Inv’t In Retail Assets Exceeds €1,800M In YTD16

8 September 2016 – Expansión

So far this year, transactions amounting to more than €1,800 million have been completed (in the retail sector). Moreover, the development market is expected to be reactivated.

After years of low and moderate activity in the retail sector, the exit from the crisis represented a turning point and the last two years have been particularly intense in terms of investment in shopping centres and retail parks. In addition, experts forecast that sales growth will continue during 2016, along with the development of new projects.

In this way, whilst investment in the office segment has moderated during 2016, following the significant activity that was registered there last year, activity continues a pace in the shopping centre sector and, records are being broken, such as, for example, with the sale of Diagonal Mar (Barcelona) for €493 million in August.

Growth in income

Thus, during the first eight months of the year, investments amounting to more than €1,800 million have been made. The big four have strengthened their position as advisors to these types of operations. For example, Deloitte was the buy-side advisor in the Diagonal Mar deal, whilst CBRE advised on the sell-side.

Growth in the economy, as well as an improvement in consumption have represented a wake-up call for shopping centres and, in 2016, sales are expected to grow and the promotion of new projects is expected to be reactivated. Moreover, given that sales are growing at a faster rate than the volume of visitors to shopping centres, the ratio of spend per visitor is also improving. Thus, as a result of the good results and the demand for premises, rents in prime shopping centres increased in 2015 for the first time since the outbreak of the crisis, by between 5% and 10% on average, according to a report from CBRE.

Last year, investment in shopping centres and retail parks exceeded all expectations, with a total volume of €2,650 million. In terms of the profile of investors, the Socimis were the major players, with Merlin and Lar leading the charge, along with fund managers.

According to CBRE, although the economic and political uncertainty is concerning buyers, it has not affected investment activity in retail assets. The consultancy firm estimates that 2016 could end with a total investment volume of €2,000 million in the shopping centre sector.

“Opportunistic funds that invested between 2012 and 2014 are busy divesting in 2016, having reached their target returns much sooner than expected. Institutional investors, which have a much lower cost of capital, are now taking over the reins, now that the yield offered by shopping centres in the rest of Europe is lower than in Spain, despite the fact that the evolution of the consumer environment is less favourable than in our country. We have never before enjoyed such a favourable environment for completing transactions in Spain”, explained Javier García-Mateo, Partner in Financial Advisory at Deloitte.

For José Manuel Llovet, the Director of Retail in Spain at Lar, shopping centres have great potential. “Sales are increasing along with consumption, which means that shopping centres are managing to achieve much higher rent increases than offices, which have not ended up experiencing the improvements that were expected at the beginning of the recovery”, explained Llovet.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

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