According to the Spotlight on Retail report by the real estate consultancy Knight Frank, during the coming 18 months, more than €3,000 million of retail assets are expected to come on to the market.
While 2014 and what we have seen so far of 2015 has been all about large prime shopping centre deals, the upcoming months will see more smaller core plus and value add investment opportunities in secondary cities.
Shopping centre investment volume tripled in the first few months of 2015, compared with the same period the year before. In Q1 2015, €520 million was invested, compared with €150 million in the same period the year before.
With various deals on the verge of being completed, we expect the first half to close out with more than €1,000 million invested.
According to Elaine Beachill, Retail Investment Associate at Knight Frank, “investment volume will continue to be above the historic average and the outlook for 2015 is fewer large deals, although a greater percentage of investment opportunities”.
In terms of the type of investor, SOCIMIs and fund managers are the most active players, accounting for 46% and 40% of market share respectively. In terms of nationality, 22% of investors are Spanish, while 78% are international, mainly Dutch, English and American.
The main retail indicators suggest that the retail sector is now in recovery. Footfall figures started to see an upturn in 2013 and continue to trend upwards. The Consumer Confidence Index is above 100 points, a record high after the crisis and sales are starting to recover in almost all segments.
For Félix Chamizo, Partner and Retail Director at Knight Frank, “all of these positive figures appear to suggest that we will see rents rise in the short to medium term”.
In terms of shopping centre performance, small shopping centres (convenience shopping centres) that are located in urban areas or secondary cities with a large catchment area, are performing very well.
The least affected segment by the crisis was the prime High Street. Retail units on the main high streets have seen rents remain stable and have very low levels of vacancy. “In fact, there is a major shortage of prime High Street space and when a unit comes to market, it is quickly snapped up”, indicated Félix Chamizo.
However, consolidated secondary locations – which were less sought after in the past – have been the go to option for many overseas brands for their first stores in Spain. As was the case with Hema, Dealz, Tiger and the Chinese operators Mulaya and Okeysi.
We would also note growing operator and investor interest in the Puerta del Sol area. Projects in close proximity, such as Canalejas, suggest that there will be an increase in retail unit rents in the area and certain operators are already taking up positions there.