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News Release

Dublin

European Retail Property Investment up 90% in first nine months of 2010 property market”

Retail sector accounts for 50% of all investment activity in Irish commercial property market


Dublin Thursday 28 October 2010   Direct investment in retail property in Europe during the first nine months of 2010 reached €15.2 billion, up 90% on the same period last year (€7.8 billion)  Investment volumes during Q3, traditionally the quietest period of the year, held steady against Q2 volumes and totalled €5 billion. Ten deals of at least €100 million were completed in Q3, most notably Unibail-Rodamco’s acquisition of seven Simon Ivanhoe shopping centres in Poland and France for €715 million.
 
According to John Moran, Managing Director, Jones Lang LaSalle (Ireland), the retail sector accounted for 50% of all commercial property investment in the Irish market, with activity focused primarily on two areas: secure units in busy Dublin city centre locations and  sale-and-leaseback transactions for banking institutions. Most of these retail investments were in the under €5million lot size category where investor demand remains strong.
 
The UK, Germany and notably Poland together accounted for 80% of total investment volumes in Q3 (€4 billion).  While Poland has seen a healthy demand for retail real estate investment in the first half of 2010, a number of transactions did not complete during this period.  However, Q3 saw a major shift, with Poland leapfrogging into third place behind Germany following the completion of Unibail-Rodamco’s acquisitions in Warsaw. Due to the favourable macro-economic situation in Poland and positive retail sales (up 6.6% up in August 2010 year on year), investor interest in prime shopping centres in Warsaw and the regional cities of Poland has increased markedly. 
 
Germany continued to see increasing interest from international players to supplement the strong domestic market, which resulted in further yield compression during Q3 2010. The increasing availability of finance and the improving economic outlook continues to boost investment demand, with transactions of over €700 million completed in Q3; these included two Aldi sale-and-leaseback portfolios, resulting in Aldi generating revenues of over €260 million from sales to Allianz Real Estate and MGPA.
 
While  the UK saw a significant increase in volumes transacted in Q3, this was due to the €1.15 billion Tesco sale-and-leaseback deal; otherwise the UK has maintained consistency throughout the year, with approximately €1.4 billion traded each quarter. Seven shopping centres traded in Q3 in the UK, notably Stratford Centre in London, which was sold by Land Securities to Catalyst European Property Fund for just over €100 million.
 
David Raven, Head of UK Shopping Centre Investment at Jones Lang LaSalle, said: “The vast majority of stock in the UK shopping centre market that has traded in 2010 is inferior in quality to 2009, which was characterised by a high volume of prime transactions. The fact that the relatively inferior quality stock has traded is further evidence of buyer sentiment improving. This theme is set to continue in the short term as the supply of prime stock coming to market is limited, which should suggest prime yields will remain at their current levels or even harden.”
 “Leveraged investors and particularly the raised Opportunity Funds have become more prevalent throughout the year and are likely to dominate buying activity in the final quarter of 2010 and into 2011 as long as they are able to secure debt from the lending banks. This buyer type will be of key importance for the vast majority of secondary stock which is anticipated to come to the market.”
 
According to John Moran, this trend is also important for the Irish market, where it is expected that there will be significant product availability in 2011 due to the disposal programmes that will be necessary as part of the debt reduction process driven by NAMA.  “We expect and continue to see significant overseas activity in the Irish Market driving the remainder of 2010 and 20112,” he said.