Shopping Centres. Spanish Real Estate Market Market Summary 2016 and Outlook Market Information 2016/2017 March 2017

Transcription

1 Shopping Centres Market Information 216/217 March 217 Spanish Real Estate Market Market Summary 216 and Outlook 217 Información de Mercado. Marzo 217 AGUIRRE NEWMAN

2 Información de Mercado. Marzo 217 AGUIRRE NEWMAN

3 Contents 1 Introduction 2 Conclusions 3 Forecasts 4 Economic outlook 5 6 Shopping centre market Sales, vacancy and rents 7 Investment market

4 1. Introduction The aim of this report is to analyse the performance of the main market indicators for shopping centres in 216. The outlook and new challenges that the market faces in the short-term will also be examined. As is usually the case, the shopping centres that are bestpositioned within their catchment areas (Gold centres) are the ones that have benefitted the most from Spain s recent economic upturn. This uptick is also feeding through to the best-positioned secondary shopping centres (Silver centres), whose fundamentals have improved, with rising rental income and declining vacancy rates. Bronze shopping centres, those that are worst-positioned in their catchment areas, have barely benefitted from the improving economy. Centres where occupancy rates show no signs of improving are what stand in the way of rental growth. Compared to the last two years, 216 saw an increase in the amount of new supply added to the market, which even exceeded the 273, sqm of new GLA (Gross Lettable Area). Considering the projects in the pipeline for this and the coming years, development activity seems to have made a comeback in the shopping centre market, although levels are still a far cry from those seen before the onset of the crisis. In terms of the investment market, the shopping centre segment emerged once again as the second most active in 216, behind offices. The total transacted volume came in at over 3,6 million, making 216 the most active year on record for this segment. As in previous years, when preparing this report we have held interviews with many of the main shopping centre market players, as well as retailers, investor-owners and developers, in order to gain an insight in to their views on the state of the market over the past 12 months and their forecasts for 217. This report is grouped into 6 sections: conclusions on the state of the market and the outlook for the current year, where the general market is currently at, changes in supply, demand, prices and vacancy rates, and an analysis of the investment market. Below is a table showing a comparison of the main market variables, between 213 and 216: KEY VARIABLES Var Stock (sqm) 15,157,225 15,266,115 15,39,887 15,624, % Average Vacancy Rate Gold Centres (%) 3%-5% 3%-5% 3.% 2.8% - 2 bp Average Vacancy Rate Silver Centres (%) 13.% 12.% 12.% 1.% -2 bp Average Vacancy Rate Bronze Centres (%) 3.% 3.% 3.% 29.% -1 bp Variation in Average Prices Gold Centres (%) 1.7% 3.5% 5.% 5.% Variation in Average Prices Silver Centres (%).% 1.5% 2.8% 3.% 2 bp Variation in Average Prices Bronze Centres (%) -2.8%.%.%.% bp New Supply (sqm) 25,88 18,89 124, , % Investment Volume ( million) 693 2,5 2,2 3,5 59.1% Initial Yield Gold Centres (%) 6.5%-6.75% 5.5%-6.% 5.%-5.3% 4.% - 4.5% -8/-1 bp Initial Yield Silver Centres (%) 7.5% 6.5%-7.5% % 5.75% % -25 bp Initial Yield Bronze Centres (%) >9. >8.5 >8% 8.% bp Información de Mercado. Marzo 217 AGUIRRE NEWMAN 4

5 2. Conclusions Below we detail the main conclusions of this report. The upbeat economic performance, reflected by a GDP which grew 3.2%, largely underpinned domestic demand and, more specifically, drove the rise in household consumption. Footfall in shopping centres continued to trend upwards as in previous years. In 216, the total number of visits reached 1,934 million, up 1.5% y-o-y. Shopping centre sales rose almost 3.8%, reaching 42,464 million. This increase means that sales per sqm of GLA reached 2,718 per sqm/gla, representing a 3.3% rise on last year. Gold centres continue to benefit from the positive economic backdrop, with both occupancy rates and average rents improving. The low vacancy rates in Gold centres is causing retailers to turn to the next category of centres in terms of quality, referred to as Silver. This category saw vacancy rates improve in 216, with rental levels also edging up slightly. Bronze centres remain high-risk products, registering very high vacancy rates of over 25%, and seemingly stable rents. Incentives are still commonplace in this category of shopping centres, in a bid to attract potential retailers via rent-free periods or stepped rents. The 273, sqm of new GLA added to the market in 216 considerably topped the new supply added during the last three years, but is still a long way from pre-crisis levels. The main shopping centres opened in 216 were Parque Nevada (Granada) and FAN Mallorca Shopping (Palma de Mallorca). Of the 273, sqm of new GLA, 17% related to extensions of operating shopping centres. In 216, the total stock of shopping centres in Spain reached a Gross Lettable Area (GLA) of 15,624,653 sqm, arranged over a total of 58 shopping centres, each comprising an average size of 27, sqm. The Gross Lettable Area (GLA) for each 1, inhabitants reached 334 sqm. This places retail saturation above the level established as the supply-demand equilibrium, which is between 3 and 325 sqm of GLA per 1, inhabitants. Nevertheless, each market context must be analysed individually. Demand from retailers for space centred on Gold and Silver centres. Bronze centres, or those that are worst-positioned, remained off the radar of the main national and international retailers, only appealing to small local retailers. 216 booked a record investment volume, coming in at over 3,5 million. Institutional funds were the most active buyers in the investment market, accounting for over 5% of the total volume, whilst Socimis were also once again very active, accounting for over 35%. The initial yield tightened slightly due to the perception of potential value uplift in rental levels and the positive macroeconomic backdrop. In some specific cases, Gold shopping centres have seen certain deals close with a yield of even below 4.%,an alltime low. Información de Mercado. Marzo 217 AGUIRRE NEWMAN 5

