Executive Summary. Retail Market Report - Retail Units. M a d r i d a n d B a r c e l o n a. M a y

Transcription

1 Executive Summary Retail Market Report - Retail Units M a d r i d a n d B a r c e l o n a M a y

2 Summary of contents INTRODUCTION... 3 CONCLUSIONS. 4 FORECASTS.. 6 GENERAL MARKET OVERVIEW...7 The partial or full reproduction of this report is forbidden without the prior written authorisation of Aguirre Newman, S.A. This document contains general information, which may not under any circumstance be constituted to be a professional opinion or professional advisory services.

3 01 INTRODUCTION This report regarding the situation and market trends for the High Street retail unit market analyses the main variables that have affected this market in the cities of Madrid and Barcelona over 2014, as well as the outlook for this year. Throughout 2014, the trend that began back at the end of 2013 consolidated further, with private consumption and the improvement in retail indicators becoming one of the main drivers of the Spanish economy. The Spanish economy grew by 1.4% in 2014, while there was a 3.3% rise in private consumption. We started to enter a new economic cycle at the end of 2013, which has grown in momentum and become firmly established in Most of the prime high streets we analysed have performed well in terms of rents. The most significant element has been the considerable increases in rental prices in almost all areas, due to high demand from retail operators. Availability of retail units in the streets analysed continues to fall, with most vacant space located on the less retail-oriented streets. This report is grouped into 6 sections: conclusions on the state of the market in 2014 and the outlook for the current year, where the general market is currently at, changes in the retail market in Madrid and Barcelona, and an analysis of the investment market. We also include quantitative and qualitative information that will help answer the following questions: How will private consumption perform this year? Which streets have the most retail unit space available? Will rents continue to increase as seen in recent months? What have been the key factors in the investment market? Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 3

4 02 CONCLUSIONS Below we detail the main conclusions of this report: Madrid Market Over 2014, there has been a general increase in rental prices across all of the prime high streets analysed, reaching an average increase of 14%. The high streets that have seen the highest increase in rents compared to the year before, have again been Gran Vía with 27%, Serrano with 21% and Fuencarral with 15%. The Madrid vacancy rate has followed much the same positive line as rents, with the vacancy rate falling in the prime areas analysed. One can see that the majority of vacant space is on less commercial streets. Calle Preciados and Puerta del Sol are the only areas analysed that have no available retail units, which was the same case one year ago, therefore the vacancy rate still stands at zero. Calle Goya has a lower vacancy rate than one year ago. The end of rent controlled contracts meant that more transactions were completed in the Prime area, than in the past. Both national and international brands are continuing to open large flagship stores. Online sales are continuing to grow as they have done in recent years. Barcelona Market In 2014, rents on prime streets in Barcelona increased. With the exception of Portaferrisa and Pelayo, where rents have remained stable, rents for units located on other streets have generally increased by around 5%. Avenida Diagonal was the street with the highest rental uplift over the last year - rents increased by 10% year-on-year. The Barcelona market vacancy rate has grown slightly from 2.6% to 3.7%. The only prime high street of those analysed where the vacancy rate has fallen is Avenida Diagonal. There has been a considerable increase in the number of retail units available on Rambla de Canaletas compared to the same period last year. Over the period analysed, there were a considerable number of new store openings on the prime streets in Barcelona. We would highlight that Versace and Dior opened stores on Paseo de Gracia, the 19 stores that were opened on Rambla de Cataluna and the 37 stores opened on Avenida Diagonal. Rents on Calle Portal del Angel continued to rise, reaching 260/sqm, which firmly places it as the most expensive place in Spain to rent a retail unit, only just overtaking Calle Preciados in Madrid. These streets are 2 of the top 15 most exclusive streets in Europe. Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 4

5 02 CONCLUSIONS Investment Market The volume of investment in retail units over the period analysed stood at approximately 1,330 million, which is 330 million more than the figure registered the year before. If we exclude sale and leaseback deals from the total, the total volume of investment is very similar to last year's figure. The key players in the investment market over the period analysed are mainly family offices, followed by investment funds. Occupier transactions and added value transactions have accounted for 30% of the total investment volume. Although the prime retail areas of Madrid, Bilbao, Valencia and Seville are the most sought after, once again, investors are starting to look at the main retail streets and the best streets in various provincial capitals. Yields in prime areas have fallen by 100 basis points compared to 2013, hitting around 4%. Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 5

6 03 OUTLOOK Madrid and Barcelona As a result of the positive macoeconomic outlook for 2015, over the year we will see an improvement in household consumption, end consumers, and therefore an increase in retail consumption. Rents will continue to gradually increase in all prime areas. New sectors of the market such as home living stores (Tiger and Mauss) and homeware stores (Hosten), which were particularly affected during the crisis are now back on the scene. Tendency for the same types of retailers to focus on specific areas (Calle Lagasca, the restaurant stretch of Calle Preciados, Calle Montera, etc.). We expect that online sales will continue to increase and that traditional stores will change their customer service and sales offering in line with this change. Flagship stores will become more important, both for national and international operators. Over the next few months Primark will open its flagship store on Gran Vía in Madrid. Investment Market New purchasers will begin to appear in the market in Together with private investors (family offices), SOCIMIs and new investment funds focused on retail units will be more active in the market. There will be a change in tack towards demand for retail units in areas located outside of the main cities and retail high streets. Investments for income-producing, mixed-use buildings or those undergoing a change of use will continue to hold centre stage. In property investment transactions, the underlying retail asset is crucial. Yields will continue to fall not just in prime areas, but also on more standard retail streets for the first time. Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 6

