Savills World Research Retail

Market Report Spain Retail Warehouses

GRAPH 1 GRAPH 2 New Developments by Type of Scheme* Consumer Confidence and Retail Sales

Small Medium Consumer Confidence Index Large Very Large Leisure Retail Warehouses Retail Sales (right axis) Factory Outlets Retail Parks (SC+RW) 120 10% 35 100 30 5%

80 25 0%

20 60

-5% Growth Annual 15 40 -10% 10 20

5 0 -15%

0 2015M04 2016M04 2017M04 2018M04 2005 M04 2005 M04 2006 M04 2007 M04 2008 M04 2009 M04 2010 M04 2011 M04 2012 M04 2013 M04 2014 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

Source: Savills Aguirre Newman / * forecast Source: CIS / INE

SUMMARY Record high investment in retail warehouses in 2017

■ The Spanish economy shows signs ■ In the changing climate, retailers impeding rental growth in the retail of a more steady recovery. For 2018, and landlords must ensure that warehouse sector. a growth of 2.7% is forecast, four the retail park is aligned with the tenths less than in 2017. market, through joint management, ■ In 2017, four retail parks were incorporation of new brands, and developed, totalling more than ■ During the first nine months of diversification of activities. 54,300 sq m. If all the forecasts 2017, e-commerce grew by 25%. are met, ten retail parks will be From the sectors present in retail ■ Three years ago traditional developed in 2018, totalling more parks, Electronics captures the retail warehouse operators started than 250,000 sq m. highest share of online sales. opening units in urban locations, as a response to the need for expansion, ■ During the first four months of ■ With 94 retail parks and a floor client diversification and adaptation 2018, the retail market accumulated area of more than 2.4 million sq to the digital world / ecommerce almost €495m of investment, around m, Spain is currently fourth in the challenges. €95 m of which corresponds to the European ranking. The retail density retail warehouse market. for retail parks is 52 sq m per 1,000 ■ The lack of availability of prime inhabitants, still far below the products and the slowdown in the European average of 65 sq m. diversification process of retail offer are the main factors which are

savills-aguirrenewman.es/research 01 Market Report | Spain Retail Warehouses

Economic Overview In 2017, the Spanish economy "Along with a more sustained economic continued to show strong dymanism growth expected in 2018, the Spanish and a more steady recovery than the previously recorded expansive retail market will maintain its attractiveness, cycles. In 2017, the GDP grew for and its progress will be reflected in rising the fourth consecutive year at a rate of 3.1%, two percentage points less investment volumes and the development of than the previous year, but above the average of the other Eurozone retail warehouses" Gema de la Fuente, Research countries (2.3%) and economies such as Germany (2.2%), United slowdown is largely explained by the Consumer confidence ended 2017 Kingdom (1.7%) and (1.8%). evolution of private consumption, with a y-o-y increase of almost which will grow at the same pace as eight basis points. This was due For 2018, Focus Economics household income, thus reducing to increased public confidence forecasts a growth of 2.7%, four the expansion momentum gained in in the economy. The Centre for points less than in 2017. The previous years. Sociological Research (CIS) notes that this average is only one tenth The CPI´s interannual rate for the below the one obtained in 2015, GRAPH 3 month of December 2017 fell to which is currently the historic high in Main Economic Indicators six bps points, standing at 1.1%, the series. The accumulated value in according to the definitive economic April was 97.88, two points less than data published by the National the accumulated value in 2017. Household consumption Employment CPI Institute of Statistics (INE). The CPI 6% forecasts for 2018 in Spain ensure Throughout the whole of 2017, stability and few notable changes, retail sales increased by 1.4% in 4% with some subtle increases. The both the seasonal and calendar 2% latest CPI published (March) shows adjusted figures. The Canary Islands a value of 1.2%. (3.2%) and the Balearic Islands 0% (2.8%) registered the highest rates. In 2017, the Spanish economy , (both with -2% generated 560,000 jobs, which -0.2%) and País Vasco (-0.1%) are