6 3. Forecasts Below we detail the outlook for the shopping centre market for the coming 12 months. Spain s economic forecasts for the short and medium term are positive, with growth expected to move within a range of 2.25% and 2.75% for the next two years, well above the Eurozone average. This said, economic growth is expected to ease slightly due to the end of certain external factors that have had a very positive impact on the economy over the last two years. The forecast economic growth, and its positive effect on the job market and household consumption, make us upbeat regarding 217 s footfall and sales performance. Circa 235, sqm of new GLA is expected to be added to the market in 217, approximately 8% of which will correspond to new supply and 2% to extensions of existing shopping centres. As in previous years, one or more of the scheduled openings could suffer delays. it comes deciding where to open new retail units. These categories will continue to see rising occupancy rates and rental levels that gradually edge up. Meanwhile, Bronze centres will only remain on the radar of small local retailers and will have little draw. In terms of the investment market, the high level of interest seen since 214 is set to continue on into 217. However, investment volumes are not expected to reach the levels seen in 216, more due to the lack of product on the market than to a decline in interest from potential buyers. The initial yield required by investors for the best shopping centres will remain at levels seen in 216, around 4.%-4.5%, however the possibility of some very specific deals being signed below this level cannot be ruled out. As for Silver and Bronze centres, and only Bronze centres with repositioning potential, slight further adjustments in the yield required by investors could be seen. Medium and large-sized chains will continue to focus their interests on the best-performing centres, i.e. Gold and Silver centres, when Información de Mercado. Marzo 217 AGUIRRE NEWMAN 6

7 Gobierno Comisión Europea FMI OCDE Funcas CEOE FITCH BBVA reserach 4. Economic outlook In 216, Spanish economic growth exceeded initial expectations, with GDP rising 3.2% and topping the initial-year forecast by over half a percentage point. Domestic demand was the main driver of this growth, particularly highlighting the upbeat performance of household expenditure. Foreign trade booked a marginally positive result in 216. Employment grew throughout the year, with the number of people employed rising by 413,9 at year-end. The number of people in employment reached 18,58,1 in 216, whilst the number of unemployed came in at 4,237,8, placing the unemployment rate at 18.63%. This gradual improvement in the job market is without doubt the star performance of the Spanish economy. Rather than positive, the average wage per employee posted a fairly neutral result, up by just.5%. The economic backdrop, combined with the healthy performance of the jobs market in 216, favoured household consumption, as is demonstrated by the main consumer indexes. In 216, both household consumption and retail sales continued to climb as they have been in recent years. Spanish economic growth forecasts for 217 and 218 remain very high, between 2.25% and 2.75%, and considerably higher than that forecast for Spain s neighbouring countries and other advanced economies. This said, the rate of growth is expected to ease slightly compared to that seen in recent years, as some factors that previously favoured consumption will no longer have a positive effect, such as low oil prices and the tax reforms. Despite this more moderate growth, the Spanish economy will continue to create jobs at a rate of around 3, new jobs per year. However, unemployment will not reach pre-crisis levels as a result of the significant percentage of unemployed people that would have difficulty finding work at any point of the economic cycle. Inflation will continue to be shaped by fluctuations in oil prices, which are expected to continue to steadily climb in the medium term. Inflation forecasts for year-end 217 stand at circa 2.4%, with underlying inflation at close to 1.1%. The Eurozone's improving economic activity, together with rising inflation, forebodes potential interest rate increases in the short term (H1 218). Lastly e-commerce (B2C) continues to gain traction in the retail sector, with a turnover of over EUR24, million in 216. The e- commerce growth rate came in at over 2%, whilst retail business grew by just 3.3%. 6,% 5,% 4,% 3,% 2,% 1,%,% -1,% -2,% -3,% -4,% -5,% 1. Change in GDP (%) 2. Q-o-Q CHANGE IN GDP (%) 4,% PIB (Evolución Intertrimestral) PIB (Evolución Interanual) 3,% 2,% 1,%,% -1,% -2,% -3,% -4,% -5,% Source: INE Source: INE 3. GDP Growth Forecast Employed Population / Unemployment Rate (%) 3,5 3, 2,5 2, 1,5 1,,5 2,9 2,5 2,3 2,1 2,1 2, ,5 2,4 2,2 2,5 2 1,9 2,7 2, Ocupados Tasa de Paro 3% 25% 2% 15% 1%, 1. 5% Source: INE Información de Mercado. Marzo 217 AGUIRRE NEWMAN 7

