Hines Wants To Invest More In Retail, Highlighting Sector Recovery

Hines is targeting new investment in the retail sector as spending and occupancy recover after a decade in the doldrums. 

London is one of the most attractive cities for investment in retail real estate, according to a major new report from the U.S. investment giant. Benefiting from an affluent local consumer base and strong international visitor numbers, the city is among major European metropolitan areas best placed for property investment, it said.

In its white paper Retail’s Next Act, Hines dubbed locations with high levels of local retail spending and a strong tourism concentration as “dual driver markets” and said opportunities in such cities stand out.

Among the top 20 markets out of 242 Hines analysed for total nights spent in hotels in 2024, several important high street markets, including Rome, Amsterdam, Paris, Barcelona and Milan, are now above or just slightly below prepandemic totals, while London was also among this cluster for opportunities.

“These areas may offer opportunities for high street investment, but also for sub-types that rely on non-discretionary spending,” Hines said.

Hines also picked out Manchester and Glasgow as “tourism supportive,” while Irish capital Dublin outperformed the two British regional cities for local retail spend but was behind on tourism, leisure and hospitality.

Hines pointed to the European retail sector having some of the fewest construction starts since 2017, limiting new supply, while it said that pricing for high street retail in key European locations is down, yields are up, and the fundamentals make retail attractive for investment.

Recent rent growth in European high street retail has been concentrated in luxury-oriented streets like Bond Street in London, where retailers are competing for a handful of available units, and Via Monte Napoleone in Milan or rebased mass-market-oriented locations, such as Manchester, Glasgow and Dublin.

Hines also said grocery-anchored retail centres, still comparatively rare in the UK, should continue to outperform competitors because of their ability to draw shoppers, increase foot traffic and boost occupancy rates, while retail in mixed-use developments generates rent premiums relative to similar standalone uses.

“Constrained supply over recent years means that retail has essentially right sized to meet a new demand reality and an opportunity is emerging as record low vacancy rates combine with positive global economic trends, including rising wage growth and strong consumer demand,” the report says.

It speculated that many investors had thrown out the good retail with the bad and that investors could take advantage of potential mispricing.

“We believe a new era for certain types of retail is here. Retail fundamentals appear strong in many markets around the world, creating a powerful case for real estate investors to pay close attention to this sector,” Hines Global Chief Investment Offier David Steinbach said of the findings in a statement.

“In our opinion, we’re seeing that winners in this sector have been sorted after years of little new development, and what seems to be a levelling off of e-commerce’s encroachment on brick-and-mortar’s market share,” Hines Research Senior Managing Director Michael Hudgins added.