Annual Growth Annual represents a total number of almost the only autonomous regions with -4% 19 million employed people, 2% decreases in the 2017 sales index. more than in 2016. During the first In March 2018, the retail sales index -6% quarter of 2018, the unemployment registered an annual growth of -8% rate was 16.74%, two percentage 1.9%. points below the figure of the first

Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 quarter of 2016. E-commerce

Source: INE The rapid progress of E-commerce in Spain is unstoppable. According GRAPH 4 to the National Commission of Trade Volume Share in E-commerce by Category 2017* Markets and Competition (Comisión Nacional de los Mercados y la Competencia – CNMC), in 2016 (last full year available), online transactions of products and Electronics Leisure 12% services accumulated a turnover of 14% €24,185m, 21% more than in 2015. Services 7% Rest of During the first nine months of 2017, categories turnover amounted to €21,880m, 69% Food Fashion representing a 25% y-o-y increase Retail 7% 22% and 90% of the 2016 annual total. categories Health 31% 5% By considering only the categories Household most susceptible to being 4% incorporated into shopping centres Entertainment Department Stores and retail warehouses, we obtain a 3% 25% Restaurants figure of €6,742m transacted in retail 2% categories, a figure that represents a 27% y-o-y increase, two percentage points above total growth. Source: CNMC / Accumulated Q3 2017

02 June 2018

During the first nine months of Decathlon (which ranks first in the of locations where opportunities are 2017, the retail sectors which most total ranking), Worten, Media Markt detected. increased their transaction value and Ikea. This index measures were Services (86%) and Household the customer's journey through The great challenge lies in boosting (70%). In 2016, however, the sectors the different purchasing channels the adaptability to new market which increased most were Grocery (online, mobile and physical store). trends and the demand of an (61%) and Food & Beverage (47%). increasingly volatile consumer. This result demonstrates the degree Not all activity within a retail of competitiveness that retail brands To achieve this, the competitive warehouse has the same weight. now have as real drivers of market advantages of the retail warehouse The electronics sector, with 12% changes in Spain and the omni- format, that is to say, its of the total retail business in distribution channel as a growth convenience, easy accessibility, e-commerce, accounts for the strategy. parking, wide commercial offering largest online sales. and competitive price should be Trends utilised. In addition, efficient and However, during the first nine The retail warehouse sector active management ensuring the months of 2017, this activity rose in Spain remains healthy. The commercial offering is aligned with by 9%, registering a slowdown in duration of lease contracts, the the socio-economic characteristics growth of 11 percentage points stability in investment returns, and of the environment should be compared to 20% the same period the emergence of market niches undertaken. in 2016. where there is still potential for new developments are some of the The search for a new shopping Activity in the home sector (a reasons for the continued growth of experience, new technologies and constant in retail parks) had the the sector. the multi-channel strategy are some opposite experience, with its of the factors that are, to a large transaction volume growing by 70%, The main retail warehouse operators extent, promoting change in the compared to 23% in 2016. are boosting the trend to convert retail park sector. The attractiveness physical stores into showrooms that of these complexes will also be In spite of this, it is important to allow online consumers to examine increased when unique activities consider that online sales of home the product before buying it. The in retail parks, such as fashion and products has few supporters, and click and collect or click and deliver accessories, restaurants or even currently, it barely represents 4% of formats facilitate the purchasing leisure activities geared towards the the total retail activity transactions. process by ensuring all channels are whole family gain importance. already integrated. With regards to the current The arrival of new entrants is a positioning of the different brands Brand expansion policies determining factor in the promotion in the online world in accordance are focusing on gaining the of this change from the traditional with the latest index prepared by necessary funding in order to both concept of retail parks as a mere MHE, four logos have been chosen refurbish and modernise current revenue-generating scheme to a from ten present in retail parks establishments with the latest destination where activities are both based on the scores obtained: technology and expand the number more varied and more novel. Retail Park Stock GRAPH 5 Retail warehouse stock already New Openings exceeds 2.4 million sq m. This places Spain in fourth place in the European GLA Shopping Centres GLA Retail Parks ranking of countries with the largest surface area behind the United 1,200,000 Kingdom, France and Germany.

