Sun Starts To Shine On Retail Investment Again At Cannes Jamboree

As the retail industry gathered in Cannes for MAPIC 2024, the question on the lips of most delegates was whether there would be some green shoots rising after nearly a decade of being battered and bruised by e-commerce and lockdowns, plus political uncertainty hammering consumer confidence. 

After three intense days, the answer was a qualified “yes.” The doom and gloom has definitely gone, but the recovery remains a slow burner — even those feeling positive vibes said it could take a year for the underlying improvement in sentiment to be evident to the wider market. 

Bisnow travelled to the city of superyachts, the glistening Mediterranean and the effortless chic of the French Riviera, with its storied hotels where a cappuccino could set you back a week’s wages.

Investment deals for prime malls are starting to tick up, and private equity investors are starting to turn their attention to secondary centres, taking on a level of risk they have shied away from for a decade. 

But there remains nervousness, particularly around the balance sheet of leisure tenants that have been a major part of the reinvention of malls in recent years. 

Of course, the biggest question at MAPIC was whether liquidity had returned to the retail real estate market. There have been some recent major deals on both sides of the Atlantic, primarily Blackstone’s first major retail deals in several years, including the $4B acquisition of U.S. listed retail owner Retail Opportunity Investments.

U.S. giant Hines also recently called the bottom of the market for quality retail real estate. 

“The bell has rung on the bottom of the retail real estate investment market,” CBRE Head of European Retail Chris Gardener said.

In Europe, Gardener pointed to major deals such as Blanchardstown shopping centre outside Dublin and Forum Palermo, Italy, bought by Kryalos SGR for about €200M, as examples of major retail schemes that have transacted. He said value-add investors are circling more deals heading into the new year.

“There is a huge amount going on behind the scenes. Only a small percentage of what is happening is visible at the moment,” he said. “Inevitably at this stage in the cycle, it is the value-add investors who are leading this, which is unsurprising at this horizon. But I’m sure we’ll see core-plus investors next and then core after that. It may take some time, and it certainly won’t be immediate, perhaps even another year, but liquidity is definitely returning.”

While several transactions have been driven by major private equity companies and funds, Gardener also highlighted French-headquartered Klepierre in the listed sector.

“Klepierre is a company which is performing well, has achieved a successful capital raise and is reinvesting in a sector in which it is already a specialist,” he said. “It’s great to see and very encouraging for the whole market.”

Landsec, the UK’s second-largest REIT, has stated its intention to buy more in the prime shopping centre sector, while peer British Land has invested in out-of-town retail parks and cited the performance of its portfolio as a driver in recent positive financial results. 

While there have been tentative signs of renewed interest in prime retail real estate, the secondary market has continued to languish, both in terms of occupancy and investment interest. But there were some signs that opportunistic investors are back on the prowl.

Sandra Ludwig, head of EMEA retail capital markets at JLL, said positive signs are emerging that big transactions are back on the agenda, driven by new capital coming into the European and U.S. markets. There are also strong signs of increased volumes over the next 12 months despite a year-on-year drop in transactions in the first three quarters of 2024.

“There’s already much more activity in the markets. Transactions are happening, but there has been a lack of really big transactions so far,” she said. “Looking at 2025, I’m pretty confident that volumes will move up and it’ll be easier to do bigger transactions because financing will be easier to find. There’ll be more new capital and private equity moving into the market.”

She added that there were positive signs of new investment activity in secondary shopping centres, again driven by the introduction of new sources of funding, including money from private equity.

“People are back and they are taking their chances, which is great,” she said.

Leisure and food and beverage have been seen as the saviours of many shopping centres, and most malls feature a wide range of both, but there are still questions over whether all landlords understand what leisure will work in their locations.

Asset owners should treat their relationship with leisure and entertainment operators as a partnership and focus less on the generation of typical commercial revenues from them, according to Yaël Coifman, senior partner at Leisure Development Partners.

“More often than not, the retail owners and developers seem to think they can get a commercial rent. You can’t,” she said. “It’s a lot harder. They’re capital-intensive in terms of investment. The margins can be pretty challenging, specifically because of the labour costs more than anything else, so they can’t generally pay typical commercial rents.

“You need to think of this as a partnership between the landlord, or owner, and the attraction operator.”