of domestic investors in these markets.

In comparison, transaction volumes in the UK totaled €1.3 billion in the first quarter - up 54% on Q4 2008, although the sale of a 50% stake in the Meadowhall shopping centre accounted for almost half (48%) of this volume.

“We expect that as the year progresses and buyer and seller expectations are increasingly aligned and the market moves towards fair value, that transactions will be forthcoming. Two major drivers to this will be the realisation of valuation markdowns and a restricted return of liquidity from the banking sector,” says Eddy.

Source: www.theretailbulletin.com, April 22nd 2009.