1,000,000 This sector represents 15% of the total retail surface area in Spain, still 800,000 considerably less than the United Kingdom and France, with a weight 600,000 of 35% and 25% respectively. sq m However, this format has gradually 400,000 gained popularity since 2000, when it barely accounted for 10% of the total retail surface area. 200,000

In 2017, this stock increased by 2%, 0 incorporating 54,300 sq m of new

1990 1994 1995 1996 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SBA into the market, distributed 2018* over four formats: two small retail Source: AECC / Savills Aguirre Newman / * forecast parks in Carcaixent (4,400 sq m)

savills-aguirrenewman.es/research 03 Market Report | Spain Retail Warehouses

and in Alcorcón (8,000 sq m), sq m), Valencia (173 sq m), Toledo both developed by Corpfin Capital Total Retail Park and (173 sq m), (170 sq m) and Real Estate, as well as the Terraça Stand-alone Retail Valladolid (159 sq m). Plaça retail park (29,500 sq m) Warehouse Unit Stock developed by City Grove and the The combined total GLA of retail In stark contrast, two provinces, retail park (12,400 sq m) in parks and stand-alone retail Jaén and Segovia, have recorded Benidorm. warehouses occupied by the retail densities of <10 sq m. sector´s main retailers stands at However, the inauguration of the The development of these parks has almost five million sq m. first phase of the Jaén Plaza retail slightly affected the average size of park (29,000 m2), set for 2018, will the retail parks in Spain, which has , and the Region substantially change the density of now dropped to 25,700 sq m. of Valencia account for just over half this type of park in the province of of monitored space, with all three Jaén, which will increase from 7 sq In terms of the total distribution falling within the five regions with m to 52 sq m per 1,000. inhabitants. of retail parks by size, the lion´s the largest amount of retail space, share of parks comprise between both in terms of retail parks and In the same manner, the two 10,000 and 19,999 sq m, 28 in total, stand-alone retail warehouses. projects scheduled for 2018 in although they barely represent 30% Sagunto and Alfafar (VidaNova Park of the total market GLA. At the provincial level, Madrid, in Sagunto, with 45,000 sq m and Barcelona and Valencia occupy Alfafar Park in Alfafar, with 57,300 The GLA breakdown by region is the top three positions, accounting sq m) will significantly increase headed up by the autonomous for 35% of the Spanish total. the retail density in the province regions that are home to the mega Furthermore, the three provinces of Valencia, which will be 213 sq parks: Andalusia, with Luz Shopping which lead the ranking in terms of m, the highest in retail warehouse (Cádiz) and the Madrid Region, stand-alone retail warehouses also density in the whole of Spain. with Parque Oeste (Alcorcón) and feature among the five provinces Megapark San Sebastián de los with the highest GLA in terms of Economic activity vs Reyes which account for 49% of the retail parks. retail density region´s total GLA. By including the value of retail Retail density in the expenditure per person, obtained These regions also have a higher retail warehouse from the household spending than average retail density (which market survey prepared by INE, in the retail refers to the average surface area Spanish retail density for the total density in retail warehouses, we can for every 1,000 residents in each retail warehouse market stands at get an overall view of the existing region), standing at around 52 sq m 107 sq m per 1,000 inhabitants, correlation between both variables per 1,000 inhabitants. equating to a 7% rise. and the existence of market As such, 17 of the 52 provinces opportunities for the implementation The autonomous regions of Aragón have already exceeded the of a new commercial offering. and have the highest retail national average density, six of densities, with 113 sq m and 108 sq them surpassing the 150 sq m: Thus, the focus should be on the m per 1,000 inhabitants respectively, (211 sq m), Cádiz (190 provinces that register a better followed by the autonomous regions of Valencia (86 sq m), Madrid (77 sq m) and Andalusia (65 sq m). GRAPH 6

