Demand for European retail property has been rising steadily over recent years. During the first nine months of 2015, this segment received investments totalling €51.5 billion, which is 59% more than the same period in 2014 according to Cushman & Wakefield. Germany is the most popular market: investments were 90% higher than in 2014, breaking all the records since the 2008 crisis.

Property types

The minimum investment threshold for high-quality retail property is €2.5M. Prices for shopping centres often start in the tens of millions.

High street retail: the main liquidity indicator for these properties is location. Premises situated in popular shopping streets with intensive pedestrian traffic that have an attractive exterior and are conveniently designed for customers (e.g., brightly and well-designed shop windows, separate and easy access entrance). High street retail property lease agreements are usually short-term (i.e., commonly 3–5 years) and have low yields (i.e., 3–4%) that are compensated by high tenant demand.

Supermarkets: the best locations are in residential districts of cities with growing populations. They should be situated near public transport links and main roads. This is one of the most popular investment formats for international investors. The advantages include ease of management, low risk and relatively high yields (i.e., 5–6%). Lease agreements on this kind of property are long-term (i.e., 15 years).

Shopping centres: pay attention to the spending capacity in the region, surrounding infrastructure and transport access to the premises. Recommended tenants include food retailers, consumer electronics, soft goods stores (e.g., clothing brands), cafés, recreational centres and cinemas. This type of investment is challenging to manage due to a large amount of tenants and should only be considered by professional real estate investors. Lease agreements are usually signed for 5–15 years with annual yields of 4–7%.

Retail warehousing property: it's better to choose warehouses located near major transport arteries (e.g., motorways). This type of property comes with high yields (i.e., 6–8%) and high risks (i.e., dependence on the economic situation, low lease rates, quick deterioration of the premises). Lease agreements are signed for 5–10 years.

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