Investors have turned to Spain to satisfy appetite for retail parks and international real estate advisor Savills predicts that potential transaction volumes could reach between 70 and 100 million in 2010, up considerably from a total of 19 million in 2009.
The research suggests that demand is driven by current yields of between 7% and 7.25%, compared to 6% in UK. However, a shortage of available supply combined with a predicted upturn in demand will, Savills warns, cause a downward trend in yields. The current retail warehouse stock represents a density of 73 m² per 1,000 people compared to 257 m² in the UK.
Luis Espadas, Savills retail investment director in Madrid, says: "Retail parks stir up strong interest amongst international investors. They seek well anchored parks in principal Spanish cities at market rental levels with good lease lengths and minimal vacancy. What many investors are not aware of is how scarce this product is and the lack of projects under construction."
Savills reports that between 2010 and 2011, 355,000 m² of retail parks will be added to Spain's existing retail park stock of 1.29 million m². At year end 2009 prime retail rents stood at 16/sqm/month, 27% below market peak which reached 22/m²/month in 2007. These levels are in line with Germany and France but below Italy and UK. The rise in rental values will, according to Savills, be determined by the development of new quality parks, the arrival of a wide range of operators and in particular the presence of fashion retailers who currently pay some of the highest rents alongside opticians, computer retailers, restaurants and sports companies.