on point Retail Market Report 2008 Shopping Centres in Spain

Transcription

1 on point Retail Market Report 28 Shopping Centres in Spain

2 Economic Context Following a decade of high growth, a threat to the Spanish economy began to appear at the beginning of summer 27 spurred by the global credit crisis. This situation has caused a slowdown in decisions made by investors and developers due to the credit squeeze and today, at the start of 28, it is already clear that the Spanish economy is entering a new stage in which more difficulties will arise. The slowdown in the residential market has had a moderating effect on 27's GDP growth which after a gradual reduction reached 3.5% annual in the fourth quarter and has resulted in a 3.8% growth in GDP in 27. This figure is in line with previous years, although it is precisely this maintained performance that allows the slowdown to be detected. The main cause of the slowdown seen at the end of 27 was lower domestic demand, both public and private, which is evident in the 3.1% annual growth in household consumption in 27,.7% below the previous year s growth rate. Increases in interest rates throughout the year, finishing the year at 4.79% in December, together with sharp increases in the prices of food, energy and fuel amongst others, have increased the 27 annual inflation rate to 4.2% which has had a knock-on effect on household budgets. Towards the end of 27, consumer expectations were worse than was predicted some months before as can be seen in consumer confidence data which has reversed the upward trend it had during the first part of the year, falling in the last few months to reach -19 in December. The reasons for this dispirited outlook can be partly attributed to the high rates of household debt (already exceeding net disposable income by 135%, although at the end of the year the rate grew at the lowest rate of the last 13 years, 13.2%), which makes it more difficult to save (the savings rate hit an alltime low in the third quarter at 9.9% of disposable income), and also to the global financial turbulence, which aggravated the slowdown of residential construction also not helped by the introduction of the new land regulations in the summer. % annual Retail Sales and Confidence Other decisive contributors to the drop in prospects are the lower employment creation rate (which at 3% is.2% lower than the previous year) and the increase of the unemployment rate (8.6% at the end of 27). Further increases in the unemployment rate are anticipated for January 28. As a natural consequence of these results, retail sales growth fell in 27 to 2.6% with large area retailers showing a slightly lower increase of 1.8% year-onyear. Notable developments include a 4.2% growth in sales of clothing and accessories and a.3% decline in household-related products, which rely heavily on the residential sector. Consumer Confidence Index Retail Sales Index Consumer Confidence Source: INE, Eurostat January 28

3 In a recent report the World Bank ranked Spain as the 11th global economic power considering the GDP in terms of purchasing power parity, with emerging economies such as India, China and Brazil coming before Spain in the ranking for the first time. Elsewhere, Eurostat analysed consumer spending capacity in the 27 EU countries in 26, taking into account the GDP per inhabitant in terms of purchasing power capacity. Spain comes in at the exact average of EU countries despite the increase in income per capita. This indicates a stagnation of spending capacity during the period, which was precisely a period of high economic and consumer spending growth rates. Therefore, rising prices and unemployment in 27 may have undermined Spanish consumers' purchasing power. The good news is that, despite this situation, the growth of retail sales and large retailers' sales have remained positive throughout these years in Spain, although they have moderated recently. In spite of the change in cycle or economic slowdown, the forecasts made by major economic institutions estimate Spain's growth at around 2.7% in 28, well above the 1.8% average growth rate forecast for the Eurozone. The current trend suggests slightly lower levels of growth in 29 and a gradual recovery as of 21. Whilst there is a large focus on the results of the March elections and the decisions and measures of the winning party, there is no doubt that the Spanish economy today is much more open and mature, and will possibly confront the current difficulties in better conditions than in previous crises. Over the longer term, the Spanish economy may also point to a more balanced growth pattern. % annual 4,5 4 3,5 3 2,5 2 1,5 1,5 Economic Growth: GDP Spain EU 27 Euro Zone Source: Consensus, EIU January 28