At the other extreme, the regions Retail Warehouse Density Spain with the lowest densities are Galicia Density/1,000 inhab. Average Spain (41 sq m), Catalonia (18 sq m) and 200 Asturias (16 sq m). 160 When compared internationally, and according to the data of ICSC . 120 (International Council of Shopping inhab Centres), Spain´s retail density in 80 terms of retail parks (52 sq m) is still

below the European average (65 sq m/1,000 40 m for every 1,000 inhabitants) and sq currently occupies the 13th position compared to the rest of the EU28. 0 It is important to note that with the Ceuta Melilla Murcia Galicia Madrid Navarre

exception of Belgium and the Czech Asturias La Rioja Valencia Catalonia Cantabria Andalusia Republic, the 13 countries with a Castille-La… Extremadura

higher density than Spain also have Islands Canary Balearic Islands Balearic Vasque Country Vasque a higher than average shopping Lion and Castille centre density. Source: AECC / Savills AguirreNewman

04 June 2018

spending performance in retail and a lower density, as they are locations with spending potential "Professionalism, diversity and novelty value are the susceptible to retail park formats. three drivers that will promote the evolution of the

This does not imply that other retail warehouse sector. Taking the rest of Europe as provinces with a level of retail an expample, we can identify the drivers for change." density above the average do not offer opportunities. In all cases, an Alicia Corrales, Retail Research extensive analysis of the catchment area would be required, taking into account both the existing and future and an expenditure per person as well as other smaller parks, with competition of each area in all retail above the average for Spain. a commercial offering more focused formats, as well as the product on their immediate surrounding. The quality in the nearby area. Valencia and Cádiz are in the common denominator is usually opposite situation: with 173 and the supermarket, which in turn is The main opportunities are largely 190 sq m of commercial surface accompanied by some fast food concentrated in the north of Spain: area per 1,000 people respectively. restaurants or second-tier brands the Basque provinces of Álava and Considering that the national average of DIY activities, sports or electric Guipúzcoa stand out, with a GDP stands at 107, the expenditure of appliances. per capita way above the average both the above provinces barely (60 and 40 points respectively), reaches this figure. Being coastal In the European framework, despite but with a retail density below the areas, with a high tourist influx (the being more mature, the growth national average (largely due to the main source of income in Andalusia), situation is similar. In the United Basque restriction of the so-called spending figures may not reflect the Kingdom, the prime retail parks Territorial Sector, “Plan Territorial consumption of tourists (data from already have a commercial mix in Sectorial”, for the construction and/ INE from Household Budget Survey). line with those present in shopping or expansion of new spaces). This is however the main reason for centres, with the opening of brands the existing gap between expenditure such as M&S, Next and Gap. The Catalan regions, with a wealth and commercial provision being of potential and high expenditure, above the national average. French and German retail parks also constitute the areas which have also evolved and incorporated are most sought after for the Current Situation brands such as New Yorker, H&M, development of new retail parks. The retail warehouse market in Spain Primark, JD Sports, Five Guys, has played a leading role in the retail Claire´s, Clarks, Accesorize and The Additionally, Segovia, Soria, Teruel, market during the last few years. The Body Shop. Huesca and Orense are provinces formats that have been developed where focus should also be vary from medium-sized parks, Some of the most significant directed, as they have a low density where the main brands are present, milestones in Europe have been the

GRAPH 7 Retail Warehouses and Retail Parks Density by Region*

130

Álava Vizcaya

120 Guipúzcoa Navarra

Lleida Girona Tarragona Asturias 110 Barcelona Burgos Segovia Soria Valladolid Ávila León Salamanca Zamora Huesca Palencia Madrid Zaragoza Cantabria Teruel Pontevedra La Rioja La Coruña Lugo Islas Baleares 100 Ourense Murcia Castellón Alicante Valencia

Cuenca Jaén Guadalajara GranadaCórdoba Málaga HuelvaAlmería Sevilla Toledo Cádiz 90 Las Palmas Santa Cruz de Tenerife

