European retail property provides investors with notable diversification benefits that can be gained through geography, sub-sector and risk profile, says TH Real Estate.
In a new report, Think Europe, TH Real Estate said institutional investors should consider allocating to European retail property to achieve attractive medium-term performance.
TH Real Estate global co-head of research Alice Breheny said: “Investors deploying capital across the European retail market strategically, from a market, sub-sector and timing perspective should enjoy attractive medium-term performance.
“Although most European investment markets are generally experiencing greater liquidity, the supply of good quality, interesting property remains tight.
“It is therefore important that any investment strategy is flexible enough to ensure it has the greatest chance of meeting its investment objectives,” Ms Breheny said.
The report found that the shopping centre market in more mature European economies will likely outperform the broader European property market over the coming five years.
The Nordic region is also expected to be the strongest short- to medium-term performer as markets benefit from rental value growth and sound economic fundamentals, the report stated.
TH Real Estate executive director and head of Australia Nick Evans said: “The European retail market presents an attractive, defensive opportunity for investors, due to its asset management potential, long lease terms and diversity of tenant base.
“Retail property, particularly prime core retail, has demonstrated relative resilience to market turmoil when compared to more cyclical sectors, while European prime retail has also outperformed on a historical context.”
TH Real Estate reminded investors to implement flexible investment strategies. Flexibility will enable investors to respond to market conditions and allow greater allocation to attractive market sectors.
The report also warned investors to deploy capital to the region slowly, as real estate performance is dependent on domestic market fundamentals.