4 Shopping Centres 1.4.,, 1.2.,, 1..,, m² Shopping Centres Annual Openings 8., Market performance in 27 With total retail surface area up 7% in the year, the shopping centre sector continues to be an attractive option for developers, investors, operators and consumers. In 27, new shopping centre openings remained high with 32 openings and 11 extensions or second-phase openings, contributing a total gross lettable area (GLA) of 862,3 m² with total investment in development reaching 2,675 million. Although launches of new centres and GLA increase are the lowest in the last five years, close to 22 levels when the market began to take off, 27 has been a record year in terms of new GLA in extensions and second phases, which in addition have been larger than in previous periods. In this respect, there is an ongoing trend for phased project openings and shopping centre extensions tend to be of a considerable size. 6., 4., 2., Annual GLA Examples of recently opened second phases include Rivas Futura, with its 5, m² H2Ocio shopping centre in Rivas Vaciamadrid () and Espacio Mediterraneo in Cartagena, Murcia, totalling 37,165 m². Extensions include Porto Pi in Mallorca with 6,974 m², and El Deleite in Aranjuez, with 5,7 m². But the most notable developments were the complete refurbishment and extension of the El Rosal shopping centre in Ponferrada (formerly Las Medulas), which has been re-located and extended by 37,5 m², and Barrio Art Deco in, which has increased its surface area by adding 26,85 m² to the former La Ermita shopping centre. Extensions / 2nd Phases The regions with the highest volume of new retail space are (2, m²), Comunidad Valenciana (134,6 m²) and Andalusia (11,6 m²). By province, in terms of new GLA, is followed by Valencia (88,6 m²), Zaragoza (78,5 m²), Murcia (7,5 m²), Guadalajara (64,1 m²) and Cadiz (62,8 m²). 28 has started with 578 shopping centres in Spain and a GLA of 13 million m², including all types of shopping centres of over 5, m², which represent a density of 288 m² per 1, inhabitants. This figure drops to 23 m²/1, inhabitants if only pure shopping centres are taken into account, that is, excluding leisure centres, factory outlets and retail ware- Main Openings 27 Name Location GLA Category Ferial Plaza Guadalajara 55,814 Large H2 Ocio (2nd Phase) Rivas Futura Rivas Vaciamadrid, 5, Large Área Sur Jerez de la Frontera, C ádiz 46,8 Large Plaza Imperial (1st Phase) Zaragoza 45,1 Retail Warehousing Park La Gavia (1st Phase) Ensanche de Vallecas, 43, Large El Rosal ( extension -refurb) Ponferrada, León 37,5 Large Espacio Mediterr áneo (2nd Phase) Cartagena, Murcia 37,165 Large Alcalá Magna Alcalá de Henares, 34,15 Medium Plaza Mayor de Xativa Xativa, Valencia 32,6 Medium Barrio Art Decó (extension -refurb) 26,85 Leisure Centre El Golf Talavera de la Reina, Toledo 21,6 Retail Warehousing Park UGC Manoteras 13,226 Leisure Centre

5 GLA (m2) per 1, inhabitants Shopping Centres Density in Spain Average SC only Average Navarra Asturias Murcia Canarias Pais Vasco Com. Valenciana La Rioja Cantabria Andalucia Aragon Castilla La Mancha Castilla y Leon Baleares Galicia Cataluña Extremadura Ceuta & Melilla houses. Based on the first figures, Spain is ranked ninth in terms of density in Europe, behind the UK and France. If we take into account the GLA from pure shopping centres only, Spain moves to the fourth position behind the UK, France and Germany, and slightly above Italy. GLA density per inhabitant by region has not seen significant changes and overall, those regions ranked both above and below the average have not changed. As a result of both demographic changes and new openings, the regions moving up one position in the ranking are Navarra, Asturias, Comunidad Valenciana and Castilla-La Mancha. Among those which fell in the ranking are Murcia, the Canaries, La Rioja and Cantabria (which falls exactly on the average). Today, 41% of shopping centres are over 1 years old and only 7% have recently undergone refurbishment. Increasing competition and the need for the retail mix to adapt to new consumer patterns are leading some developers to consider a refurbishment or a re-positioning, as a short term measure. It is precisely in these moments when shopping centre management is critical, both for managing the refurbishment and anticipating the need to refurbish and also fro achieving higher visitor numbers under the prevailing conditions. Shopping Centres Density in Europe Netherlands Sweden Ireland Estonia Luxembourg Portugal UK France Spain Czech Republic Italy Lithuania Latvia Slovakia * Poland Hungary Germany Belgium Greece Turkey Russia Romania Bulgaria Ukraine Total GLA in sq m / 1, inhabitants

