A new report from real estate investment manager Hines says that investors around Europe may have been oblivious to a resurgence in the continent’s real estate market.
The report, Retail’s Next Act, says that a number of key themes are emerging that support its belief that years of turmoil have given way to a transformed retail sector.
These, it said, include:
- Retail fundamentals appearing strong and/or improving globally, with regional variations potentially offering diverse investment opportunities.
- Positive net operating income (NOI/rent) growth + a reset in pricing
- Limited retail supply in a sector ‘right sized’ for lower demand
The sector, Hines writes, was adversely impacted by the great financial crisis of 15 years ago, and was then dealt another body blow by the Covid-19 pandemic. These, it said, have led to historic lows in vacancy rates across the US.
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Hines writes: “In other words, it looks as though the sector has entered a new era in which it has pivoted to meet lower demand. […] This is a story that echoes in European and Asian markets, where supply constraints in certain geographies could have an outsized impact on the next market cycle.”
Europe, the authors write, could be on the edge of above-average growth in consumer spending due to several factors, including healthy wage growth since 2021, a stabilisation in inflation; and a correction in house prices, which is likely to boost consumer confidence.
It adds: “Given that the most optimal time to invest is when pricing is inexpensive while fundamentals show signs of strength, we believe that market trends are currently converging to form a potential sweet spot for global real estate investors in certain segments of the retail sector. This investment thesis applies across the US, Europe, and Asia.”
