Investors are likely to increasingly focus on value-add opportunities in larger, mature European shopping centre markets in 2011 and 2012, according to DTZ Research's latest Property Times European Shopping Centre report.

With limited further yield compression expected across these markets, retail investors are concentrating on increasing the income of their assets whilst at the same time avoiding the risks associated with new shopping centre openings. Consequently, there will be an increase in refurbishments and redevelopments of existing, secondary centres. This redevelopment potential is estimated to apply to 12 million sq m of shopping centre stock in France and Germany alone, representing half the existing stock.

The prime retail sector, and shopping centres in particular, have proved relatively resilient during the downturn. The retail sector accounted for 34% (EUR 31.3 bn) of total European investment in 2010, its highest relative level for at least a decade. Investment in shopping centres reached EUR 12 bn in 2010, compared to a modest EUR 6.5 bn in 2009 and approaching levels seen during the peak of the market between 2004 and 2006.

Magali Marton, head of DTZ CEMEA Research said: 'Prime yields for shopping centres across the major European markets have been falling since the end of 2009. Prime yields currently stand at 6% in France, Germany and the UK, and between 6% and 7% in the other major markets. We expect only very limited further yield compression in the medium term. Consequently, we expect investor interest to be driven by income returns, rather than capital growth. Redevelopments and refurbishments of existing secondary centres offer investors the ideal opportunity to generate new revenue and improve existing centres’ current rental cash flows.'