6 Outlook 28 will be another record-breaking year in terms of new GLA, in line with 23 and 26, estimated at 1.2 million m² during the year. In fact, some of the openings that were postponed from the end of last year have confirmed opening during the initial months of 28, even though launches at the start of the year are not usual. These include A Laxe, Vigo, and Portal de la Marina in Ondara, Valencia, scheduled for February, and Espacio Buenavista, Oviedo, scheduled for March. It must be pointed out that approximately 25% of the new GLA relates to second phases or enlargements, such as the Plaza Imperial in Zaragoza (82,3 m2) or Alegra in San Sebastián de los Reyes, (25,5 m²). Around 34% of these projects are large-size centres. Despite the high levels of existing retail surface area, a large number of projects continue to appear throughout Spain. This responds to the fact that there is still space in the market for new shopping centres in their various guises and also that recently some developers have become more interested in the retail sector to diversify their portfolios in the light of recent changes in the residential market. Taking into account the most viable projects for the next three years, there is 1,635, m² in 58 projects under construction and 936, m² in 41 licensed projects. If we add unlicensed projects and enlargements and second phases under construction, it is estimated that 21 could close with 16,611,4 m² of GLA distributed throughout 683 centres, resulting (if all projects are developed) in growth of 28% from 27, a very similar level to the previous three years (29%). In the same way that various projects at the end of 27 delayed their opening until 28, some of the centres that hope to open in the next three years but are still in initial phases might not be able to complete it in this period. It is not just that there is greater competition. The recent economic situation in which consumption is one of the worst-affected variables together with forecasts for the next few years could cause a slowdown in the development of some centres. On one hand, some developers might find themselves unable to find financing for their projects in the short or mediumterm, whilst on the other, several retailers that have already begun to notice the downturn in consumption have decided to suspend their enlargement and refocus their strategy for the coming months. Something similar could happen to some of the projects planned further into the future: currently a total of 217 projects, equivalent to 7 million m², defined to a greater or lesser extent, have been identified in the market for development over the next 7 or 8 years. The development of all of these projects, however, does not seem viable at the moment. The developers should wait for the economy and the sector to settle over the coming years to see if they will then be able to continue. In the European context, taking into account the pure shopping centre projects for 28 and 29, Spain is the fourth country in terms of new GLA. If the numerous retail park projects, including retail warehouses and leisure centres or factory outlets, are also included it is clear that Spain would overtake Turkey and move into third position behind Russia and Italy. Returning to the possible scenario between 28 and 21, Andalusia stands out amongst the Autonomous Communities for the largest number of projects planned for the next three years, followed by, Valencia, Aragón and Galicia. However,, Zaragoza, Cádiz, Murcia, Valencia and Las Palmas have the most individual projects. Expected future evolution of the GLA in Spain m² Planned without licence Planned with licence Under construction 28% 16,611,4 2776,,c 16,333, ,, 1,937, % ,, 1373,, ,, % 15% SBA 24 SBA 27 SBA 21

7 It is estimated that future density will reach 349 m² per 1, inhabitants by the end of 21, taking licensed and under construction projects into account. That number rises to 357 if projects currently still without a license are also included. Provinces which will see the greatest increase in density (with increases of more than 9 m²/1, inhabitants) are Melilla, Zaragoza, Huelva, Cádiz, Burgos, Las Palmas, Murcia, Cáceres, Pontevedra, La Coruña, Almería and Seville, while those that will see the greatest decrease (with -1 to - 12 m²/1, inhabitants) are Alava, Navarra and La Rioja. With the exception of 26, average density in Spain has increased gradually since 2, largely due to population growth. It has grown by 25% in the last three years, and is expected to grow at a slightly lower rate over the next three, around 16%. Despite the fact that the population growth is expected to continue, this could also be taken as the first sign of a future moderation in the growth of the shopping centre market. With the exception of the developers associated with hypermarkets Carrefour, Alcampo and Eroski, the largest shopping centre owners in Spain are Unibail- Rodamco, ING Real Estate, Sonae Sierra and Metrovacesa, in that order. However, in the coming three years, the Andalucia Com. Valenciana Cataluña Canarias Galicia Pais Vasco Murcia Aragon Castilla y Leon Castilla La Mancha Asturias Extremadura Navarra Baleares Cantabria La Rioja Ceuta & Melilla Expected Growth by Autonomous Community developers who will develop the largest amount of space will be Erosmer Ibérica, InterIkea, Realia Business, Grupo Lar and Multi Development. Riofisa, LSGIE and DuProcom would join this ranking if the total number of projects in the longterm are also taken into account. It is precisely this type of specialist developer in the sector which is most likely to get new projects off the ground in the coming years, in a scenario in which it is increasingly complicated to develop welllocated, innovative centres which are in touch with consumers' new habits. Existing GLA GLA Total GLA in s sq m The need to carry out extensive market studies that are capable of reliably discovering and measuring the most suitable concept for the target clients is increasingly important. In this way, the subsequent leasing, tenant mix and management are capable of guaranteeing the success of the centre. Future Density map by Province (existing centres, under construction and with licence) National Average 335 (m 2 /1, inhabitants) From 5 to 7 From 35 to 499 From 25 to 349 From 15 to 249 From 7 to149

