Retail investment in Europe increased to €6.13 billion in the second quarter, with a focus on high-quality assets.

Investors in European retail property continue to focus on quality assets, according to the latest research from global real estate firm CBRE, with a number of notable High Street deals taking place in the second quarter of 2012. (Q2 2012). Jimmy johns

As evidence of instability in secondary retail areas emerges, the deals demonstrate the strength of demand for core retail.

In Q2 2012, European retail investment activity increased slightly to €6.13 billion ($7.5 billion USD), up from €5.75 billion ($6.9 billion USD) in Q1 2012. However, this is still below the quarterly average of €8.7 billion ($10.5 billion USD) over the last two and a half years, showing the tight supply of core goods.

In recent years, demand for top shopping malls has been a driving force behind retail investment activity in Europe; nevertheless, property investors are also interested in quality product in other retail segments, such as High Street assets.

The purchase of 52-60 Avenue des Champs-Elysées (main tenant Virgin Megastores) for around €500 million by Qatar Investment Authority and the purchase of Luminar House, Oxford Street (main tenant Zara) by PonteGadea Immobilianria for €185 million by PonteGadea Immobilianria are prime examples of the type of asset that is attracting investors with a long-term capital preservation strategy. Since acquiring the property in 2001, the vendor - one of Deka's German Open-ended Funds - has generated a very substantial financial gain.

Associate Director of EMEA Research at CBRE, Iryna Pylypchuk, says, "Quality assets of all types continue to outperform in the European retail investment market, a trend we expect to continue in the medium term. Due to a lack of core product on the market, some investors will be forced to go elsewhere, with core plus and value-add prospects currently providing an appealing middle ground due to low investor competition."

In most European markets, retail investment activity has declined this year. Both the first and second half of 2011 saw a fall in retail activity in Central and Eastern Europe (CEE) and the Nordic region, which had been viewed as retail activity hotspots in prior quarters (H1 and H2 2011).

Russia was the sole market to show strong transactional levels in H1 2012, with four significant shopping center transactions completed in Q2, including three in Q2. Following a good couple of years for retail investment, product sourcing difficulties have begun to affect Germany as well. This was particularly true in Q1 2012, while the market increased to €1.8 billion in Q2 2012, putting Germany ahead of the United Kingdom (UK), which transacted around €1.5 billion.

Head of European Retail Investment at CBRE, John Welham, said, "With a few exceptions, such as Italy and the UK regions, where modest upward yield moves were recorded in Q2 2012, prime retail yields have remained quite stable. Secondary market segments are also showing signs of weakness, with CBRE data showing increases in secondary retail yields in a number of big European markets, including Italy, the Netherlands, Sweden, and the United Kingdom."