LONDON-Despite the absolute decline in retail investment across Europe in first half 2009, it still accounted for 35% of total European property investment, up from an average over last five years of 26%, says CB Richard Ellis. This is the highest proportion on record.

Very few large deals took place in 1H '09, and the average transaction size fell to €18.4 million, a 59% decline from the market peak in 1H '07, and eight of the top 10 transactions were retail. This included Europe's largest deal - the sale of the mostly retail Dawnay Day portfolio in the UK for over £600 million. The relative strength of the market for large retail lot-sizes has helped boost the sector's share and 56% of all deals over €100 million in 1H '09 were retail.

"The absence of good quality prime product on the market and ongoing restricted access to finance continues to slow any potential upturn in retail investment activity, " said CBRE's Retail Head John Welham. "However, as some funds come under pressure to spend allocated capital, we could well see activity levels pick-up in the more secondary segments of the market."

Continental Europe is likely to follow the UK, where investor interest in retail is now very broad, and occupfer sales are supporting the market with product supply.

Restricted credit has not yet eased significantly and difficulties in obtaining finance in most European markets remains, impacting the type of retail property being purchased. The reduced number of larger shopping centre deals has reflected this. Historically, malls have constituted nearly half of total retail investment but their share fell to only 33% in 1H '09. Nevertheless, when good quality centers come onto the market, it meets generally strong investor demand, CBRE said – as demonstrated in the sale of the Plenilunio shopping center in Madrid.

Despite the generally weaker property investment market in 2009, a number of European countries saw growth in retail investment turnover in H1 compared to the second half of 2008. Owner-occupiers have been a significant source of product in both these markets, especially in the traditionally tight French retail market. The UK market, too, has been very active, with €3.6 billion transacted in 1H '09. The UK market was dominated by local buyers, suggesting that it now offers good value.