8 enero febrero marzo abril junio julio agosto septiembre octubre noviembre diciembre enero febrero marzo abril junio julio agosto septiembre octubre noviembre diciembre enero febrero marzo abril junio julio agosto septiembre octubre noviembre diciembre enero febrero marzo abril junio julio agosto septiembre octubre noviembre diciembre enero febrero marzo abril junio julio agosto septiembre octubre noviembre diciembre enero febrero 4. Economic outlook 5, 3, 1, -1, -3, -5, 1. Household Consumption Y-o-Y Change (%) 2. Consumer Confidence Index 2 Indicador Confianza Consumidores Situación Actual Expectativas , Source: INE Source: CIS 3. Retail Trade Index (Distribution Method) Annual Change (%) 12,5 9,5 6,5 3,5,5 Grandes Cadenas Grandes Superficies 8,5 5,5 2,5 -,5 Empresas Unilocalizadas Pequeña Cadena -2,5-3,5-5,5-6,5-8,5-9,5-11,5-12,5-14,5-17,5-15,5-18, Source: INE Source: INE 4. Retail Trade Index (Sales Groups) Annual Change (%) 5. Traditional Retail vs. e-commerce 1, 3. 5,% 5, 25. 4,%, 2. 3,% -5, -1, -15, ,% 1,%,% -1,% -2, General del comercio minorista Alimentación Resto * -2,% Equipo personal Equipamiento del hogar Otros Bienes Volumen Total de Negocio Variación Anual E-Commerce (%) Variación Anual Comercio Minorista (%) Source: INE Información de Mercado. Marzo 217 AGUIRRE NEWMAN 8

9 5. Shopping centre market New Shopping Centre Openings and Extensions in 216 Development activity in 216 was up on previous years, with five new shopping centres opened and another five extended. Total new area stands at 273,766 sqm, 233,766 sqm of which were added thanks to new shopping centre openings, whilst the remaining 4, sqm corresponded to extensions of existing centres. The average size of the new centres was 46,753 sqm, considerably higher than the average of recent years and an indication of the the type of centres that have come onto the market over the last year. Compared to the supply that has been delivered over the last few years, largely retail parks and small-medium sized shopping centres, 216 saw many large and very large formats, as well as outlets, come onto the market. Parque Nevada and Fan Mallorca Shopping are particularly noteworthy due to their size, between them accounting for 8% of the GLA added in 216. We would also highlight the opening of two outlets, Viladecans Style Outlet and Galeon Outlet, a format that has growth potential in Spain. New Centres in 216. Distribution by Autonomous Regions and Provinces Shopping centres were opened in four provinces in 216. Two of these were Tenerife and Mallorca, provinces which boast a very high tourism component and which thereby benefit from additional footfall. The third, Barcelona, also has a considerable tourism component, one that is proving to be particularly drawn to the outlet format that has been opened. Lastly, a project was opened in Granada which was originally scheduled to open in 24 or 25. The following 216 openings were particularly noteworthy: FAN Mallorca, real estate project completed by Carrefour Property, comprising 66, sqm and 112 stores in Palma de Mallorca. The tenant mix includes retailers from all areas of the business, and features all the main national and international brands. Viladecans Style Outlet, located in Viladecans, less than 2km from the centre of Barcelona and 1km from the El Prat International Airport. An initial phase has been opened with a GLA of 19,8 sqm, which is set to be increased to 26,5 sqm in a second phase. It boasts both national and international retailers that sell the previous season s products with a minimum 3% discount. 9% of the space is occupied by fashion retailers, whilst the remaining 1% is taken by dining offerings. 8% of the outlet s retail space was occupied when it first opened. The outlet targets both domestic shoppers and tourists, the latter having access to several services such as tax-free shopping which provides immediate tax refunds, a children s play area, wifi, click & collect point for online purchases, etc. There is also a bus service that stops at several central points in Barcelona city centre, taking passengers directly to the outlet. Lastly, the two smallest shopping centres opened are located in the Canary Islands. Together, both centres have a total GLA of 2, sqm. The first, the Trocadero shopping centre is located in Los LLanos, in Tenerife. Whist Galeón Outlet is located in Adeje in the south of Tenerife and is the island s first outlet village. Both centres feature a varied offering, from traditional retailers and amenities for customers, to diverse leisure and dining options. In addition to the new centres opened during 216, over 4, sqm of GLA was added to the stock thanks to extensions in 5 centres. One of these, the gradual extension of Alfarfar Park is particularly noteworthy, as it continues to incorporate new retailers. In most cases, the rest of the extensions were completed in medium-sized shopping centres which are highly consolidated in their respective catchment areas. Nevada Shopping, located in Armilla, Granada. Owned by the developer General de Galerías Comerciales, this centre comprises a GLA of 12, sqm. The centre was first due to open over 1 years ago; however various legal disputes which took several years to resolve, pushed its opening back to 216. This is one of the largest open-air shopping centres in Spain, and was opened with an occupancy rate of almost 75%. The centre features 185 retail units (it is forecast to house 25), including retailers from all areas of the retail business. Información de Mercado. Marzo 217 AGUIRRE NEWMAN 9