8 Trends, Affluences & Sales The average cumulative size of the centres continues to grow in line with previous years, reaching 22,54 m² although the centres launched in 27 are on average somewhat smaller than those launched in 26, which averaged m². This is because an increasing numbers of projects are launched in phases and that the towns where projects are located are generally medium or small, as demonstrated by the 55% of 27 s new GLA which was opened in towns of less than 8, inhabitants. Although the general trend is usually to open small centres in small towns, increasing the size in line with the increase in population, it is worth pointing out that in 27 five retail warehouse parks have opened in small towns (up to 5, inhabitants) while 4 large centres have opened in towns with populations from 5, to 1, inhabitants. In total figures, 27 was characterised by the opening of small centres (26% of new GLA), followed in importance by retail and retail warehouse parks (16%) and large centres (14%). However, most GLA went to large centres (27%), retail parks (17%) and retail warehouse parks (14%). Looking at the total shopping centre openings by number of centres, the most numerous were small centres (34%) and those based around hypermarkets (2%). By GLA, the list is headed by medium and large centres, which account for 22% and 21% of total GLA, respectively. The type of projects forecast for the next three years is varied: while 25% of the annual average number of centres will be small, the majority of scheduled large or very large centres or retail parks will be opened in 28 and 21. Most retail warehouse parks will be inaugurated in 28 and 29. In 29 and 21 medium-sized centres will be more important. For some time now the sector has been asking what the anchor of these new shopping centres will be. The food "anchors" behind shopping centres opened in 27 have shown the advance of the supermarkets over hypermarkets, given that 41% of centres had a supermarket while only 31% had a hypermarket and 28% had no food retailer at all. This stems as much from limitations in acquiring licenses as from changes in consumers' preferences. According to a recent study by AC Nielsen, 7% of consumers now do their shopping in supermarkets. In those centres planned for the next three years, this trend becomes more significant 43% will have a supermarket, 27% a hypermarket, and 3% will not have a food anchor. Although there was speculation about a drop in the number of cinemas in shopping centres, it is clear that future medium or large-sized projects will continue to have a cinema. Currently 39% of shopping centres have multi-screen cinemas, and over the next three years, 37% of projects will include next-generation cinema complexes. These are expected to add 3 new screens to the market. However, it is evident that due to problems in the sector, some existing cinemas have already been substituted by other commercial or leisure anchors that are able to continue to generate the volume of visitors that the retail units in the complex need. These have particularly been large-area fashion or domestic appliance stores contained within the shopping centre or alternatively the conversion into various retail units. GLA opened in 27 by size of location 1% Population 19% 8% 41% - 49, 5, - 99, 1, - 199, 2, - 699, 23%