7 e 04 GENERAL MARKET OVERVIEW Over 2014, the Spanish economy continued to grow as it has done since H2 2013, which was reflected in positive GDP growth figures over 2014 as a whole. The Institute for National Statistics (Instituto Nacional de Estadistica, hereinafter INE) states that GDP growth amounted to 1.4% in 2014, which is the first y-o-y increase for 6 years. Over the last quarter of the year, retail and household consumption indicators have seen a change in tack with positive y-o-y growth. This trend continued throughout 2014, with private consumption becoming one of the main drivers of the Spanish economy. Gross Domestic Product. GDP. (%) 6,0% 5,0% 4,0% 3,0% 2,7% 3,7% 4,3% 4,5% 5,3% 4,0% 2,9% 3,2% 3,2% 3,7% 4,2% 3,8% 2,8% 2,0% 1,0% 0,0% 1,1% 0,0% 1,4% -1,0% -2,0% -3,0% -4,0% -3,6% -0,6% -2,1% -1,2% GDP. Quarter-on-Quarter Change (%) 4,0% 3,0% 2,0% 1,0% 0,0% -1,0% -2,0% -3,0% -4,0% -5,0% The Bank of Spain indicated in its December report that it was optimistic regarding the progress of Spain's economic recovery. They indicate that "the Spanish economy started to recover in the second half of 2013 and has continued to do so over 2014, in a context of improving access to finance, an increase in confidence and a growing job market". The improved economic climate is "supported by strong private domestic demand, while net foreign demand continues to have a negative effect on GDP growth". However, the unemployment rate (which is still above 23.5%) continues to reflect the general state of the Spanish economy. Although in 2015 risk and uncertainty will remain, other factors such as strong declines in oil prices and the depreciation of the Euro will improve production and consumption. The consensus of international analysts is that Spain will be one of the best performing economies. The IMF stated in its most recent report that the Spanish economy will grow by 2% in Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 7

8 04 GENERAL MARKET OVERVIEW Although unemployment remains high, jobs have been created in ,900 new jobs were created over the past 12 months, and the unemployment rate has fallen by over two basis points to 23.70%, which means that 477,000 people are no longer unemployed. The working population has continued to decline over 2014, having fallen by 44,000, which is mainly due to the decline in the working age population (i.e. those between years of age), but predominantly due to the ageing population. Unemployment Rate (%) / Active Population / Employed Population Activos Ocupados Tasa de Paro 30% % 20% 15% 10% % The job market is expected to grow in net terms from 2015 onwards, which in turn will cause a gradual decline in the unemployment rate. Nevertheless, as we mentioned in previous reports, although forecasts from the consensus of analysts are positive, it will be a long time before we see the unemployment rate return to pre-crisis levels. In addition, various experts set the structural unemployment rate for an economy such as Spain's at above 12%. The Spanish economy has moved in to a period of moderate growth, which will slowly but surely reduce the unemployment rate, which is the main problem for Spain's economy. The Spanish economy has moved in to a period of moderate growth, which will slowly but surely reduce the unemployment rate, which is the main problem for Spain's economy was the turning point in household consumption, with the fall in this figure getting ever smaller from this point onwards. In the fourth quarter of the year, final household consumption spending grew by 0.7%, 2.5% more than the third quarter, as a result of a general improvement in all of its various components, both in terms of assets and services, and in line with an increase in salaries, which is the main resource for households to use to spend on goods. Salaries are increasing by 0.8% compared to the 3.3% registered in. Change in Household Consumption 7,0 5,0 3,0 1,0-1,0-3,0-5,0-7, Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 8

9 ene. ene. ene. ene. ene. ene. 04 GENERAL MARKET OVERVIEW Consumer Confidence Index: This index was completed via a consumer survey and evaluates two areas: a) the current situation regarding the household budget, the Spanish economy and employment, compared to six months ago, and b) expectations with regard to the next 6 months. If the CCI is over 100, this indicates that consumers are positive, and if it is under 100, it indicates that they are negative. The CCI has clearly increased over 2014 and The significant progress made is due to an improved outlook of the current economic climate, as well as consumers' increased expectations. For the first time in recent years, the indicator is now above 100 basis points, which is an indication that consumers are relatively positive about the economic climate and employment Indicador Confianza Consumidores Situación Actual Expectativas The Retail Index (by distribution type), shows retail performance, i.e., the variation in sales and employment in the retail sector in Spain. The data is broken down by distribution segments from stand-alone stores (one unit), small chain (less than 25 units), large chain (25 units or more) and department stores (retail unit over 2,500 sqm) marked a significant change in trend with regard to the index from the declines we saw in previous years, towards moderate growth. All distribution segments (stand-alone businesses, small chains, large chains and department stores) have seen this positive performance. 12,5 9,5 6,5 3,5 0,5-2,5-5,5-8,5-11,5-14,5-17,5 Grandes Cadenas Grandes Superficies If one looks at the Retail index by sales groups, one can see how virtually all product categories saw positive growth over the course of 2014 and the greatest growth in sales was seen in the 'household goods' sector, which performed the best out of all of the categories, after various years of being the worst performing category. 10,00 5,00 0,00-5,00-10,00-15,00-20, General del comercio minorista Alimentación Equipo personal Equipamiento del hogar Otros Bienes Información de Mercado. Mayo 2015 AGUIRRE NEWMAN 9

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