According to CBRE, European Outlet Centres received over €1.1 billion ($1.26 billion USD) in investment in 2015, with transaction rates more than three times those seen three years prior. iphone installment plan qatar
In 2015, the number of centers transacted increased by a third over the previous year, but unlike in 2014, when all of the purchasers were already involved in the market, in 2015, 70% of transactions were to new entrants, including institutional money.
"We've seen institutional capital flood the sector in a big way in the last 12 months, out-bidding conventional specialist owners and pushing yields significantly lower across Europe," said Daniel Hayden, CBRE's Director of International Valuations.
"With most sectors' rental growth projections being tempered, faster growth in Outlet Centers provides opportunities for investors to boost their overall returns." Via the mutual risk / share reward dynamics of the leasing structures, well-managed Outlet Centres around the world demonstrate good cash flow growth to investors. Property investors also followed suit, concluding that Outlet Centres help deliver a balanced portfolio strategy that aligns with retailers' market penetration strategies, just as retailers have recognized the value of outlets by integrating them into their multi-channel approach to delivery."
"Until recently, investors tended to leave the ownership and management of Outlet Centers to specialist funds," said John Welham, Head of EMEA Retail Investment at CBRE. However, the sector's strong relative success, especially during the last downturn, has sparked considerable interest in direct investment in Outlet centers."
"Bankers would be put off by the thought of short lease terms and turnover rents," said Marco Rampin, Head of Debt & Structured Finance at CBRE Capital Advisors. "So it was an education process to teach them that Outlet leases in fact provide income growth through turnover rents, underpinned by base rents and a level of asset management flexibility that isn't available in a traditional lease."
"You can't judge an Outlet Center as you would a shopping center; they just don't function in the same way," Daniel Hayden continued. However, as a result of these gaps being better known and the risks factored in, the sector now has a larger lender pool."
"We've seen the gap between prime shopping center yields and prime Outlet Center yields narrow from about 200 basis points two years ago, to 100 in the early part of last year, to potentially less than 50 today, thanks to increased investor interest and capital flowing into the market." And for the very best students in the class, the difference may be as small as zero."
According to CBRE study, shopping centers in Europe provide nearly 225 sq m of space per 1,000 people, while Outlet Centers provide less than 5 sq m. It's no surprise that a supply/demand imbalance has emerged, given that it accounts for less than 2% of the overall retail landscape but has generated some of the highest returns over the last three years.
"While there is much less Outlet Centre stock available than shopping centers," Mr. Welham concluded, "there has been a noticeable rise in liquidity as a number of existing owners take advantage of the recent increase in investor interest and increased prices." We've already seen a significant number of sales in 2016, which points to a good year ahead for the industry."