"There was fierce competition for the assets that were perceived to have key asset management opportunities, as well as competition for assets that were largely seen as significantly under-rented," says the report. A key factor in investor enthusiasm for the product was rental growth. "Retailers are continuing their expansion trail with only a marginal contraction of retailer demand, particularly for prime center locations."

Institutions are the most voracious. They were net buyers of shopping centers by a margin of euro 1.5 billion ($1.8 billion). Public property companies were the biggest sellers as they took advantage of the capital growth seen on their assets purchased over the past three years and were net dis-investors to the tune of euro 1.2 billion ($1.4 billion).

Although more product was available during the first half of 2004 and rising interest rates, yields continued to harden as demand continued to outstrip supply.

"The apparent yield compression of these types of schemes, which are dominant within their local catchment but not beyond, raises the question of whether some prime regional schemes were under-priced," the report states.