Investor demand for prime shopping centres in the UK, Germany and France is unlikely to wane in the next few months, according to new research released last week by property adviser Cushman & Wakefield.

Core/core plus assets will be the main targets in these countries, according to C&W's Market Beat report on the retail sector in the UK, Germany and France. Well-located secondary shopping centres with little vacancy could also provide real opportunities, especially in the UK.

Large portfolio sales are set to continue and will help boost investment volumes in Germany and the UK, says C&W. Assets which require asset management for creating value and redevelopment of existing schemes, particularly in Germany and the UK, will constitute the main set of opportunities for investors. The repeal of the SIIC plan, scheduled for 31 December 2011, should enhance the French market.

European retail investments amounted to EUR 12.2 bn in the first three months of the year, an increase of 31% compared to the same period in 2010 (EUR 9.3 bn). Activity was mainly focused on the UK (EUR 5.6 bn) and Germany (EUR 3.1 bn) which together represented 71% of all retail investments in Europe. This performance is linked to the completion of several large schemes such as the Trafford Centre in Manchester acquired for EUR 1.8 bn, the sale-and-leaseback of 21 Tesco stores in the UK for almost EUR 700 mln and the acquisition of 42 Metro Cash & Carry stores in Germany for EUR 700 mln. In France, which chalked up investments of EUR 555 mln in Q1 2011, the completion of transactions in excess of EUR 100 mln could help lift volumes close to EUR 1.2 bn by the end of the first half.

C&W expects a better equilibrium between supply and demand in the next few months as the retail property markets in France, Germany and the UK benefit from improvements in the economic climate. The number of shopping centre openings is slowing down in general: in the UK, only 314,120 m2 of shopping centre space will become available by the end of 2012, compared to 838,000 m2 in 2008 alone. The fact that the Stratford City shopping centre will account for almost half of openings between 2011 and 2012 makes the decline even more significant. In Germany, the amount of shopping centre space opened has been decreasing since 2008. France differs from its two neighbours in that following on from a 61% fall in openings between 2009 and 2010, new shopping centre availability will rise again in 2011.

Despite an improved economic climate in the first few months of 2011, which went hand in hand with increased household consumption, several factors overshadow the future performance of the retail markets in the UK, France and Germany. Inflationary pressures, the EU sovereign debt crisis and the austerity measures taken by numerous European member states are likely to slow down GDP growth within the EU (+1.7% in 2011). Particularly severe budget cuts and public sector cuts will weigh on British consumers, whilst retail sales in France are likely to suffer from the high unemployment rate, even though this rate continues to fall.