Investors are not flying to prime, but to sustainable rental values, according to a panel of investors at this year’s ICSC European Conference in Berlin. Risk-averse investors are also concentrating on core European markets.
Those who are still investing prefer to invest through joint ventures or club deals rather than through the ‘fund’ model that was so popular before the crisis. This is because investors want fewer partners and more control with their investments.
According to Anne Kavanagh, Global Head of Asset Management at AXA Real Estate, the fund model hasn’t recovered from the crisis. She added: “Retail requirements are changing and shrinking in some cities, while expanding into other areas. We are looking at those trends and being careful in our decision making.”
The important point is where retailers want to be. The panel, moderated by real estate researcher and writer, Andrea Carpenter, pointed out that Investment follows retail trends, and investors’ money goes to towns and cities where there is a demand but with the growth of ecommerce, the number of cities where retailers want to be located in is fewer. Despite this, Kavanagh says that AXA is planning to boost its retail investment by 50% over the next year.
Investors are taking a much more active role in selecting their investments, according to Dr Frank Billand, board member of Union Invest, Germany. “Interior design of assets will have to change to reflect changing consumer behaviour. All our operators and managers play an active role in managing our assets and have responsibility to manage the change.”
But retail real estate is still a very good investment, according to Billand. “When my investors question such a large single investment, I say: ‘Why? There are 80 tenants with that investment.” His problem is finding the right product for such investments as development has slowed.
Matthias Boning, CEO of mfi management fur immobilien, agreed. He said: All investors are not only more careful but they have a higher level of knowledge to make the right decisions.”
For Eric Donnet, Managing Director and COO of AEW Europe, raising equity is difficult as investors are much more selective and opportunities that match that are fewer, particularly with new developments.
However, with fewer developments going ahead, the market is stabilising as there is no risk of oversupply, and for companies such as AXA Real Estate, this opens the opportunity for a strategic programme of refurbishment of existing shopping centres. Anne Kavanagh said: “We can invest equity in upgrading centres we own, confident in the fact that new developments won’t happen or have been shelved.”