9 There has been a 22% drop in cinema visits over the last three years, 8% in 27 alone, dropping particularly in the first five months of the year and September. Growing competition has caused the closure of 36 cinemas in 27, 8 of them in shopping centres, although the net total of screen closures was 37, given that new complexes usually have a large number of screens which compensates for the closure of single screens or smaller, older cinemas. Considering the number of schemes 4% 35% 3% 25% 2% 15% 1% Tipology of Centres 27 Total Stock It is specifically the cinemas that open in shopping centres that are the main beneficiaries of closures, given that they work to improve their facilities and incorporate the most innovative technologies (Imax, Xpand, Cinegames, cinemas with fragrance and sound effects, etc.). This aspect serves to underpin the degree of differentiation which is increasingly necessary for new projects. Apart from this differentiation, traditional anchors and recently emerged operatoranchors such as Ikea or Media Markt or others that may emerge, what does the future hold for shopping centres? Everything seems to indicate that the rapid change which consumer habits are subject to will result in a change of cycle around 21: there will be more centres, more competition, more e-commerce, higher population, more retired people we hope with greater purchasing power more retailers, more leisure options, a demand for better service and an increased necessity to care for the environment and enjoy limited free time. This will probably have an impact on the cost of developing centres, above all to invest in sustainable buildings and in centre management demands. New shopping centre concepts will also begin to emerge, increasingly looking to pamper and surprise the client, in both specific environments and mixed use complexes. Throughout the past year we have seen how almost all operators had ambitious 5% % Small Retail Park Retail Werehouse Park expansion plans, for both shopping centre units and retail warehouse parks, encouraged by good consumption performance and the success of shopping centres among resident populations and tourism. Although the Footfall Iberica visitor index numbers generally increased during 27, the results in December were 2.3% lower than the same month in 26. Analysing visitor numbers from a sample of centres in different categories shows that the average increase is only around 1%. Obviously, each case is different, given that some centres benefited from the integration of new retailers, others suffered due to new competition and others, such as some leisure centres, registered falls in visitor numbers. The drop in visitor numbers was particularly seen (principally in secondary centres) in the last months of the year, from September to November, while December and the first week in January registered, as is habitual, a recovery in visitor numbers, although these were lower than 26. Based on our sample of shopping centres, the impact on sales of the growth in visitor numbers in 27 has been diverse but generally positive, and on average retail sales have increased by 9%. Large Medium Leisure Hypermarket Factory Centre based Outlet CommercialVery Large Gallery Looking at the last four months of the year again, this increase is considerably lower at around 4% due to the effect on consumption of the general economic situation and weather which was a more pleasant than expected. Comparing the annual sales data in shopping centres and the growth of retail sales, it is easy to understand the motive for the closure of a multitude of small shops, which are more sensitive to negative evolution of consumption than chains and do not benefit from the protection afforded by being part of a shopping centre. Following forecasts made by various business associations, the number of visitors during the sales period seems to have grown at a somewhat slower pace than in 27, although sales grew at around 5%-7%, in line with expectations. This is as a result of the effect that increased prices and worsening expectations have had on consumers, who are being more cautious and prefer to wait until sales periods before purchasing. This year, almost all retailers brought sales periods forwards, as well as increasing discounts.

10 Therefore, Spanish consumers have decided to continue spending, but at lower pricepoints at least for a number of products and services. As a result, sales of own-brands have increased in supermarkets and discount retailers, as well as sales in factory outlets and low-cost restaurants, such as McDonald's. The sales performance of the principle retailers in 27 could be generally described as having been more positive for low-cost brands and for the electronics and new technologies sector, and moderate for other retail activities such as clothing, leisure and household (linked with the evolution of the residential sector). A notable aspect is the worse performance of sales in relative to the rest of the country. Luxury goods continued to show a strong performance and further growth is expected for 28. This sector tends to be quite resilient in times of less favourable economic climates and new operators continue to show interest in the sector. Adverse economic data continues to be released during early 28 which has proved detrimental to consumer confidence and the confidence of some retailers who, in some cases, are considering halting their expansion plans until there is more visibility on how the market will evolve. Simultaneously, other retailers with a smaller presence in Spain continue to expand whilst others turn to emerging countries in Eastern Europe and Asia. Although the economic slowdown is beneficial for some, all retailers are logically being more cautious when selecting the projects in which to develop their businesses in the next years. Faced with this changing environment, it is expected that February and March will be more challenging than usual for a retail sector which awaits political and economic developments in the country in the coming months. As discussed, this situation could delay the development of certain projects, due to their need for financing and potential difficulties in leasing. However, the traditionally upbeat Spanish consumer may dispel the negative outlook looming over the sector and cause spending to increase when the current period of uncertainty is over.

