Retail investment market in Germany: After year-end rally in portfolios, most significant increase in turnover in an asset class comparison

BNP Paribas Real Estate publishes market figures for Q4 2024

Even though the results of the years before 2023 have not yet been achieved, the retail investment market was able to take advantage of the continuously improved market sentiment over the past 12 months and achieve a good overall balance in 2024. With a total transaction volume of around €6.3 billion, the weak prior-year result was exceeded by almost 28%. This is the result of the analysis by BNP Paribas Real Estate.

“In the overall view, the leading position among the property types held by the retail sector over the course of the year was narrowly relinquished to logistics investments (around €6.9 billion). However, by far the largest year-on-year jump in sales was attributable to the retail division, which is a clear indication of the positive trend in the asset class,” explains Christoph Scharf, Managing Director of BNP Paribas Real Estate GmbH and Head of Retail Services.

In the fourth quarter, several food-anchored parcel sales were brought over the finish line shortly before the end of the year, driving up the portfolio volume. In total, around €1.2 billion flowed into portfolios (19% shared), while individual sales accounted for almost €5.2 billion (81% shared).

One factor that speaks in favour of the current broad and multi-layered demand structure in the retail investment segment is reflected in the distribution of turnover by property type: with the specialist retail and food sectors (33% shared) as well as commercial buildings and department store assets (around 28% each), three out of four retail divisions have very extensive market shares. In addition, shopping centers were also able to gain significant shares in the second half of the year, not least due to the sale of Munich’s Pasing Arcaden (12% of the total result). The Pasing Arcaden transaction, which was co-advised by BNP Paribas Real Estate, is one of the largest shopping centre asset deals of the past ten years.

Retail parks with initial yield compression

In the top markets, the retail investment volume continues to be closely linked to individual major transactions in the three-digit million range. According to the report, only Munich (a good €1.5 billion) and Berlin (around €1.3 billion) were able to generate high volumes through the Fünf Höfe, Pasing Arcaden, Maximilianstraße 12-14 and the KaDeWe deal. Apart from these sales drivers, smaller commercial and department store deals as well as food transactions can be seen again and again in the A-cities, but these are only marginally significant in terms of total sales. In total, the A-locations recorded the highest volume since 2020 at around €3.4 billion (+257% compared to 2023).

Due to the high demand, the net prime yields of retail parks fell again for the first time in the fourth quarter (4.65%; -10 basis points). All other property types have remained stable at the end of the year so far: individual food retailers are still at 4.90%, shopping centres at 5.60% and DIY stores at 5.70%.

Prospects

The retail investment market can look back on a good year in 2024, in which the asset class was able to play its way further to the fore compared to the other property types. For the next 12 months, the overall positive developments in the past year are likely to provide additional tailwind. In view of the significant increase in volume, it is particularly pleasing that the result could be realized without major company takeovers, which usually drive up sales significantly again.

Rather, the retail investment division is currently benefiting from very complex sales drivers: With the deals of Pasing Arcaden, Fünf Höfe, Maximilianstraße 12-14, KaDeWe and the numerous food portfolios, shopping center transactions as well as high-street and food investments played a significant role in the good overall balance. Accordingly, the very diversified product portfolio of the retail division currently seems to be an important competitive advantage in an asset class comparison, which retail investments can increasingly exploit for themselves.

In 2025, it is important to confirm the positive trend that has been taken. However, the conditions for this must be right not only on the demand side, but also on the supply side. Some deals were able to be concluded shortly before the end of the year, which meant that only a few investment opportunities were taken into the new year. However, there are initial signs that the pipeline in the offering segment is already filling up again at the beginning of the year.

“Meanwhile, the trend in prime yields confirms the trend that price adjustment processes continue to lose momentum and stabilisation tendencies are becoming sustainably entrenched. For the coming quarters, even slightly declining prime yields represent a quite realistic scenario – retail parks have already made a start in this direction,” says Christoph Scharf.