Retail Expenditure per person Badajoz Melilla Cáceres 80

70 Ceuta

60 -10.00 40.00 90.00 140.00 190.00 240.00 Retail warehouse density

Source: INE/ AECC / Savills Aguirre Newman / * The bubble size is the GDP per capita

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emergence of click & collect lockers are now seeing developments of that have favoured the increase hybrid models, where traditional Retailers «En un entorno con elevada liquidez y razonable nivel in traffic and sales, as well as the retail warehouses coexist with open Three years ago, a trend started in setting up of several new entrants buildings that incorporate restaurants, which traditional retail warehouse de oferta, con valores de repercusión todavía bajos, that have diversified the commercial cinemas and retail premises allocated operators such as Media Markt, y los indicadores del mercado retail en crecimiento offering and improved the image of for family leisure. Worten, Decathlon, IKEA and Leroy the sector as a whole. Merlin chose urban locations in (volumen de ventas, afluencia, etc.) se espera que VidaNova Park in Sagunto, which reponse to both the expansion durante 2016 se mantenga la actividad.» Salvador Furthermore, there have been is currently in the leasing phase, is needs and the diversification of improvements to the existing already incorporating 35% aimed at the clientele, as well as for their González, Inversión Retail parks by way refurbishments, and leisure and restaurant activities, whilst adaptability to the digital world. in marketing, greater importance only 23% will be for traditional home has been given to leisure and and electronics retail warehouses. These new urban formats tend to be entertainment. smaller and designed more carefully The Spanish retailer Pause & Play, in order to enhance the more In Spain, in a climate where the engaged in the gambling industry experiential component. retail market is undergoing profound has recorded significant growth in changes, retailers and landlords must recent years. It now has premises Additionally, the inverse take actions to ensure that retail in the Terrassa Plaça retail park, and phenomenon is also taking place. parks are aligned with new trends. may end up being present in some of That is to say, regular brands are In order to achieve this, there are the projects that are currently being expanding from the city centre factors that are considered key, marketed. and shopping centres, and are which include a joint management, now beginning to look on the retail the entry of new brands (national and The food and beverage sector has warehouse market favourably. Such international), and the diversification also been gaining importance in is the case with brands such as of commercial offering through new retail parks and will be visibly active Orchestra, Mustang and Deichmann activities. when the presence of leisure activity that now also have larger premises in increases. retail parks. The need for joint management is considered more and more It is important to highlight the recent The home giant IKEA is expanding important. Lar España Real Estate opening of Foster Hollywood in its business model. They have Socimi´s acquisition of Parque Rivas Futura (Rivas-Vaciamadrid), already established premises in the Abadía (Toledo) in 2017 and Rivas La Tagliatella (500 sq m) in city centre and opened collection Futura (Rivas-Vaciamadrid) in 2018 Terrassa Plaça (Terrassa) and the points. This complements their new are significant milestones, as they overwhelmeing restaurant offering strategy consisting of incorporating make this company a specialist in that will be incorporated in VidaNova their products in market places such retail parks, rendering this sector Park (Sagunto), with brands such as as Amazon or Alibaba. professional. Consequently, there is Vips, Ginos, Volapie and KFC. a need for consultants to manage the The two drivers of growth for retail park as a whole and provide Furthermore, the American food Decathlon will be its in-house added value. brand Blue Frog, which opened its brands and its human resource premises in Spain at the Parquesur teams, for which it will focus its The reduced number of retail shopping centre in 2017, has efforts on in-store services through warehouse operators requires the confirmed its opening in the Alfafar personalised client advice and clubs incorporation of new brands. This Park retail park. This with be its first for supporters of specific fields. trend is beginning to be observed, location in this format in Spain. but in a subtle way. Such is the case with the Italian fashion brand Globo Moda, which now has three branches TABLE 1 in Spain, and the French low-cost Main New GLA Expected in 2018* footwear giant Chaussea, which is present in Parque Oeste Alcorcón Asset Location GLA (sq m) Developer (Madrid), (Parla Natura) and Pulianas (Alameda City). A. Interés Urb. Alfafar Alfafar Parc Alfafar 57,300 Parc The diversification of the commercial offering through new activities is Vidanova Parc Sagunto 45,000 Lar España Real Estate also considered an essential factor Estepark Castellón 32,000 Fyrtarn Family Office as it increases the attractiveness of the previously highlighted formats, Leroy Merlin/ Trop. Barranco las Torres F. 1 Adeje 32,000 expanding their range of clients, and Atlántico their average stay. Jaén Plaza F.1 Jaén 29,000 Grupo Alvores With this objective in mind, we Source: Savills Aguirre Newman / *forecast

