RETAIL INVESTMENT: WHEAT SEPARATED FROM CHAFF AMID GLOBAL UPTURN

The new Union Investment index analyzes the attractiveness of the top 17 markets.

Buoyed by a positive outlook among consumers and retailers alike, the majority of retail markets worldwide remained in good or very good shape during the second quarter of 2018. The ongoing economic boom is creating a number of lucrative growth markets that offer diverse investment opportunities. At the same time, the retail investment landscape is gradually being reshaped as the global upturn continues.

In particular, there is a widening gap between investor-friendly retail markets with good fundamentals and markets where the early warning signs first became apparent two years ago.

As Union Investment’s Global Retail Attractiveness Index (GRAI) for Q2 2018 shows, the difference between the top performers and the weakest markets in Europe is now around 20 points. Compared with the previous analysis in Q4 2017, this gap is getting wider.

Henrike Waldburg, Head of Investment Management Retail at Union Investment Real Estate and Member of the ACROSS Advisory Board. Image: Union Investment

“The retail property sector is already experiencing a high degree of investor uncertainty,” said Henrike Waldburg, Head of Investment Management Retail at Union Investment: “So it’s vital to keep track of the very different patterns of regional development and to distinguish between markets that are trending positively for investors over the long term and ones that have severe structural deficiencies. The latest Global Retail Attractiveness Index can provide some useful pointers in this regard.”

SHOOTING STARS: CZECH REPUBLIC AND POLAND

“One of the most important signals is the fact that the overall index for Europe in mid-2018 remains well above average at 110 points,” added Waldburg. “The main drivers for the EU-12 index are the further improvement in consumer confidence and the consistently positive mood among retailers.”

According to the new GRAI, the most attractive retail markets in Europe in Q2 2018 are the two Eastern European countries, Poland and the Czech Republic, followed by two economies that were badly hit by the recent financial crisis: Ireland and Portugal. Once again, Germany remains one of the top five markets in Europe.

Of these five countries, only two have improved their index value year-on-year: the Czech Republic (+5 points) and Poland (+4 points) – the latter having been the top performer in Q4 2017. Significantly, the heaviest losses were suffered by mainland Europe’s economic heavyweights, Germany and France, each of which fell by seven points.

While the slump in France was mainly due to inflation, Germany was hit by weak retail sales. Another change since the previous survey involves the new bottom three in the EU ranking: France, the UK and Belgium. At 99 points, Belgium is the only country in the current index to have slipped below the 100-point mark. The main reasons for this are the well below average outlook among Belgian retailers and weak growth in retail sales.