11 Demand & rental levels Demand levels Prime Secondary Shopping Centres Retail Warehouses High Street Units Demand from retailers for retail space remained robust throughout 27, fuelled by strong economic indicators. For shopping centres, demand for prime locations was very strong during the first half of the year and strong for secondary locations, with keen interest in taking space on the Mediterranean coast. However, the changes in the economic and financial backdrop were noticeable during the second half of the year, moderating demand for shopping centres in secondary locations. As for retail warehouses, demand for prime projects gradually declined from very high to high levels, and from high to moderate levels for secondary locations. However, demand for high-street retail units remains high, due to two factors: interest from national chains, which showed a slight slowdown by the end of the year; interest from luxury brand operators, which has proven strong, especially among new entrants. Innovative retailers which opened stores in Spain in 27 include Jules, Esprit, McGregor, Cóctel, Claire s and Fashion Kids. The most dynamic businesses EUR/m²/month Shopping Centres 12 during the year were clothing and accessories, perfumes, shoes, sports gear and books in chronological order. The shopping centre vacancy rate has not seen significant changes relative to previous periods, continuing to be at a minimum in prime centres and between 3-5% on average in secondary centres. Rental levels for prime shopping centres followed the trend observed in previous years, with an increase of 4.6% in and 5% in Barcelona in line with the growth rate recorded by the best locations on the Mediterranean coast. Secondary shopping centre sales declined as a result of increasing competition and, overall, have seen growth rates in line with inflation or remained stable. According to our database, the average rent for shopping centres throughout Spain is 18 /m². This average has been fairly stable over the last two years a decrease of only 1 /m² despite the increase in the number of shopping centres and especially retail warehouse parks, with lower average rents. Prime Rents in Spain Strong Weak At present, the economic uncertainty is expected to last for several months before returning to the steady growth seen today. For this reason, prime rents are forecast to stabilise in 28, with only moderate or inflation-rate increases, as a direct result of lower private consumption and delayed expansion plans by operators. A potential increase in incentives and vacancy rates is also expected in secondary locations which are less consolidated and adapted to demand from their catchment areas. Broadly speaking, retail warehouse rents remained stable or showed increases in line with inflation for prime locations and the trend is expected to continue in 28. Average high-street retail units saw increases of 7.8% and 7% in prime locations in and Barcelona respectively. The outlook for 28 points to a moderate increase in rental levels for prime streets, while secondary locations will be negatively affected by the economic backdrop and will probably remain stable. 1 8 Shoping Centres ( /m² /month) 6 4 Barcelona Retail Warehouses ( /m² /month) Barcelona España High Street Units Barcelona 18-22,5 ( /m² /month)

12 Investment market Retail Investment Volumes in Spain Following record volumes of investment in 26, the Spanish retail sector continued to maintain large volumes of asset trading throughout 27, reaching 1.75 billion in 39 transactions. Although this is a 4% drop on 26, and also 11% less than the levels reached in 25, it is the third-highest total in recent years. If Banco Santander's 2.4 billion branch network transaction is included in this data, it would exceed the previous record. However, it is considered to be more of a financial transaction and for that reason has not been included. The average total volume of transactions has dropped because this year there were significantly more prime retail unit transactions than in previous years but their volume was not as high as in 26, reaching only 45 million. The shopping centre sector continues to see the highest investment volume, accumulating 1.88 billion in 14 transactions, 68% of the total volume. Retail warehouses and supermarkets accounted for 119 million in 6 transactions, while retail units reached 445 million in 19 transactions, representing 7% and 25% of the volume respectively. Million Among the most relevant transactions are the purchase of La Nueva Condomina and Metromar shopping centres, in Murcia and Seville respectively. The purchase of the latter became the benchmark for prime yields in 27. In 27, various portfolio transactions have been closed of mainly high-street retail units and the odd supermarket chain, making up 18% of total transactions and 12% of volume, among which the portfolios of Barclays, Telepizza and the supermarkets sold by Redevco are notable. The vast majority of the total volume (82%) is still cross-border transactions, which usually indicates that the buyer is foreign given that Spanish developers are still the largest sellers of shopping centres. Private investors are gaining ground particularly in the area of retail units and occupiers in the retail warehouse sector., ,, The main buyers were Irish and British funds and institutions, accounting for about 5% of the volume, while Spanish companies accounted for about 26% of total volume which, by type of buyer, was led by property companies. Without including high-street retail units and in relation to the European market, the increase in investment volume in 27 was 7% in continental Europe (excluding Ireland and the UK), showing a decrease in the fourth quarter as a consequence of the international credit crisis and general investment uncertainty. Despite this, the number of transactions in this quarter was greater than that of similar periods in previous years and transactions in Spain accounted for 5% of the total volume. If 27 began with a lively market with high levels of demand, the summer's global finance crisis slowed down many of the transactions already in negotiation, especially if they involved high levels of credit which banks were not willing to, NAME UGC Manoteras Diversia La Nueva Condomina La Bretxa Metromar Planetocio Travesia L Aljub Los Fresnos Main Transactions in 27 LOCATION GLA VENDOR PURCHASER 14, Alius Inversiones Axa Reim Ibérica Alcobendas, 24, Realia Business Heron International Murcia 14, Trusam British Land, Pillar San Sebasti án 12,77 Cap Center Invesco Mairena de Aljarafe, Sevilla 23, Novaindes (Multiocio ) UBS Villalba, 22,7 Inversoil Wereldhave Vigo, Pontevedra 1,4 Credit Agricole Pradera Elche 16, Grupo Lar Henderson Gijón, Asturias 2,4 Testa Redevco 27 Investment per Retail sector and volume in Spain High Street Units 25% Retail Warehousing 7% Shopping Centres 68%

