“Is 2022 the time to go shopping for retail assets?” - REFIRE/TARGA Communications Roundtable Discussion
On 26th January 2022, a stellar line-up of market experts from JLL, Slate Asset Management and Savills Germany gathered online to discuss and shared their insights on the latest trends and investment opportunities in the European retail asset class sector at REFIRE and Targa Communications online roundtable “Is 2022 the time to go shopping for retail assets?”
The well-attended virtual session was moderated by Andrew Barber, managing director at Targa Communications and Charles Kingston, chief editor at REFIRE – Real Estate Finance Intelligence Report Europe.
The Key Takeaways
- 2022 will be a turning point for the retail asset class, with the repricing of recent years making the sector more competitive, at a time when retailers have better adapted to new ways of consumer shopping. In the European market, retail will remain an in-demand asset class.
- Investors in Europe are now highly incentivized to focus on meeting ESG targets. This approach will only become more mainstream in 2022. In Europe, ESG is already actively shaping the assets, geographies, and investment strategies of key investor groups.
- The strengths and merits of retail parks remains a subject close to the hearts of investors, particularly in the light of trends crystallised during the pandemic and the need to adapt quickly. This asset class is proving to be of high value across Europe.
Retail sector tendencies
Jörg Krechky, Head of Retail Investment Services Germany, Chairman European Retail Investment Board, Savills Immobilien Beratungs-GmbH stated: “Some €9 billion of capital is looking to flow into the retail sectors, which underscores the capital pressure. One sector where we will see a lot more activity is where investors see the opportunity to convert existing shopping centres”.
He added: ”It is always good to go shopping for retail properties as long as investors see a future for these properties. We expect a more dynamic time in this market.”
Briain Morris, Managing Director, Head of Investments Europe, Slate Asset Management added with reference to current developments: “2021 was a great year for Slate. We expanded our European footprint. Tenants are extremely resilient, and we enjoy the robustness of the cash flow from our properties. In Germany our focus has been on the discount format. We like those footprints. We managed to maintain rental income from our German discounter clients at 100% during the pandemic. Those tenants are very resilient.”
Marlene Sanches Tavares, Head of Retail & Logistics Investment at JLL, commented: “Yield compression on grocery-based retail has been widely-experienced in recent years and has intensified with the pandemic. The biggest problem is the lack of available product. Some major retailers are considering sale-and-leaseback, so there will be more activity”.
“Retail and logistics are going hand in hand. Even in Spain and Portugal we see the shift towards massive yield compression.”
In regard to the tendencies in 2022, Marlene Tavares mentioned: “I'm definitely optimistic about the retail sector after years of turmoil in the industry. The year 2021 was dominated by small retail stores and convenience stores. We see opportunities for 2022 and expect things to evolve.”
Brian Morris added: “We, at Slate Asset Management, are opportunity driven and are now primarily looking for deals in the Nordics, UK and Germany.”
High street retail
Marlene Tavares: “Remote work and the decline in tourism have contributed to the increase in high street vacancy.”
Repurposing of shopping centres
“Repurposing of shopping centres is locally-driven”, mentioned Jörg Krechky. “In Germany, there aren't that many examples of malls being transformed into something else. Savills is converting a shopping centre into a university campus.”
Marlene Tavares:” There are examples of great place making and repositioning in Lisbon and Portugal. One example in Lisbon was a supermarket-based shopping centre. The supermarket is still there, but the other space was converted into an international school.”
Discussing one of recent examples, Marlene Tavares commented: “We have seen how important it is for owners to take care of their shopping centres. Sonae Sierra provided and managed an online platform for its retailers during the Corona pandemic. They developed high-end food courts with Michelin-starred restaurants. Now they are trying to integrate medical offerings and public services into shopping centres to increase footfall.”.