European retail investment remains stable in H1 2018

Retail investment in Europe, totaling €58 billion ($68 billion), the second-largest sector after offices, remained stable over the past 12 months, according to BNP Paribas.

On half-year, even though its share of total investment slightly declined (22 percent versus 23 percent in first half 2017), retail property volumes remained higher than the 10-year average. Among the major markets, in first half 2018, lower investment in Germany (–16 percent) can be linked to an inadequate supply of larger portfolios. Decreasing volume was also recorded in the United Kingdom (–10 percent), but especially in first quarter 2018.

Several large transactions have occurred in second quarter 2018. Retail property investments were up in France (+57 percent), mainly thanks to the Apple Store transaction on the Champs Élysées. Portfolio retail deals boosted the Polish market. In Italy, big deals brought first half 2018 in line with results registered in 2017, a record year. In Spain, retail assets still represent the major part of total investment (42 percent).

In the euro zone, retail trade will stand at +1.7 percent in 2018 and should reach +2.1 percent in 2019. In the major markets, compared to 2017, weaker growth is expected for this year: Germany +1.2 percent (vs. 3.0 percent in 2017), France +2.8 percent (vs. 3.0 percent) and the U.K. +1.7 percent (vs. +2.1 percent), in domestic currency and at constant exchange rates. As observed over the past few years, thanks to a dynamic economy, retail sales growth in CEE countries remain strong in 2018: Poland (+6.0 percent), Czech Republic (+5.3 percent).

“Retail is facing structural changes. Physical stores stay under pressure from the online players and consumers’ expectations adjusted to their store experience to the new omni-channeling shopping habits,” said Patrick Delcol, head of pan-European retail.

European online sales are still increasing (+13.6 percent in 2017, source: E-commerce Foundation), but at a lower pace compared to 2016 (+15.4 percent) and previous years. Internet penetration is growing at a faster pace than average in Southern and Eastern countries.