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Andy Schofield

Henderson Research: Southern European Shopping Centres

​Andy Schofield and Stefan Wundrak (Directors of Research, Property) authored our latest research report, released at Expo Real, on why institutional buyers are returning to Spain and Italy, seeking to pinpoint the trough in the cycle.

​Institutional buyers are returning to Spain and Italy, seeking to pinpoint the trough in the cycle. Prime yields for shopping centres and parks represent attractive discounts relative to the UK, Germany and France, where best quality assets command yields of between 4.75% and 5.00%. Spanish and Italian shopping centre yields are close to the top end of their previous cyclical range. The timing is now right to take advantage of yield driven capital growth, despite the challenging macroeconomic environment. The recovery in prime yields will probably take place quickly, leaving a narrow window to invest.

The property risk premium for Spain and Italy is higher than for most other major countries in Europe. However, expected returns should compensate for the risk. Capital uplift will drive short term performance as yields respond to lower risk aversion and rental growth will contribute to performance after retail sales and retailer confidence recover. Incoming data suggests the economic situation in Southern Europe is stabilising sooner than expected. While this is good news, the consumer economies will struggle in the short term. Retailers are therefore targeting established centres and closing non-performing stores. In terms of vacancy and churn, however, there are wide variations in performance between and within regions, highlighting the importance of opportunity-led strategy. In terms of stock-picking, large centres with affluent catchments are strongly recommended and only prime centres with stable passing rents should be considered. Dominant centres proved to be resilient over the crisis years and are much better placed over the medium term to lead the recovery in rental growth.
Read the attached report

Andy Schofield

Andy Schofield

Director of Research

Andy's biography