Spanish retail sees yields move out: Savills

Real price adjustments in the Spanish retail investment market are taking place and prime shopping centre yields have moved out 200 basis points since the start of 2008, according to new research issued by Savills. With product on the market as well as investors seeking opportunities, the international property advisor predicts it is only a matter of time before buyer and seller expectations match.

2009 has seen a slow start, but with a record time transaction for Santander Banif Inmobiliaro's Madrid Plenilunio Shopping Centre between February and May 2009, German investors showing interest and American opportunity funds on the hunt for 9% yields, the pricing adjustment that has been taking place might provoke more transactions.

Economic conditions have undoubtedly affected investor confidence and sales have fallen since the beginning of the year by 5% and 8.8% for the services sectors and food respectively, while household goods and personal goods dropped by as much as 24.3% and 10.6%. These falls have led to retailers requesting discounts of between 15-25%, Savills said.

Nevertheless some chains are taking advantage of the economic situation and low price supermarkets (Lidl, Dia, Mercadona) are benefiting whilst traditional brands (Carrefour, Hipercor, Alcampo) are aggressively marketing. Meanwhile El Corte Ingles has launched a new discount brand Aliada, fashion retailer C&A has created a low cost line Avanti and Decathlon has recently launched its Koodza store.

'The unfavourable international economic conditions and the uncertainty about the outlook of the Spanish economy have eliminated investment activity in the first quarter of 2009,' said Luis Espadas, director of retail investment at Savills Spain.

In terms of development, the forecast number of new shopping centre space set to open in 2009 has been reduced by 45% to approximately 635,000 m2, although Savills anticipates this figure could reduce further.