IKEA investment arm in talks to buy city-centre retail property in big European cities

IKEA's Ingka Investments is in talks to buy commercial property in prime locations in several big European cities after it finalised its first-ever such acquisition last month, its managing director said.

The investment arm of Ingka Group, which owns most IKEA stores, is pushing into the real estate market as part of IKEA's shift towards big city-centres from out-of-town. So far, such locations are leased.

Scouting for city-centre retail property more or less ready to house IKEA stores across Europe's main cities, Ingka Investments' first deal was in Paris' Rue de Rivoli.

"We have ongoing discussions in big European cities," Ingka Investments Managing Director Krister Mattsson said in an interview. "It takes time to buy properties, but there is a lot in the pipeline," he told Reuters.

Inkga Investments is pushing ahead with the new strategy despite the wider retail market uncertainty caused by the pandemic.

Despite the exodus from high streets prompted by the coronavirus, price tags for the kind of properties that Ingka Investments is hunting for have not tumbled, Mattsson said.

"For good locations in big cities, which is what we are looking at to meet our customers, there is always demand," he said. "We haven't seen any big impact yet on prices for such properties - which one may have expected when the crisis came."

Besides good space for the IKEA store, buildings could also include other retail, office and even residential space, and Ingka Group would take over as landlord.

The decision to build up a real estate portfolio stems from privately held IKEA's long-standing strategy not to rent. Acquisitions, as IKEA's other investments, are self financed.

Separately, Ingka Group's malls arm Ingka Centres is also shopping for inner-city property, albeit targeting bigger developments aimed at housing IKEA-store anchored malls. Scouting Europe, Asia and the United States, it has so far made two such acquisitions.

Ingka Investments' portfolios also include renewable energy and forests.

Starting in 2017 with the purchase of handyman services platform TaskRabbit, Ingka Investments also buys into startups that may help IKEA speed up its digital transformation, improve its services, and become more sustainable. The latest addition is a stake in logistics solutions and delivery platform Mover Systems.

Ingka Investments has to date made 23 such minority stake investments totalling more than 200 million euros ($238 million), it said. It has not disclosed the price tag for TaskRabbit and two more full acquisitions.

Ingka Group is a franchisee to brand owner Inter IKEA.