Savills: RE Inv’t In Retail Parks Reaches Historical Peak

3 May 2016 – Mis Locales

Retail parks are sparking interest in the real estate investment market in Spain. In 2015, investment in this type of asset amounted to €500 million, i.e. seven times more than in 2014. In the context of total retail investment, that figure represented 21% of total volumes in 2015 and accounted for 20% of the total amount invested in this segment since 2000, according to a specialist report about the market, which the international consultancy firm Savills publishes each year.

So far this year, investment in retail parks already amounts to €122 million, i.e. 18% of the total amount invested in the retail sector. Although the majority of that figure relates to the sale of six retail parks by Bogaris to the JV created by Redevco and Ares for €95 million, Luis Espadas, Capital Markets Director for Savills Spain, says that “this operation is evidence of the interest being generated by these types of assets, which are attracting both new profiles of investors and new property developers. The investment figures registered so far this year exceed those recorded during the same period in 2015.”

From the point of view of real estate investors, this sector, which generates returns of 6% for prime products and which is prone to decrease due to the imbalance between supply and demand, is very interesting in the context of the recovery in consumption, given that it requires only moderate investment volume and generates higher levels of profitability than for other retail products. Moreover, it is “safe”, due to the quality of its tenants and the fact that it barely requires any management following the purchase.

Retail space in retail parks, just over 1.85 million sqm, now accounts for 12.5% of the retail real estate market and construction activity is continuing to grow, boosted above all by traditional domestic players in this segment in the retail sector, although other investor profiles, such as the Socimis, have also started to develop retail parks, such as the complex that Grupo Lar has announced that it will construct in Sagunto. In addition, international property developers are expected to enter the market, especially from France, to actively seek out land.

According to the consultancy firm, all of this will boost investment forecasts, on the one hand, along with the arrival of new operators to the format in the retail sector, on the other hand.

For the time being, the expansion plans of operators familiar with this format, such as Leroy Merlin, which expects to open 25 new stores between now and 2020; Ikea, with new formats such as the new delivery point in Navarra; Media Markt, Sprinter and supermarkets such as Lidl and Aldi, as well as the entry into retail parks of less typical brands, such as H&M, C&A and Mustang, are proof of the consolidation of the retail park segment. (…).

The report also identifies which provinces have the greatest potential for the construction of retail parks, based on retail density and the spending capacity of each population. País Vasco, Cataluña, the Balearic Islands and Castilla León are the regions with the most suitable provinces for this business niche.

Original story: Mis Locales

Translation: Carmel Drake