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The scarcity of prime stock and abundance of capital are forcing Europe’s retail investors to venture into the secondary segment, PropertyEU's latest Retail Investment Briefing has heard.

The dearth of product will force investors to start looking outside the ‘comfortable spectrum’, predicted Chris Gardener, director of European retail investment at CBRE and one of the panellists.

‘I think we will see a further move by investors into the secondary space. We’re already seeing it in Germany, and we’re definitely seeing it in the UK where yields are coming in. Another factor is that finance is now more readily available for secondary stock.’

While describing secondary retail as ‘a vast array of stock’, he noted that for investors who get the fundamentals right, secondary ‘should not be feared’ and will perform. ‘It’s a sector we see as almost outperforming core if you buy the right assets with the right fundamentals.’

Gardener said secondary shopping centres which have seen under-investment but where the fundamentals such as the catchment population are right, were a good bet. ‘Especially in an up cycle, for every euro invested you’re almost getting two euros back. Moving these centres to the next level does require capital expenditure, but as long as you do that you will prosper, whether that be in Germany or Poland or wherever.’

Fellow panellist Henrike Waldburg, head of investment management for shopping centres at Hamburg-based Union Investment, noted that the use of the term ‘secondary’ could be misleading. ‘You have to be careful with the term secondary in retail. Essentially, the key word is catchment. If the catchment is good, if the demographics of the catchment are good and if the purchasing power is there then it is a good asset to invest.’

Union, she said, has 40 shopping centres across Europe and is a core investor but it is opportunistic about where it invests. ‘Just as there may be opportunities in the Nordics, there may also be opportunities in parts of southern Europe or CEE outside the hotspots Poland or the Czech Republic.’

Click on the link below for the Retail Investment Briefing video on primary vs secondary retail.