Spanish Retail explains reasons for confidence despite uncertainty at MAPIC

The main event of the international retail real estate market takes place at a crucial moment for the Spanish sector. Despite the fact that the investment continues with record figures and the activity of the industry of shopping centers in Spain has gained momentum, the uncertainty created by the ‘catalán’ attempt of Independence casts a shadow on the economic outlook. The priority at this trade fair is to not lose investor confidence.

Cannes has always been a good time to test the market, however it is seldom that the benchmark of the international retail sales market has been so essential for the business of spanish companies.

From November 15-17 at the Palais dels Festivals in Cannes, the MAPIC event brings together the best of investment and real estate promotion of commercial assets. In 2016, more than 8400 visitors attended the fair, coming from 78 countries, among which, were 2100 retailers, 2500 promoters and real estate managers and more than one million investors. This year approximately 300 representatives of Spanish firms and more than 40 companies, among others from our country, are present at the fair.

MAPIC will address many topics: Digitalization, technology, the buying experience, leisure trends, avant-garde architecture applied to shopping centers and renovation, and Food & Beverage, the main topic of this year´s edition that casts the spotlight on an essential element and that has become the central strategic component of various shopping and leisure centers.

However, in these impromptu chats that enrich the real estate fairs it is very likely that the information which is coming out of Spain makes the spanish retail representatives strive to convey a message of confidence to the international market. The situation in Catalonia produces untimely uncertainty at a time in which the Spanish retail real estate has had a string of various quarters exhibiting great growth strength.

A message of strength and confidence

Undoubtedly, that will be the message that the organisation AECC (Asociación de Centros y Parques Comerciales, in spanish) will convey at the conference that it is preparing for November 15 at the fair. Already the title of the session, The Magic Circle of Retail in Spain: Leisure, Tourism & Shopping promises a conference at which the strengths of the spanish retail market will be highlighted: an industry that is growing amidst the fervor of tourism, the recovery of consumption and leisure after a really good year for commercial real estate.

In this regard, MAPIC is the right venue to showcase the extraordinary numbers for the activity of the shopping centers, which can boast of a 2,5% increase in sales for 2016. In addition, the average occupancy of shopping centers has increased by 94,4% on average during the first quarter of 2017 and the consumption outlook for this year is strong.

What is certain is that spanish retail, except for the ‘catalán question’, is experiencing one of its best moments. The CBRE consultancy, in a recent report, talked of the “best economic expansion cycle” in order to describe the expansion of the business of shopping centers and High Street in Spain.

The data exhibited confirmed the smooth progress of the market with an economy that is encouraging sales and attracting new foreign investors to spanish shops and shopping centers and a digital revolution that is requiring retailers to adapt their strategies in order to keep up with competition.

An attractive market for investment

The excitement that Spain arouses among international investors does not take anyone by surprise. After nine months in which Spanish real estate has reached record numbers the retail assets are already the firmest investment commitments. In total, the sector attracted a third of the 10.3 billion of real estate investment as of september according to the Investment Insight Spain report of the Cushman & Wakefield consultancy, which expects to close the year with record figures.

The major sale purchase operations of shopping centers have boosted retail investment until transforming it into the segment that has received the most money in recent months. Furthermore, foreign investors are those who have been involved in the largest operations, thereby leaving spanish partners in a secondary role.

Once again, this year a significant number of sale purchases are occurring and a renewed interest has been observed in the sector of commercial parks, although a repeat of the record investment volume of last year is not predicted according to the CBRE.

On the other hand, the consultancy emphasizes that in 2017 a change in the trend in the spanish High Street market has been observed, with the appearance of some insurers making a bid for prime assets with large volumes even though private spanish investors and family offices dominate this business. According to consultancy data in the first semester the investment in these premises reached 515 million euros.

Investor demand continues running high and this is being reflected on the profitability of commercial assets that has shrunk to 4,25% for the most prime product. The profitability for secondary assets has also diminished and is between 5,75% and 6,25%.

More Shopping Centers

In addition, this edition of MAPIC comes at a time in which the promotion of shopping centers is being re-launched. The latest data of the AECE foresees the creation of approximately one million of GLA m2 in twenty new shopping centers that will open their doors between 2017 and 2019. In addition, expansion projects are in the wings and which will amount to another 340.000 m2 of new market opportunities.

Retail has become a refuge for the investment of many institutional investors and foreigners who have observed in the evolution of the spanish economy an opportunity for growth in retail. In this regard, we will see if the uncertainty for the catalan challenge effects this “magical retail circle” and if the inertia acquired is enough to maintain the confidence of international markets.

Más información: Especial MAPIC 2017