Europe retail property investment hits 3-year high

LONDON, April 20 (Reuters) - European retail property investment hit its highest level in three years in the first quarter, as it continued to speed ahead of the continent's overall commercial real estate market, a report said.

It was the only market segment to see an increase over the prior quarter as institutional investors start to move into retail and away from their main focus on office space, property consultant CB Richard Ellis (CBRE) said on Wednesday.

Investment in European retail property rose 4 percent quarter-on-quarter to 12.2 billion euros ($17.57 billion), its best performance since the first quarter of 2008, when the financial crisis was taking hold, it said on Wednesday.

Retail turnover made up 45 percent of the 26.7 billion euros transacted in European commercial real estate investment in the quarter and investment in the quarter was 20 percent higher than the five-year average.

There were two very different drivers in the two key markets, Britain and Germany, which together accounted for 70 percent of the results, CBRE said.

In the UK, with 4.9 billion euros of retail investment in the quarter, the Trafford Centre and a Tesco sale-and-leaseback accounted for nearly half of investment in the quarter.

Germany, which saw 3.7 billion euros of investment, surged on the country's economic recovery and retailing potential.

Retail property in Germany, Europe's largest economy, has been recently driven by revitalised consumer spending, encouraging economic prospects for 2011 and affordable debt finance.

Pension and sovereign wealth funds were actively looking to increase their exposure to the retail segment, mainly in core assets and markets, and particularly in the shopping centre sector, CBRE said.

John Welham, CBRE's head of European retail investment, said the growth in institutional activity would support further recovery at the core end of the market.

'We are seeing more capital looking for 'value-add' opportunities as specialist retail investors decide that it is time to invest outside prime in certain markets,' said Welham.

($1=.6945 Euro)

(Reporting by Brenda Goh; Editing by Karen Foster) Keywords: EUROPE RETAIL ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.