06 June 2018

Additionally, during 2017, Decathlon different retail offer suited to the The chain, which currently has 83 inaugurated three shops in the city needs of the population. In the first premises in Spain, in addition to centre, with a size similar those on few months of 2018, three pilot its online store, has invested €47m the peripheries of the cities. The stores opened in Colmenar (Madrid), in its digital transformation, which Ortega y Gasset branch in Madrid Talavera de la Reina (Toledo) and implies the updating of 100% of its allows us to order online and pick Figueres (Gerona). establishments. up in-store 24-hours a day using a barcode scanner. After the inauguration of the 20th The company wants to take a step Bricomart (9,400 sq m) in 2017 at further in innovation, by including To face the challenges of the digital the Terrassa Plaça retail park, by the its own online market place with world, which already accounts for end of 2018 the French multinational products from other brands, in order 10% of Decathlon´s total sales, the will have scheduled openings in to expand its range of products brand is testing a window counter Burgos, Villalonquéjar (7,000 sq m), without incurring logistics costs. for the purchase of products after Salamanca (7,500 sq m), Madrid, business hours, along with online Alcobendas (8,500 sq m) and After the opening of its third physical shopping services including pick-up Barcelona, Cornellá de Llobregat store in Santiago de Compostela within an hour and home delivery on (8,660 sq m). (Coruña) in 2017, Media Markt the day, if the order is placed before inaugurated a new shop in Zubiarte 3 p.m. As of 2019, the distributor plans its Shopping Centre (Bilbao), in a second establishment in the Basque space of around 3,000 sq m. They Decathlon ended 2017 with the municipality of Galdakao, Vizcaya also offer the well-known Stop&Go opening of its 166th Spanish (9,000 sq m). Moreover, the company service in the car park of the branch, located in the municipality has confirmed a new location in shopping centre, allowing customers of Villanueva de la Serena (Badajoz), Lugo, Galicia, where a 25,000 sq to collect the products purchased with a commercial area of 1,393 sq m plot was acquired on the As online without having to get out of m. For its last opening of the year, Gándaras Industrial Estate. their cars. Decathlon opted for a large format shop that joined the two already In March 2017, Bauhaus, the Worten is continuing its expansion existing in Mérida and Badajoz as German DIY-centre company plan in Spain with the aim of opening well as their brand called City in inaugurated its 11th establishment branches in each province. Cáceres. in Spain, with 13,500 sq m of commercial space in Alfafar After 2017, when this expansion With the merger of Leroy Merlin and (Valencia), and is in negotiations to process slowed down, with three Aki, both companies will create a acquire a plot of 15,000 sq m on the new stores and relocations in new business model with shops of road from Crevillent to , in Madrid, the brand is currently different formats that take advantage the town of . facing 2018 with the intention of of the original strengths of each rebooting activity by opening a new brand. The deep structural changes branch of 750 m2 in Lepe (), experienced by Media Markt in and another of 1,500 sq m in the The restructuring process, which recent years are part of the process 7 Palmas Shopping Centre (Las will be consolidated in 2019/2020, of adapting the company to the Palmas de Gran Canaria), in addition will consist of the development of digital age. to a project in Extremadura.

GRAPH 8 The German company Eggo Kitchen, Main Retail Warehouses Operators 17/18 which specialises in the design, manufacture and sale of kitchen furniture, and has a network of their own five shops in Spain, has begun its expansion through the franchise format. The goal of the company is to open at least five branches throughout the year, and 30 establishments during the next five years.