10 5. Shopping centre market New GLA in 216 Distribution by Category An analysis of the number of new centre openings highlights that the Outlet category has triumphed the most, with two new openings, one in Adeje-Tenerife and the other in Viladecans. The other three centres opened fall into one of three categories: very large (VL), large (L) and small (SM). If the new supply is analysed in terms of the area added by each category, the largest amount of space was added by the very large (VL) category, and in fact by one centre alone, Nevada Shopping in Granada, which comprises 12, sqm of new GLA. Large (L) centres added 66,27 sqm of GLA, thanks to the opening of the FAN shopping centre (Mallorca). Development activity in 217 is expected to be on a par with that seen in 216 in terms of GLA, but higher insofar as the number of centres opened is concerned. Retail parks, along with small and large shopping centres, will be the categories that dominate the openings. The amount of new retail space coming onto the market will continue to grow in 217, extending the trend started in 214, when the amount of new GLA added bottomed out. Opening/Extensions of New Shopping Centres (units) New Shopping Centre GLA (sqm) Aperturas Ampliaciones * Source: Aguirre Newman Source: Aguirre Newman Distribution of New Shopping Centres by Type (216) Distribution of New Shopping Centres by Province (216) % SBA % Nº 6,% 6,% 5,% 5,% 4,% 4,% 3,% 3,% 2,% 2,% 1,% 1,%,% MG GR PE CF,% Barcelona Granada Tenerife Mallorca % SBA % Nº centros Source: Aguirre Newman Source: Aguirre Newman Información de Mercado. Marzo 217 AGUIRRE NEWMAN 1

11 MG GR ME PE HI PC CF CO 5. Shopping centre market Retail Space At year-end 216, there were a total of 58 shopping centres in Spain, equating to a total GLA of 15,624,653 sqm, edging slightly above the year-end 215 figure by 1.5%. Although the amount of retail space opened was up y-o-y, development activity remains a long way from the historical average, a result of the low level of development activity in the shopping centre market. However, unlike in 214 and 215, when new supply came onto the market largely via small and mediumsized projects, 216 saw the return of very large shopping centres and outlets. A distribution analysis by shopping centre type (graph 1) at the national level remains largely unchanged compared to recent years. Small centres (SM) accounted for the largest percentage of openings, coming in at slightly over 27% (graph 1). If the same analysis is carried out for space added, large shopping centres added the highest percentage of GLA, accounting for over 25% of the total retail space added. As mentioned in previous reports, this situation is logical, given that in the majority of towns/cities, large shopping centres have a limited amount of space in which they can be developed, a limited budget and are in direct competition with small traders. All this is added to the fact that a high population density in the catchment area is needed for them to be economically feasible. activity plummeted in the decade starting in 211. Between 21 and 21, an average of 755, sqm of GLA were added each year, and between 1991 and 2 an average GLA of 465, sqm were added, however, between 211 and 216, a GLA of just 27, sqm per year were added. As of 211, the market s performance has been one of a much more mature market. New retail space comes onto the market via carefully researched projects that meet the specific requirements of each market. Shopping Centres and GLA by Autonomous Region The autonomous regions of Andalusia, Madrid, Valencia and Catalonia account for 55% of Spain s shopping centres and 58% of the country s GLA. Along with these regions, Galicia and the Canary Islands are the other autonomous regions where the number of centres is higher than the national average of 31 centres per region. At the other end of the spectrum, Cantabria, La Rioja and Ceuta are the autonomous regions with the least number of shopping centres and the lowest GLA, along with Melilla, which is still the only region to not have one single shopping centre. If the number of openings per 1-year period is analysed, we can see that compared to previous 1-year periods, development 1. Number of Shopping Centres and GLA by Type 2. Shopping Centre Openings (GLA sqm) by 1-year periods 3,% 25,% 2,% 15,% 14,2% 13,3% 25,4% Nº de Centros SBA 27,4% 21,2% 2,3% 17,9% 14,3% 12,6% 11,6% % 8% 3% 1,% 8,1% % 5,% 3,8% 2,1% 3,6% 1,5% 2,7% %,% % 1% 2% 3% 4% 5% 6% Source: Aguirre Newman Source: Aguirre Newman Información de Mercado. Marzo 217 AGUIRRE NEWMAN 11

