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Investment: price pressure in varying intensity
Retail properties, just like all other usage ca- tegories, have come under price pressure. The main underlying causes are high inflation and the related reactions by central banks in the form of interest rate hikes, which have fundamentally ch- anged the capital market environment and the in- vestment market. These developments have been compounded by a substantially weaker economic outlook. The consequences include rising yields and a sharp drop in transactions – and here, the Austrian market is in line with the European trend. There are, nevertheless, differences among the subsegments of the retail market that are reflected in varying yields and diverging investor interests. Investments in shopping centres came to an almost complete standstill at the beginning of the pandemic. This market is traditionally characterised by a large share of major institu- tional investors, who are showing little interest in new commitments due to the still incomplete repositioning of trans-regional shopping centres and the related risks. The lack of transactions makes it impossible to provide a yield range for this submarket.
see little volatility, also in times of high inflation and strong online competition. New developments are rare due to the rigid zoning situation, and the demand for existing properties is good. Prime yields in this submarket range from 5.25 to 5.5 per cent. The interest in supermarkets is relatively strong and good prices can still be realised for properties in suitable locations with long, fully indexed leases and prime yields of roughly five per cent. Pro- perties with these specifications are particularly interesting for investors, but are seldom found on the market. For retail and mixed use properties on established shopping streets, the yield is heavily dependent on the lease term, indexing and tenant credit ratings as well as the development of rents (increases or decreases) for retail space. Investors are interes- ted in high street properties and/or locations that allow for flexible use (e.g. partial conversion from retail to office or hotel use). Properties in absolute top locations (Golden U, Golden Quartier) form a separate segment that disengages in part from yield-based price determination because investors are prepared to pay prices for these unique locations that are only economically understandable over the very long term.
Retail parks that are focused primarily on every- day necessities have rebounded. Here investors
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