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News Release

London - Moscow

Retail Real Estate Investment Up 85% in Continental Europe in Q2 2009

ew European Retail Property Research from Jones Lang LaSalle


London - Moscow, 22nd July 2009 - Direct retail real estate investment in Continental Europe was up by 85% in the second quarter 2009, compared to the first quarter of the year, according to new research from Jones Lang LaSalle. This has been largely driven by an increase in lot size rather than number of deals, 33 deals in Q1 compared to 38 deals in Q2. The transaction volume was circa €1.9 bn in Q2 2009, compared to €1bn in Q1, giving a total of €3bn in the first half of the year. This is comparable to the volume transacted in the same period in 2004. However H1 2009 volumes overall were 63% down on the same period in 2008, despite a number of major deals taking place, including nine deals over €100m in H1 2009.

Jeremy Eddy, lead director of European retail capital markets at Jones Lang LaSalle said: “One common theme linking most of the major retail transactions in 2009 to date has been vendor or structured financing that has been available to the purchaser. With debt remaining severely restricted across most European markets, the availability of vendor financing has allowed many of these larger deals to take place at the levels achieved.”

Looking ahead he continued: “The prospects for retail investment in continental Europe in the second half of 2009 remain cautious.
 
Transactions initiated by distress are not prevalent as yet and mid year valuations have not resulted in significant liquidity issues. We are aware however of several significant transactions that have recently completed or are close to exchange, particularly in Germany, and we believe that there will continue to be strong interest in prime quality stock.”

Similar to the first quarter, Western Europe accounted for most of the retail investment volume (95%) with very limited activity in CEE, as investors focus primarily on domestic and core European markets.

The big five markets have dominated in the first half, as predicted by Jones Lang LaSalle in its ‘Big Five’ Report issued at MAPIC in November 2008. France and Spain saw their first transactions of 2009 after none in the first quarter and became the most active markets in Q2, with France transacting €693m and Spain transacting €360m. Notable transactions included Pramerica’s acquisition of “Le 31” shopping centre in Lille from Foruminvest for circa €160m and Orion’s acquisition of Plenilunio Park in Madrid from Banif for circa €235m, the largest single asset transaction completed so far in Continental Europe during 2009.

Shopping centres in Continental Europe made up the lion’s share of retail transactions in H1 2009 (€2.0bn and 69% of volume), up considerably on the previous quarter.

The high street remains very attractive in all countries due to lot size and income security. The sale and leaseback market is also experiencing increased activity, particularly for food based retail premises, driven both by retailers’ requirements for capital and investors’ interest in long term and secure income streams.  The retail warehousing sector has been hit hard in H1 2009, representing only 13% of the total volume, compared to 30% in H1 2008.

Funds and institutions have been the most active purchasers, accounting for approximately 40% of total volume and it is clear that the persisting problems in the debt market are making it difficult for leveraged buyers.

Meanwhile retail investment in the UK in the first half of 2009 was €1.8bn. This was principally transacted during Q1; Q2 saw fewer deals with very little stock on the market. Yields for prime stock are stabilising and whilst demand and sentiment from investors has improved, tenant default and rental decline is still impacting values, particularly in the secondary market. Equity buyers are dominating as the debt market remains very challenging. Additionally a premium is being paid for long dated secure income.

Vladimir Pantyushin, Head of Research, Russia and CIS at Jones Lang LaSalle added: “The retail investment activity in Russia has been quite low recently. However, investors continue to show keen interest in this asset class, encouraged by the resilience of the Russian consumer. The key point will be the end of rental decline, which should serve as a sign of forthcoming market turnaround. In the meantime, investors shop around in search for larger discounts from developers.”
 
Notes to Editors
This research considers all investment sales of shopping centres, retail warehouses and factory outlet centres in Continental Europe. Our analysis on Continental Europe excludes the UK & Irish markets, the high street and any investment deal less than €5 million in value.
 
 

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $41 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008 and 2009 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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