28 August 2018 – Cinco Días
E-commerce is having an unexpected effect in that it is boosting the main high streets of Madrid and Barcelona. A number of operators are opening flagship stores to compete with online sales, whilst at the same time, there is a great deal of interest from investors wanting to acquire these types of properties since they represent assets with high returns.
During the first six months of the year, the main high streets of Madrid and Barcelona sparked a buying frenzy amongst real estate investors. They spent €700 million on the purchase of stores during H1 – that figure was 44% higher than they spent during the whole of 2017, according to the High Street report published by the consultancy firm Savills Aguirre Newman.
In an environment of low returns on other investment alternatives, given the context of low interest rates and enormous liquidity in the market, significant capital flows are being channelled towards property. Within the sector, the high street segment (stores on the most commercial streets) of Madrid and Barcelona are attracting investors.
The yield or return in the best commercial neighbourhoods of Madrid and Barcelona amounts to 3.25%, and in secondary areas, that figure rises to between 4.5% and 4.75% (the better the area, the higher the cost of operations and so the lower the returns). In large towns, the yield on prime stores reaches 4%.
Institutional investors (large real estate and pension funds) have been the most active players, accounting for 76% of all operations, according to Savills Aguirre Newman, with the remaining 24% involving insurance companies, private firms, family offices and Socimis (…).
“Institutional investors continue to focus on the best commercial thoroughfares of the large cities, where the purchase tickets typically exceed €20 million”, says the study. Meanwhile, private investors are more active in opportunities in the cities in which they reside, where they are local experts.
Madrid has accounted for a large number of the operations seen in recent months, with the acquisition by the fund Hines of Preciados 13 (..) and Redevco’s purchase of the Mercado de San Miguel. Meanwhile, AEW bought the Mercado de Fuencarral; Generali acquired Preciados 9; Thor Equities snapped up Gran Vía 30, and M&G Real Estate purchased 68 on the same street. Nevertheless, a lot of the investment this year has been due to one transaction involving a portfolio of Inditex stores, which were acquired by the German fund Deka for €400 million.
For investors, another attractive feature of the Spanish market is the improvement in the rents that tenants are paying, which have clearly risen in recent years since the crisis. Prices on Calle Preciados, for example, have risen from €270/sqm/month two years ago to €277/sqm/month in 2018. Gran Vía has also seen a €10/sqm/month increase to €240/sqm/month, according to data from the consultancy firm.
In Barcelona, prices on the most expensive street in Spain, Portal de L’Angel, have grown by 5.5% during the same period to €285/sqm/month. Nevertheless, prices on Paseo de Gracia are rising the fastest, by 15%, to reach €260/sqm/month (…).
One of the major changes that is being seen is the concentration and opening of large flagship stores in the centre of the two cities through which the operators are seeking to counter the strength of online shopping, by offering what they call a shopping experience (…).
In this vein, as Cinco Días revealed last week, the Chinese technology firm Huawei is going to open a flagship store on Gran Vía 48 in Madrid, in the former C&A store. On the other hand, the Sfera brand, owned by El Corte Inglés, is leaving Gran Vía 30, given that it has recently reorganised its business in the centre of the city to focus on its larger and recently renovated megastore on Calle Preciados.
Original story: Cinco Días (by Alfonso Simón Ruiz)
Translation: Carmel Drake