European retail investment grew to EUR 12.2 bn in the first quarter (Q1) of 2011 - a 4% increase over Q4 2010 and the highest quarterly total since Q1 2008, according to the latest research by CB Richard Ellis.

The property adviser sees this performance as further evidence that investment in retail property is growing much faster than the overall commercial real estate market in Europe, with Q1 retail turnover constituting 46% of the total European commercial real estate investment market.

The latest retail sector quarterly results are 20% above the five-year average; however, the current trends are mixed and vary from market to market. As in recent years, the UK and Germany dominated, accounting for 70% of the Q1 2011 total.

Similarly significant in absolute size at EUR 4.9 bn and EUR 3.7 bn respectively, these were the only countries to see retail investment surpass EUR 1 bn in Q1 2011. However, the drivers behind the latest results were quite different between the two markets. In the case of the UK, a small number of large transactions boosted the Q1 results, with the Trafford Centre (EUR 1.9 bn) and a further Tesco sale-and-leaseback (EUR 800 mln) accounting for close to half the retail investment.

Germany, on the other hand, surged ahead, with Q1 2011 retail investment alone matching the 2009 annual total. The strength of economic and occupier markets recovery, combined with an improving retailer mix as many retailers continue their expansion plans in Germany, is attracting increasingly broad interest, from both local and international investors. In fact, investor demand, while still focused on core assets in most cases, is now actively spreading into smaller markets - towns with a population of 50,000 and above.

The rest of Europe (with the UK and Germany excluded) reported close to EUR 3.7 bn of retail investment in Q1 2011, which is 11% above the quarterly average for the last three years.