Jeremy Eddy, Director, European Retail Capital Markets at Jones Lang LaSalle said: “Market fundamentals held up relatively well in Q3, with occupier demand remaining strong for the best space and consumer confidence actually increasing slightly, although retailers are less confident about their short-term prospects. Uncertainty in the financial markets and the continuing lack of available finance means that investors are likely to remain cautious for the remainder of the year, although 2009 should present increased opportunities as pricing becomes more realistic and stability returns to the capital markets.”

While the lack of available finance and the worsening economic outlook has clearly reduced investment activity, some 59 deals were completed in Q3 (89 in Q2), including six over €100 million.  In the year to date, Germany remains the prime area of activity for investors, with a total volume of €2.0bn transacted in the first three quarters of 2008, representing 19% of the total – considerably less than its 29% market share in the same period last year. Although occupier demand for the best locations in Germany remains solid, retail sales have not grown as much as expected. Spain (€1.074bn) is some way behind in second place, followed by Finland (€1.024bn) and Russia (€913m).

Shopping centres were the prime target for investors in Q1-Q3 2008 (€6.7bn and 61 % of volumes), but the defensive qualities of retail warehousing have also proved popular, with investment in solus units and retail parks accounting for almost 30% of transaction volumes.  The supermarket sector, which was dominated by leveraged buyers in 2006-2007, has been hit the hardest, with transaction volumes representing just 9% of the total traded so far this year.