12 ALMERÍA CÁDIZ CÓRDOBA GRANADA HUELVA JAÉN MÁLAGA SEVILLA HUESCA TERUEL ZARAGOZA ASTURIAS BALEARES LAS PALMAS S.C. TENERIFE CANTABRIA ALBACETE CIUDAD REAL CUENCA GUADALAJARA TOLEDO ÁVILA BURGOS LEÓN PALENCIA SALAMANCA SEGOVIA SORIA VALLADOLID ZAMORA BARCELONA GERONA LÉRIDA TARRAGONA ALICANTE CASTELLÓN VALENCIA BADAJOZ CÁCERES LA CORUÑA LUGO ORENSE PONTEVEDRA MADRID MURCIA NAVARRA ÁLAVA GUIPÚZCOA VIZCAYA LA RIOJA CEUTA MELILLA AVERAGE 5. Shopping centre market Saturation Index by Province The retail saturation index has remained largely unchanged over the last 12 months, as the low level of supply that has come onto the market has not been enough to significantly affect saturation levels. Retail saturation is measured in the same way as GLA (Gross Lettable Area), i.e. per thousand inhabitants. This analysis is completed at both the provincial and the national level and compares how developed the retail market is in the different regions of Spain. Optimum retail density is fixed at between 3 sqm and 325 sqm of GLA per 1, inhabitants. In areas where the retail density is between these levels, supply and demand are considered theoretically balanced, whereas in areas where the retail density exceeds these levels, the market is considered saturated, and areas which have a lower level, are believed to have development potential. However, each market must be studied individually, as the factors that can affect whether a GLA higher than that suggested by the optimum retail density can be developed or not, vary from area to area. At year-end 216, Spain s retail density stood at around sqm of GLA per 1 people. Such a figure indicates that the country s retail market is theoretically saturated. catchment area; the quality of the retailers in the existing centres; the transient population; purchasing power; the climate, etc. In markets where the population has a higher disposable income, the GLA per 1, people can exceed the theoretical level of retail saturation. Likewise, in markets where there is a high transient population or a strong tourism component, the retail density can also be greater. As explained in the following section, the provinces where the GLA per 1 people exceeds 325 sqm, benefit from a significant tourism component and/or the population has an above-average purchasing power. The two graphs on the following page (graphs 5 and 6) detail the gross disposable household income (per capita) by province. The first details the provinces where the gross disposable household income is higher than the Spanish average ( 14,992 per year), whilst the second graph shows the contrary. It must be remembered that gross disposable household income trended downwards from the onset of the crisis, until at least 211, when the last official figure was published by the INE. Forecasts suggest that 214 and 213 will have registered similar levels and that a slight uptick will have started to be seen as of 215. Some factors which affect the level of retail saturation and that should be taken into account when it comes to calculating and analysing retail density are: the retail high street supply in the Retail Density by Provinces (GLA per 1, inhabitants) 65, 6, 55, 5, 45, 4, 35, 3, 25, 2, 15, 1, 5,, ,9 334,6 Información de Mercado. Marzo 217 AGUIRRE NEWMAN 12

