Deloitte: Inv’t In Retail Sector Will Reach €3.046bn in 2017

23 November 2017 – Expansión

Shopping centres have reached their cruising speed. After breaking all records last year, with a transaction volume of €3.769 billion, investment in the sector is maintaining its strong dynamism and could reach €3.046 billion by year-end. That would represent the second highest annual figure for a decade, according to research by Deloitte for The Shopping Centre Handbook.

So far this year, investment in shopping centres has amounted to €2.296 billion, which represents 30% of the total volume invested in the non-residential real estate market in Spain. Moreover, the remaining weeks of the year are expected to be particularly busy, which should allow the figure to exceed the €3 billion threshold in 2017.

Historical operations, such as the purchase of Xanadú (Arroyomolinos, Madrid) by the British fund Intu Properties for €520 million and the subsequent sale of 50% of that asset to TH Real Estate for €264 million; and the acquisition by Klépierre of Nueva Condomina, in Murcia, for €230 million, have catapulted investment this year despite the fact that, if the outstanding operations in the pipeline materialise, the total volume will be 19% lower than in 2016.

Record operation

Compared with other countries in Europe, Spain is consolidating its position as the third largest market in terms of investment, accounting for 16% of total volume. In this sense, the purchase of Xanadú leads the ranking of the largest operations transacted in Europe this year. Nueva Condomina also features in the list of top 5 deals, together with the purchase of Rathaus Galerie Leverkusen, (Germany) and Le Befane Shopping Centre (Italy), both of which were acquired by Union Investment, for €220 million and €244 million, respectively.

“Investors in shopping centres in Spain believe that the strong macroeconomic outlook will continue to boost household consumption and with that, the valuation of retail assets”, said the Partner in Financial Advisory at Deloitte, Javier García-Mateo.

In terms of the investor profile, García-Mateo explains that this year, “the stage has been shared by Spanish Socimis, which have seen their stake of total investment fall to 16%, to the benefit of international funds, which are looking to build large multi-country platforms”.

The Director of Financial Advisory at Deloitte, Ana Granado, also points out that this year, financing for shopping centres amounting to between €1.2 billion and €1.5 billion has been closed. “The traditional banks are being joined by a select group of alternative providers of capital, which are willing to finance the development of land and projects in the transformation and renovation phase”, she said.

Regarding the supply, currently, the average commercial density of shopping centres in Spain amounts to 285 m2 for every 1,000 inhabitants. By province, Zaragoza (with 638 m2 for every 1,000 inhabitants) and Las Palmas (with 641 m2 for every 1,000 inhabitants) are the Spanish provinces with the highest commercial density. At the other end of the spectrum are Lérida, with 40 m2 for every 1,000 inhabitants and Gerona, with 65 m2 for every 1,000 inhabitants.


In terms of the commercial park, José María Espejo, Senior Manager at Deloitte Financial Advisory, indicates that 45% of the current supply of shopping centres is showing signs of significant technical obsolescence. “Any renovation processes will have to go hand in hand with some major capex investment”, he said.

According to Deloitte’s calculations, the amount of investment required to reposition the obsolete assets amounts to around €1.08 billion.

By way of example of some of the shopping centres that have been repositioned in recent years, La Moraleja Green, in Madrid stands out, with an investment of €10 million. That shopping centre, located in Alcobendas and inaugurated in 1995 is owned by Kennedy Wilson, which bought it from ING Real Estate in December 2015 for €71 million. Meanwhile, Unibail Rodamco, has invested €148 million in the repositioning of the Glòries shopping centre in Barcelona and Intu has spent €12 million on improvements at its shopping centre in Asturias.


In terms of challenges for the future, commercial spaces are going to have to adapt to cater for the new habits of consumers and to make e-commerce an ally.

According to the report, shopping centres are at very preliminary levels of evolution and only the most advanced have online shopping platforms, mobile applications and loyalty programs for their clients.

Specifically, the level of omnichannel use of shopping centres in Spain amounts to 33%. By category, retail outlets achieve the highest degree of omnichannel use, whilst shopping centres bring up the rear in terms of their degree of digitalisation.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Real Estate Starts To Drive GDP Again After 7 Years In Decline

6 April 2015 – El Mundo

On the demand side, household consumption and the recovery in investment in the construction sector are the components that drive growth. And, on the supply side, construction has reappeared on the scene again after seven years of harsh decreases. The same elements with which the crisis started in 2007.

In light of this data, the recovery is therefore bracing itself with identical components to those that led to two recessions, in particular the return of property.

The fact is that, although it is likely that errors from previous periods will not be committed, for example, the abolition of tax deductions, incentives for developers and easing of credit, housing has had an important impact both on the banking sector, as well as on the economy as a whole. For this reason, many analysts think that the production model of the Spanish economy should be more diversified and depend to a lesser extent on construction.

Most of the indicators suggest that the property market has been stabilising since 2014 and is now brimming with strength. The recovery in the gross added value of the sector is already materialising. After 24 consecutive quarters of negative growth, with annual decreases of more than 15% in 2010 and 2012, the sector recorded its first, albeit meagre, upturn (0.02%) in the third quarter of 2014 and bounced back forcefully in the fourth quarter, growing by 3.4%.

All of this has meant that construction at current prices (€53,829 million) accounted for 5.1% of GDP. It still only accounts half of what it represented at the start of the crisis in 2007 (10.1%). But experts expect a rapid acceleration.

In terms of investment in construction, possibly catapulted by the activation of public works in the face of new electoral commitments and also by the increase in building (activity), the sector recorded its first positive annual growth rate since the crisis (and the second quarterly increase) after 26 quarters of consecutive decreases. Therefore, the decline is deemed to have come to an end.

Specifically, residential investment increased by 0.4% in inter-quarterly terms during the last three months of 2014, whereby completing four quarters of gains. According to the Bank of Spain, all of this seems to mark “a change in the cycle for this component of demand”. Moreover, the indicators available from the first quarter (of 2015) point to a continuation of this trend in a context in which new building permits recorded a new upturn.

Meanwhile, the notarial statistics show that house transactions increased by 20% at the end of the year, with an average transaction volume of 30,000 homes per month. This recovery is concentrated in the segment of used homes and is continuing to benefit from the increase in purchases by overseas citizens. Now Spanish citizens have joined the drive to make house purchases.

Other indicators in the real estate market also show the same trend, with an increase in house sales and in house prices. Thus, in 2014, for the first time since the crisis started, the segment experienced a positive average annual increase (0.3%) following decreases of 10.6% and 13.7% in 2013 and 2012.

But, as Santiago Carbó and Francisco Rodríguez note in a report prepared for Funcas about the start of the recovery in the market, the real estate and construction sector “have unquestionable importance for the economic growth of Spain”. For this, they say that now that the economy is recovering “the role of (the) construction (sector) will become significant, sooner or later”. Above all, it is important for the generation of employment. In this way, construction contributed more than any other sector to the creation of more than 96,000 new Social Security memebrs in February; construction alone accounted for 26,000 jobs, i.e. more than a quarter of the total. The number of social security contributors has returned to one million (people); in 2006, there were 2.5 million. In terms of employment, the number of people has decreased by 62,000 with respect to the same month last year.

The emergence of the construction sector in (terms of GDP) growth will be more important this year and in the future. According to the Bank of Spain, the recovery of the added value of construction companies has continued during the first months of 2015. Meanwhile, Funcas indicates that, as a result of the more vigorous than expected behaviour of consumption and construction, GDP (growth) should reach 3%, versus the 2.8% that the Bank of Spain currently predicts.

Original story: El Mundo (by Francisco Núñez)

Translation: Carmel Drake