The French furniture and decoration brand Maisons du Monde, continued its expansion plan in 2017 with a total of six new openings, among which its 20th store in Parc Vallés (Tarrassa) stands out with 1,775 sq m. At an international level, the aim of Maisons du Monde is to continue with business development through Source: Savills Aguirre Newman

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an omni-channel approach, and m/month, whilst the range of surface Estepark (32,000 sq m) are the most have opened 25 to 30 premises each areas varying from 1,500 sq m to significant projects. shops, by 2020. 5,000 sq m have an average rent of €10 per sq m/month. Finally, retail - Alfafar Park will be developed by Rents warehouses over 5,000 sq m have Agrupación de Interés Urbanístico The bargaining power of a developer an average rent close to €9 per sq Alfafar Parc in the commercial area in negotiating rents will depend m/month. chaired by Ikea. Notable brands on, among other factors, the such as Bauhaus, Decathlon, Vips, characteristics of the project in In regards to achievable rents, if we Ribs, Gifi, Orchestra, Muerde la terms of catchment area, number of take into account a retail warehouse Pasta, Juguetilandia, La Piemontesa inhabitants, (both residents, tourists of approximately 1,500 sq m located and Blue Frog stand out. and floating population), dimensions in a super prime retail park, the and characteristics of the land plot Spanish average achievable rent will - The retail park of Lar España Real (surface area, buildability, parking), be in the region of €18 per sq m/ Estate Socimi VidaNova Parc is as well as competing prestigious month, higher than the European set to open in September. It has brands existing in the immediate average, which is €16.40 per sq m/ a hybrid design in which activities surrounding area. month. typical of a retail park will co-exist with others more related to leisure. The lack of prime product and the Stability remains the norm both in Among the classic retailers that slowdown in the diversification of the cities with local currencies (London, will be present, it is important to retail offer are the main factors that Stockholm, Oslo and Copenhagen), mention Leroy Merlin (8,000 sq m), are holding back the rental growth in and where Savills is present in the Decathlon, Worten, Conforama, the retail park sector. Eurozone. The highest rental levels Jysk, Eggo Kitchen, C&A, Casa, are found in Dublin and London, TiendAnimal, Burguer King y KFC, In 2017, Spanish average rents where they stand at €36.3 and €35.9 Pause & Play, Urban Planet, Vips, continued to be in the region of €10 per sq m per month respectively, Ginos and Volapie. Facilities will also per sq m/month. This value amounts whilst Amsterdam and Belgrade are include a Yelmo cinema complex to €12 per sq m/month for prime positioned at the other end of the and a Masymas supermarket. retail parks and €9 per sq m/month spectrum, both with €10 per sq m/ for secondary retail parks. month, levels that have remained flat - Estepark is a retail park with an y-o-y. open-air design. To date, the brands With regards to secondary parks, that have confirmed their presence rents in medium to small locations Future Projects in this retail park are: Leroy Merlin, are around €7-8 per sq m/month and If all the anticipated deadlines are Mercadona, Electro Hiper Europa, those in large locations are €8-10 met, 2018 may become the year in Alain Affelou and KFC. There has per sq m/ month. which the largest number of retail been firm interest on the part of parks will be developed, with a Maison du Monde, Porcelanosa, By size, retail premises with a total of 10 projects. Alfafar Parc Eggo Kitchen, Pause & Play, Ribs surface area of less than 1,500 sq m in Alfafar (57,300 sq m), VidaNova and Ginos. The retail park will also have an average rent of €11 per sq Parc in Sagunto (45,000 sq m) and have cinemas and children´s leisure. Investment market GRAPH 9 At the end of 2017, the investment Average Rent by Activity Sector turnover in the traditional retail segment exceeded 3.5bn , marking Rent National Average a historic record, 14% above the 14 previous peak reached in 2015.

