Direct retail property investment in Continental Europe totalled €980m in the first quarter of 2009, which is -37% down on the previous quarter (€1.5bn), according to Jones Lang LaSalle (JLL).

Western Europe accounted for the vast majority (89%) of transaction volumes as European investors are increasingly focusing on their home markets. The proportion of retail investment volume accounted for by domestic investors has increased from one third in 2008 to over half in Q1 2009.

Jeremy Eddy, director of European retail capital markets for JLL, said: “Investors continue with their ‘wait and see’ strategies in Continental Europe, with most markets seeing some fall in prices in the first quarter. At the same time, the high cost and lack of access to finance continues to restrict market liquidity, particularly for larger transactions. There is demand for prime product in the best locations and low vacancy rates in many top schemes provide the secure long-term income that investors seek. ”

Italy and Germany were the most active markets in Continental Europe, accounting for 31% and 28% respectively of total transaction volumes. In Italy, two deals over €100m were completed, but Germany was the most active market in terms of the number of deals completed in Q1 (9). Investment into Central and Eastern Europe (CEE) was quiet, due in part to the lack of domestic investors in these markets.

Shopping centres were the prime target for investors but accounted for just over one third of the total volume transacted, compared with 55% in 2008, reflecting the lack of prime product on the market and the difficulty in raising finance for funding larger transactions.

However, those centres with strong defensive qualities in terms of location, scale, tenant covenant and quality remain a key target for investors in 2009. Factory outlet centres, accounting for 26% of transaction volumes, were also a target in Q1.