13 Huesca Teruel Zaragoza Asturias Baleares Cantabria Burgos León Palencia Soria Valladolid Barcelona Girona Lleida Tarragona Madrid Navarra Álava Guipúzcoa Vizcaya La Rioja Almería Cádiz Córdoba Granada Huelva Jaén Málaga Sevilla Las Palmas Sta. Cruz de Tenerife Ávila Salamanca Segovia Zamora Albacete Ciudad Real Cuenca Guadalajara Toledo Alicante Castellón Valencia Badajoz Cáceres A Coruña Lugo Ourense Pontevedra Murcia Ceuta Melilla Andalucía Aragón Asturias Baleares Canarias Cantabria Castilla - La Mancha Castilla y León Cataluña Com. Valenciana Extremadura Galicia Madrid Murcia Navarra País Vasco Rioja, La Ceuta Melilla AVERAGE Andalucía Aragón Asturias Baleares Canarias Cantabria Castilla - La Mancha Castilla y León Cataluña Com. Valenciana Extremadura Galicia Madrid Murcia Navarra País Vasco Rioja, La Ceuta Melilla AVERAGE Andalucía Aragón Asturias Baleares Canarias Cantabria Castilla - La Mancha Castilla y León Cataluña Com. Valenciana Extremadura Galicia Madrid Murcia Navarra País Vasco Rioja, La Ceuta Melilla AVERAGE 5. Shopping centre market 1. Total Area (sqm) by Autonomous Region 2. Number of Shopping Centres by Autonomous Region S.B.A. Media SBA Nº de Centros Media Centros por CC.AA Average Size of Shopping Centres by Autonomous Region (GLA sqm) Tamaño Medio C.C Retail Density Map by Provinces (GLA per 1, inhabitants) DENSITY (sqm/1, inhabitants) Over 325 From 3 to 325 From to 3 Vizcaya Coruña Asturias Cantabria Guipúzcoa Lugo Álava Navarra Pontevedra León Palencia Huesca Orense Burgos La Rioja Lérida Gerona Salamanca Barcelona Valladolid Soria Zaragoza Saturated Balanced Potential Segovia Zamora Guadalajara Ávila Madrid Cáceres Badajoz Toledo Ciudad Real Cuenca Albacete Cordoba Jaén Murcia Huelva Seville Granada Almería Malaga Cádiz Teruel Valencia Castellón Alicante Tarragona Balearic Islands Source: Aguirre Newman Santa Cruz de Tenerife Las Palmas Source: Aguirre Newman Gross Disposable Household Income per capita ( ) Provinces above the Spanish average* Gross Disposable Household Income per capita ( ) Provinces below the Spanish average* Source: INE *211. Last figure released at provincial level Source: INE *211. Last figure released at provincial level Información de Mercado. Marzo 217 AGUIRRE NEWMAN 13

14 Badajoz Barcelona Burgos Cáceres Cádiz Castellón Jaén León Lleida Madrid Málaga Murcia Valencia Valladolid 5. Shopping centre market Future Supply It is anticipated that between 217 and 218, almost 6, sqm of retail space will be added to the market via both extensions and new openings. Some centres slated to open between this year and next should have already been delivered, but for various reasons their scheduled opening dates suffered delays. In 217, 9 centres are expected to open, whilst in 218 this number is 8. The new openings planned for 217 will add a total GLA of 189,393 sqm to the market, whilst extensions will add a further 44, sqm of GLA. The most landmark projects by size will be opened in the province of Madrid. The first, Sambil Outlet Madrid comprises a GLA of 42,83 sqm and is being developed on the site of the old M-4 shopping centre. It will offer a mixed-concept format that will include both outlet and full-price stores. The second project is Plaza Rio 2, an urban centre, located in the Madrid Rio area. Madrid will be the province to see the most activity in 217, home to the two aforementioned openings. Between the two, the centres will boast a total GLA of almost 85, sqm. Valencia will be the second most-active province in 217, with two shopping centres forecast to open, which will add a total GLA of 35, sqm to the market. An analysis of future supply by asset type, produces mixed results, with projects forecast in all categories, except for leisure centres and very large centres. 4. Oferta Futura (m² SBA) Aperturas Previstas Ampliaciones Previstas Aguirre Newman sobre datos de la AECC Oferta comercial prevista (% según tipología de centro) Nueva (SBA) Ampliaciones (SBA) Hipermercado Parque Comercial Pequeño Mediano Grande Outlet 12. Nueva SBA prevista por provincia. Año Nueva (SBA) Ampliaciones (SBA) Aguirre Newman sobre datos de la AECC Información de Mercado. Marzo 217 AGUIRRE NEWMAN 14

15 6. Sales, vacancy and rents The latest retail sales figures published by INE highlight a clearly positive trend, extending the trend of the last three years. The positive performance of this business is also reflected in the figures published by the Spanish Association of Shopping Centres (AECC) and by the operating results presented by various shopping centre owners. Both the AECC and Spain s main shopping centre owners booked rising footfall and sales in 216. According to the AECC, shopping centre footfall grew almost 1.5% during 216, reaching 1,95 million visits. This growth not only extends the positive trend seen in previous years, but the rate of growth is also greater than that previously seen. AECC figures place sales for 216 at 42,464 million, up 3.6% on 215, and equating to a market share of 17.8% of total retail sales, unchanged y-o-y. Despite the rising prominence of online shopping, the average spend per customer continued to gradually trend upwards. The average ticket, i.e. the amount spent on average by anyone visiting the centre, stands at per visit, up circa 2.25% versus 215. Average sales per sqm also climbed to 2,718 per sqm, a 3% increase on 215. These sales figures per sqm relate to the overall market and must be adjusted for each type of shopping centre. Carrying out the same analysis by type of centre, highlights that sales in Gold centres stood at 3,75 per sqm/year, whilst sales per sqm in Bronze centres remained unchanged on last year s figure at circa 1,5 per sqm/year. The sales and footfall figures reported by some shopping centre owners is far higher than those published by the AECC, due to the characteristics of their portfolios and/or a more effective asset management strategy. For example, a major investor-owner of approximately 15 shopping centres reported a y-o-y increase of over 8% in sales at year-end 216 and a 5.5% rise in footfall, way above the average figures released by the AECC. In the same vein, the main company specialising in outlet centre management and investment reported an 11% increase in sales in Spain and a 1% rise in footfall versus Total Shopping Centre Sales and Shopping Centre Sales as a % of Total Retail 2. Average Ticket ( /visitor) and Sales per sqm in Shopping Centres ( /sqm/year) ,% 22, ,5% 17,% 16,5% 16,% 15,5% 21,9 21,8 21,7 21,6 21,5 21,4 21,3 21, ,% 21, Ventas %/Comercio Ventas %/Comercio Fuente: AECC Fuente: AECC Información de Mercado. Marzo 217 AGUIRRE NEWMAN 15