13 45% 4% 35% 3% 25% 2% 15% 1% 5% % Purchasers Nationality 27 Total Retail Shopping Centres English Spanish Irish Dutch Swiss French German finance. Investors became much more cautious, especially foreign investors, alarmed by negative news from the residential sector. This news really reflected a far worse situation than what was actually perceived in the country. At the end of 27, various transactions that were in progress were closed, although there was a slight upward trend in yield levels, especially in the shopping centre sector. This is something that has not been seen in the high-street retail unit sector, an area traditionally considered more liquid and secure, as well as accounting for less volume. Yield levels decreased to 4.5% in the first half of the year for prime shopping centres and stand-alone prime retail warehouses, reaching 4.75% for retail warehouse parks and 4.25% for prime high-street retail units. The uncertainty generated by the global credit crunch had increased shopping centre and highstreet retail unit yields to 4.75% and 4.5% by the end of 27, returning to levels as seen at the start of the year. Demand for prime product continues to be high at the beginning of 28. It is secondary schemes which are being examined much more cautiously, and in some cases it has even been necessary to negotiate the closure of transactions. Foreign investors can see increased risk in the Spanish market and their appetite for investment has decreased. Although they still consider Spain to be a good market in which to invest, they prefer to focus on opportunities that could arise in emerging European markets, given that France and England find themselves in a similar situation. In general, investors believe the retail sector, specifically shopping centres, to be a safer refuge at the current time. As a result, it could see increased investment demand coming from the residential sector in the coming months. In 28, the investment market in shopping centres will be, at least in the first half of the year, a buyers, rather than sellers market, as it has been in previous years. Reassessments of the risk of secondary assets will probably take place and an increase in available assets could be seen as the year progresses. While some investors have been hampered by the tightening of credit conditions, others are waiting for more interesting opportunities to appear derived from a hoped-for increase in yield levels. This, however, does not seem likely at the moment, nor in the early months of 28. 8% Prime Yields 4th Quarter 27 7% 6% 5% 4% 3% 2% Shopping Centres Retail Warehousing High Street Units

14 Contactos Retail Jones Lang LaSalle en España Luis Iñiguez Director División Retail Steven Weaving Director de Inversión Antonio Mora Director de Gestión Helena de Arcos Directora Comercial Angeles Pérez Directora Locales Calle Silvia Chapinal Analista Research Retail Oficinas Jones Lang LaSalle en España Pº Castellana, 51-5ª 2846 ESPAÑA Tlf: Fax: Valencia M. del Turia, 65, 1ª 465 Valencia ESPAÑA Tel.: Fax: Zaragoza Pº Independencia, 19-4ª 51 Zaragoza ESPAÑA Tel: Fax: Barcelona Pº de Gràcia, 11, 4ª 87 Barcelona ESPAÑA Tel.: Fax: Sevilla S. Fco.Javier, 2, 3ª 4818 Sevilla ESPAÑA Tel.: Fax: Marbella Urb. La Alzambra, local Pto. Banus - Marbella ESPAÑA Tel.: Fax: COPYRIGHT JONES LANG LASALLE IP, INC. 27. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them. COPYRIGHT JONES LANG LASALLE IP, INC. 27