Corio sees undiminished spending at big Italian malls

Fashion-conscious Italian consumers will continue to shop in dominant malls in the coming years despite the grim macro-economic headlines and looming austerity measures, according to Gerard Groener, CEO of Amsterdam-listed shopping centre investor Corio.

'It will be quite dramatic in Italy. But I think you will see good portfolios outperform and generate positive like-for-like, but the weaker, smaller shopping centres will have a hard time,' Groener told an EPRA Insight event on 25 January.

Corio has nine large shopping centres in Italy. Concentrated in the northern half of the country, the 250,000 m² portfolio is valued at EUR 1.4 bn. The shopping centres are doing relatively well despite lower growth in consumer spending. 'There are still fashion spenders in Italy and the performance of the portfolio is still very strong,' Groener said.

'If you read the headlines in the papers you will get scared, but you have to know the performance of a shopping centre, aside from the quality of the asset, depends very much on the spendable income of the consumer,' Groener said, commenting on consumer spending at Italian shopping centres over the next five years.

Household debt is very low in Italy, and the northern part of the country in particular, he said. While home ownership levels in Italy are at 70% - high compared to the European average - the Italians buy their homes with an average of just 40% debt. This creates a huge buffer on the household level.

As a result, Corio's Italian assets had a 99% occupancy level in the third quarter of 2011 and like-for-like rental growth of 15-16% in the last three years.

Although the macro-economic picture in Spain is similar to that of Italy, Spanish households have far more debt and consumer spending is lower. Corio has 11 malls in the country and rental growth is flat.