Despite the gloomy mood in the retail real estate investment sector, as we’ve mentioned before in these pages, the actual transaction figures for the year so far belie the overall depressed sentiment in the sector. Investors are buying, although it’s obvious that certain markets within the overall category are holding up much better than others.
Transaction volume after the first three quarters of 2020 in the German market is actually just over €8bn, the second highest volume for the nine-month period of the last five years. In Q3, about €2bn of retail property deals were concluded, about the same as in Q2, putting overall volumes at 10% above last year and 8% above the ten-year average. Q3 saw 55 deals done, up from 44 deals in Q2, according to data from JLL. In total, there have been just under 200 transactions in the course of the year to date, significantly more than in the first three quarters of the previous year (180 deals).
According to Sandra Ludwig, Head of Retail Investment at JLL Germany, the one big winner this year has been – not surprisingly – grocery-anchored Fachmarktzentren. "With regard to the types of use traded, the particularly high demand this year for crisis-resistant food-anchored properties with local supply character as a result of the pandemic is obvious: at 21%, supermarkets were traded disproportionately often", she says. Together with specialist stores, which have been enjoying solid demand for years, this product category accounts for more than half of the transaction volume.
Holding up the table at the bottom, department stores – increasingly written off as having little future – made up 26% of all retail transactions, thanks to portfolio transactions. The previous much-loved shopping centres made up 14%, while commercial buildings housing shops accounted for 9%.
In yield terms, the prime yield for high street real estate remained ‘largely unchanged’ in the Top 7 A-cities compared to Q2. Only Düsseldorf increased by 10 basis points and is now seen yielding 3.1%. For shopping centres, JLL also reports a constant prime yield of 4.75%. In contrast, the yields for Fachmarktzentren and individual specialty stores shrank again significantly in specialty shopping centres the past quarter, namely by 20 basis points. Fachmarktzentren are now yielding 4%, specialist stores up to 4.6%.
One company continuing to buy steadily into the grocery-anchored sector is Frankfurt-based x+bricks, which has just bought twelve supermarkets from TLG Immobilien for about €50m. This puts the assets, which have about five years WALT, on a multiple of between 13 and 14 each.
In total, the deal covers 26,000 sqm over the twelve properties, which are leased 68% to supermarket chain REWE. This represents an average per property of 2,166 sqm at an average price of €4.1m per property, and a probable average annual rent of €300,000 per property based on the 13-14x multiple.
It’s the third big deal between the two parties over the past four months, after TLG sold 120 further assets to x+bricks in two separate tranches over the summer. TLG is currently engaged in a programme to sell off its grocery-anchored retail assets, while x+bricks has ambitious plans to become the biggest player in the sector. The latest deal brings x+bricks portfolio to 232 retail assets.
X+bricks, founded by ex-Corestate Capital CEO Sascha Wilhelm in 2018, is controlled by Russian investment group SCP, which over the summer bought up the SB Retail Group, along with all its property holdings.