16 6. Sales, vacancy and rents Occupancy levels rose in 216 compared with previous years, in line with the trend started in , with the performance varying between the different shopping centre categories. In Gold centres, vacant space is only registered in the interim between one tenant exiting the centre and another one entering to replace it. Vacancy rates in Silver centres are gradually declining, given that retailers engaged in active expansion plans are focusing on opening units in this type of centre. Given the difficult task of taking space in Gold centres, either due to of a lack of availability or high rents, retailers are turning to Silver centres to expand and open new stores. Lastly, occupancy levels in Bronze centres have started to stabilise. However, this stabilisation should not be interpreted as the first step towards growth, as it is largely down to the strong draw of the retailers operating in these centres. In terms of the availability of retail units by size, the trend seen in recent years has held firm. Smaller units, the most common type of units in shopping centres, register the highest availability. These units are often occupied by retailers that occupy just one location (local retailers) or by small chains whose businesses tend to be less stable. As the GLA of the retail units rises, availability decreases given that there is a lower supply of larger units and that they are usually occupied by more stable retailers, normally medium and large retail chains. Rents registered a positive performance in 216, in line with the improvement recorded by occupancy and sales-related variables. The uptick in rents will gain traction as we move through the economic cycle and as sales continue to grow. Gold centres booked a similar growth rate to previous years, notching up 5 consecutive years of growth. This trend is expected to continue in the medium term. As for Silver centres, the gradual adjustments in the vacancy rate, together with rising footfall and sales, has enabled retailers to accept slightly higher rents, without it impacting their effort rates. As previously mentioned, the lack of vacant space in Gold centres is driving retailers with active expansion plans, towards this type of centre. Lastly, following the severe rental adjustments that started in 28, Bronze centres seem to have bottomed out at current levels. However, the high vacancy rate, over 25%, gives retailers the upper hand when it comes to negotiating rents, making it unlikely that rental prices will rise in this category. 3. Vacancy Rate (% GLA) 4. Rental Prices ( /sqm/month) 3% 25, 25% 23, 2% 21, 19, 15% 17, 15, 1% 13, 5% 11, 9, % oro plata bronce 7, 5, oro plata bronce Fuente: Aguirre Newman Fuente: Aguirre Newman Información de Mercado. Marzo 217 AGUIRRE NEWMAN 16

17 7. Investment market The shopping centre investment market proved a hive of activity in 216, booking an investment volume of over 3,5 million. More than 35 investment deals were closed, seven of which belonged to a portfolio, making it the second most active market for a second consecutive year in terms of investment volume, beaten only by the office market. This uptick in investment was fuelled by the consolidation of the economic recovery, the sustained increase in consumption and the gradual improvement in market, occupier and rental fundamentals. Other factors which have affected the market s performance in previous years continued to favour shopping centre investment in 216. Amongst these, we would particularly highlight, heightened liquidity on the market, continued favourable financing terms and conditions and low-yielding investment alternatives. A buy-side analysis highlights how the most active buyers involved just two categories, institutional funds, which represented circa 52% of the total invested volume and Socimis which accounted for 38%. The remaining volume was invested by certain real estate companies and private investors, that have teams specialising in this area. On the sell-side, real estate companies were the most active. This was not only a result of the divestment policies that certain real estate companies specialising in shopping centres have in place, but also the Metrovacesa portfolio sale to Merlín Properties. The acquisition of the Metrovacesa portfolio by the Socimi Merlín Properties was the deal of the year and heavily impacted investment, accounting for 28% of the total volume. The main single asset transaction was completed in Barcelona, involving Deutsche Bank s acquisition of the Diagonal Mar shopping and leisure centre for slightly over 49 million. Other significant single asset deals included the sales of the Nassica shopping centre in Getafe and the Gran Vía de Vigo shopping centre. In terms of portfolio deals, Invesco s acquisition of a portfolio of 11 hypermarkets and shopping arcades owned by Eroski and Carrefour Property s acquisition of 36 hypermarkets also owned by Eroski are particularly noteworthy. Deals have been completed for all types of shopping centres, from Gold centres which are dominant in their catchment areas to value added centres, which require a very active asset management strategy if they are to reach adequate operating levels. The lack of Gold centres and the intense pressure that certain investors are under to buy has pushed the initial yield down to alltime lows, even to below 4.% for certain trophy assets. Gold shopping centres (benchmark shopping centres in their catchment areas, consolidated and featuring top-tier international and national retailers as tenants, highly sought-after by retailers): 4.%-4.5%. Silver shopping centres (shopping centres with international and/or national retailers, however given its size, layout or the competition, it is not a benchmark in its catchment area): 5.75%-6.25%. Bronze shopping centres: (Shopping centres that are primarily comprised of local retailers, with very few national and international chains): over 7.%. Retail Park: From 5.5%. Although the most likely scenario for 217 is positive, the investment volume is not expected to match the levels reached in 216. The investment volume for 217 will almost brush the 1, million mark, a very high level and a sign of the interest generated by this market segment. Información de Mercado. Marzo 217 AGUIRRE NEWMAN 17

