Record year for outlet deals

Published:  22 December, 2016

Outlet malls have come of age reports Cushman & Wakefield

A strong of record-breaking deals and strong rental growth underline the fact that the outlet mall sector has matured from both an investment and occupational point of view, according to Cushman & Wakefield research.

Average European outlet rents have increased by more than 10 per cent over the past year and rapidly rising rents in popular locations has incentivised developers to consider outlets as new retail channels.

And for the first time ever the largest European retail transaction of the year was an outlet deal featuring two concurrent pan-European sales by the IRUS European Retail Property Fund. Which saw ten centres change hands for a reported €1.28bn.

TH Real Estate bought six outlet centres located in major cities in Spain, Italy and Poland worth over €700m, on behalf of a joint venture between NEINVER and TIAA. And VIA Outlets (Hammerson, APG, Meyer Bergman and Value Retail), agreed to buy four outlet centres in Germany, Portugal, Spain and Poland, for €587m). In a single day the deals eclipsed the entire outlet centre transaction volume for 2015, according to Cushman & Wakefield.

Cushman & Wakefield research shows the traditional yield gap between full price and outlet centres across Europe has shrunk dramatically over the past year, with the expectation that it could narrow further. And outlet floor space has grown by 6.4 per cent pa over the past five years – almost double the rate of traditional shopping centres – as investors and retailers increasingly target this once-niche part of the market. Sales growth has increased by around 8 per cent pa over the past three years while European outlet rents have increased by more than 10 per cent in the past 12 months alone.

Richard Ching, partner in Cushman & Wakefield’s outlet valuation team, said: “The European sector has come of age and is no longer a specialist, niche market. This has been demonstrated by the most recent deals which are significant by any measure.”

But he warned: “This sector is not without risks. Any new entrants to the market would be advised to form a partnership with an established outlet operator.”

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