Article | Intelligent Investment
From caution to confidence: What’s driving increased European retail investment?
June 18, 2025 9 Minute Read
Retail investment gaining momentum, driven by increased lot size
European retail investment has surged in 2025, following an exceptionally strong final quarter of 2024. A total of €8.4bn was invested into European retail in Q1. Within the past five years, only 2022 saw a stronger first quarter for retail investment. Anecdotal evidence suggests this momentum has carried over into Q2.
In this article, we explore recent trends in European retail investment and the factors that underpin them.
Figure 1: European retail real estate investment volumes and average deal size
The exceptional Q1 result represents an increase of 26% over the figure seen in Q1 2024. It is also significantly higher than the all-property investment volume increase over this period, which totalled 6%. We expect overall real estate investment to increase in Europe during 2025, as explored in our 2025 Capital Markets Outlook.
On a rolling four-quarter basis to Q1 2025, retail investment grew by 31% relative to the rolling four-quarter period to Q1 2024.
The surge has been largely driven by an increase in lot size, with the average transaction size increasing over the past two years, from €17m in 2023 to €31m in Q1 2025. While investment volumes increased in Q1 2025 relative to Q1 2024, the number of transactions fell by approximately a third. This suggests the previous challenge of lot size for the retail sector is diminishing, as confidence gradually returns to the investment market and lenders take a more favourable view of the sector.
Anecdotal evidence suggests that positive momentum has continued into the second quarter.
Figure 2: European retail investment by deal size band (by value, % share of total)
Iberia and core Continental European markets lead growth
The Iberian Peninsula is currently seeing strong investor interest and claimed the top three transactions of the quarter by value. Two significant shopping centre transactions made up approximately half of Spain’s retail volume for the quarter, with a 50% stake in Madrid’s Xanadú, and Bonaire in Valencia changing hands. In total, retail investment in Spain increased by 54% in Q1 2025 when compared with Q1 2024.
Investor interest in Spain is driven by a number of factors including a positive economic outlook, robust performance of assets in the prime segment combined with a low retail stock density per capita in many parts of the country, and record levels of tourism.
Along with Spain, Portugal boasts one of the most expensive transactions of the quarter, with a 50% stake in NorteShopping in Porto being acquired by a local investor. Portuguese retail investment grew by over 300% year-over-year in Q1, with the increase largely driven by this transaction.
In Italy, the Q1 2025 volume surpassed €500m, the highest since 2018. Two large transactions comprised most of this figure: a factory outlet portfolio and a prime mixed-use high street asset, Garage Traversi, in central Milan.
In Italy’s high street sector, family offices and occupiers looking to secure the most prestigious locations are still benefitting from a relative lack of competition from core investors. As explored in our Luxury Real Estate report, occupiers are increasingly looking to own their space to secure locations for the long-term, with prime Italian high streets a key beneficiary of this trend.
Meanwhile, in Italy’s out-of-town sector, assets show strong performance and boast attractive pricing. As with Spain, increased tourism is helping to drive performance in prime assets, particularly in the luxury segment.
In France, retail investment comprises an increasing share of total investment volumes, accounting for almost 40% of commercial real estate investment in the first quarter. Increased volumes were largely attributable to two major transactions in Paris. Firstly, a majority stake in a portfolio of three prime high street assets and secondly, a minority stake in the Forum des Halles shopping centre.
Operational resilience and potential for active asset management drive interest
In CBRE’s European Investor Intentions Survey 2025, respondents who selected retail as their main choice of investment class were asked for the reason behind their conviction in the sector.
Figure 3: What is your primary reason for selecting retail as your top choice of investment class?
The most popular responses were retail’s operational resilience, and the potential to improve assets due to active asset management initiatives. Together, they accounted for almost two-thirds of responses.
Full-year data from our European Retail Market Summary supports the view of resilience in the sector, with the assets in CBRE’s European Shopping Centres Performance Index seeing an average 5% year-over-year increase in tenant sales in 2024. The increase was well above headline inflation, which stood at 2.4% in the Eurozone and 2.5% in the UK, according to Oxford Economics. Year-over-year sales growth saw a 0.2% decline in Q1 2025, however. While this is likely due to the Easter holidays falling in April rather than March this year, it could signal a slowdown in retail spending due to weakening consumer confidence. We will continue to monitor this indicator in the coming quarters.
The number of investors believing that the sector is undervalued dropped slightly since last year, as yields have stabilised following both structural (COVID-19) and cyclical repricing.
Figure 4: Prime shopping centre yields (%)
Investment market expected to improve further, barring global uncertainty
So far this year, increased retail investment volumes are in line with the findings of our 2025 Investor Intentions Survey, where almost 60% of retail-focused investors said they would buy more in 2025 relative to last year.
Figure 5: Compared to 2024, do you expect your investment activity in 2025 to be higher, lower, or the same?
Lenders are also taking an increasingly positive view of the retail sector. Over 40% of respondents to our newly released European Lender Intentions Survey 2025 expressed a more positive sentiment to the sector compared with last year.
Challenges persist, most notably with ongoing uncertainty around the global macroeconomy and potential impact of higher tariffs. Despite improvement in May, consumer confidence across the UK and Eurozone is lower than at the start of the year. This could have repercussions for retail sales and in turn, occupier markets later in the year, despite retail sales growth remaining resilient for now.
Nevertheless, the attractive pricing of retail and strong performance of prime assets, combined with improving investment market conditions, debt availability, and interest rate cuts, are likely to lead to continued interest in the sector through the remainder of the year.
Key Takeaways
- European retail investment surged in the early part of the year. Following a strong final quarter of 2024, investment volumes increased by 26% in Q1 2025 when compared with the same quarter in 2024. This compares with a 6% increase for all-property investment volumes.
- Retail is the top performing sector on a year-over-year basis. Anecdotal evidence suggests this momentum is ongoing.
- Particularly strong performance was seen in Italy, Portugal, France, and Spain.
- The increase in volumes is driven by a surge in lot size, with a smaller number of larger value deals relative to previous quarters. Previous challenges around lot size in the retail sector appear to be fading, as confidence starts to return to the investment market.
- So far, the trend this year is in line with the findings of our 2025 European Investor Intentions Survey, where almost 60% of retail-focused investors signalled investment activity this year to be higher than in 2024.
- Operational resilience of the asset class is cited as the top reason for investing in retail, followed by the potential to improve assets due to active asset management initiatives.
- Weaker consumer confidence and ongoing geopolitical and trade policy uncertainty remain key downside risks, especially in occupier markets.