18 7. Investment market Lastly, we would also note the influence of central banks monetary policies on the investment market. In 216, we began to see the first signs of an end to monetary stimulus, with the FED raising interest rates in December for the first time in a year. In Europe, the decision was made to keep rates low until at least the end of 217, in order to guarantee monetary stimulus in a year of continued uncertainty, with four of the Eurozone s main economies immersed in general elections. This low interest rate environment has a two-fold positive impact on the investment market: Ease of access to financing: the fact that interest rates are at alltime lows means that the benchmark rate used to fix loan interest rates, the Euribor, is also at historical lows. Real estate market appeal: the ECB s corporate and public sector debt purchasing programmes are driving down the yields of both of these asset classes, pushing certain more conservative investors away from their traditional markets and towards other markets offering more attractive returns. The perception of the real estate sector as a safer market that produces higher yields than those offered by debt has pushed this sector onto the radar of more conservative investors. However, the low interest rate environment has its days numbered. The USA saw a second interest rate hike in 217, with a further 2-3 forecast before year-end. In Europe, the market consensus anticipates a first rate hike for H1 218, given the economic growth and rising inflation that is being seen. Change in Investment Volume Change in Initial Yield (%) 4. Nacional Extranjero 1,% 3.5 9,% 3. 8,% 2.5 7,% 2. 6,% Fuente: Aguirre Newman 5,% 4,% 3,% 2,% Oro Plata Bronce Fuente: Aguirre Newman Type of Centre Acquired (%/ total investment volume) Investor type (%/total investment volume) Suelo; 3,2% Hipermercad o; 15,1% Compañía Inmobiliaria 8% Privado,Family Office Parque Comercial; 4,2% Medianas; 1,1% Centro comercial; 76,4% Socimi 38% Fondo Institucional 52% Fuente: Aguirre Newman Fuente: Aguirre Newman Información de Mercado. Marzo 217 AGUIRRE NEWMAN 18

19 Aguirre Newman Madrid Calle General Lacy, Madrid Tel asesores@aguirrenewman.es Aguirre Newman Barcelona Avenida Diagonal, Barcelona Tel asesores.barcelona@aguirrenewman.es Aguirre Newman Malaga C/Puerta del Mar, 18, 8º-D Malaga Tel asesores.malaga@aguirrenewman.es Contacto Pelayo Barroso Olazábal. Director - Research and Market Analysis pelayo.barroso@aguirrenewman.es Aguirre Newman Lisbon Praça Marquês de Pombal, 16 7º Lisbon Tel portugal@aguirrenewman.pt Aguirre Newman London 1 Stratton Street London W1J 8JR Tel. +44 () Mobile +44 () london@aguirrenewman.com Antonio Montero Nuñez. National Director - Logistics antonio.montero@aguirrenewman.es Aitor Álvarez Martínez Director - Logistics Transactions Madrid aitor.alvarez@aguirrenewman.es Gloria Valverde Rubio Director - Logistics Transactions Barcelona gloria.valverde@aguirrenewman.es Aguirre Newman Mexico Monte Pelvoux 12, Piso 3 Lomas de Chapultepec, Mexico City Tel. +52 (55) asesores.mexico@aguirrenewman.com Aguirre Newman Bogota Calle 93 # 11 A - 11 Of. 62, Bogota D.C., Tel. +52 (55) asesores.bogota@aguirrenewman.com Información de Mercado. Marzo 217 AGUIRRE NEWMAN

20 Madrid Barcelona Malaga Lisbon Porto Berlin London Mexico City Bogota Información de Mercado. Marzo 217 AGUIRRE NEWMAN