12 For its part, the retail warehouse sector also hit a record level, with 10 €542m, representing 9% more than 8 the total transactions since 2015. The two largest deals in the retail 6 warehouse market in 2017 were: 4 - The purchase of nine retail parks €/sq m/month 2 and warehouses by Castellana Properties Socimi Iberian Ventures 0 worth €193m from Redevco, a subsidiary of Vukile Property, DIY Toys Gyms Sports Fashion - And the purchase of the Abadía Household Electronics retail park in Toledo by Lar España Entertainment

Car Accesories Car Real Estate Socimi from Rockspring Source: Savills Aguirre Newman

08 June 2018

for €63m, without forgetting the sale transaction of Nueva Condomina to Klepierre, which includes the retail "Despite the record investment volume in 2017, retail park attached to the centre. parks continue to face the possibility of further yield

During the first four months of compressions" Salvador González, Retail Investment 2018, the retail market had already accumulated almost €495m, of which Real Estate Socimi for €61.6m from Alisal retail park (Santander) and the almost €95m correspond to the Credit Suisse. Media Markt of Villaverde in Madrid, retail warehouse market (18% of the must be mentioned. annual total in 2017). To complete the rundown of investment transactions for retail It should also be noted that new So far, the largest transaction this warehouses, the sale by Lar España projects are being developed year has been the purchase of the Real Estate Socimi to the French by institutional companies, with Rivas Futura retail park (Rivas- fund Pierre Plus of 7,649 sq m of experience in the retail warehouse Vaciamadrid, Madrid) by Lar España retail warehouses in the Nuevo sector, that will incorporate their know-how and professionalise GRAPH 10 the sector, thus attracting more Retail Warehouse Investment conservative investor profiles.

Investment volume Retail Warehouse market Yields The retail warehouse sector is Retail Park share Vs traditional market (right axis) the retail sector that has been 600 50% registering the widest differentials 45% with respect to the last market peak, 500 recorded in 2007. 40% 35% 400 However, the gap has gradually 30% fallen to the current differential of 5 300 25% basis points, indicating a continuing mill. € margin. 20% 200 15% Prime retail park yields currently 10% stand at 4.75%, 50 basis points 100 above the prime product of 5% shopping centres, when in 2007 0 0% there was barely a difference of 20. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* Due to the growing demand, and the lack of product on the Source: Savills Aguirre Newman market, everything points to the GRAPH 11 conclusion that current prime Yields Spain product transactions may end up registering below 5%. In this case, the secondary product would remain Prime Retail Parks Secondary Retails Parks around 6.50%. ■ 8.5%

8.0%

7.5%

7.0%

6.5%

6.0%

5.5%

5.0%

4.5%

4.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Savills Aguirre Newman

savills-aguirrenewman.es/research 09 Market Report | Spain Retail Warehouses

TABLE 2 Main Deals 2017/2018 (May) Outlook

Vol. Inv. 2018 Asset Purchaser Vendor Estimated (mill.) ■ 2018 is shaping up to be a year of sustained economic Medianas Castellana Poper- growth, albeit more moderate. 193 Redevco Redevco ties SOCIMI ■ The retail warehouse sector continues to generate Nueva S.C. Nueva n/a Klepierre Condo Murcia interest in investor demand. This will be reflected in 2018 Condomina S.L. both umber of transactions and investment volumes.

Parc Vallés* 83 Frey Invest Pradera ■ Retail warehouse operators will carry on with their search for urban locations, but without losing their Rockspring appetite for retail park locations. The lack of prime Lar España Real Parque Abadia 63 Property Invest- products will favour the emergence of secondary retail Estate Socimi ment Managers parks adapted into micro markets. Lar España Real Rivas Futura (2018) 61 Credit Suisse ■ In 2017, we witnessed a subtle entry of new retailers, Estate Socimi and expect that in 2018, this trend will continue with Terrassa Plaça* 60 Real IS City Grove stronger dynamics.

Harbert ■ The emergence of hybrid models with retail El Manar 40 Catella y Aberdeen Management warehouses and buildings which offer leisure (cinemas) Corporation and restaurants will continue to be a trend in 2018. Medianas Parque Lar España El Alisal y Media ■ Imbalance between supply and demand maintains a Markt VIllaverde 33 Pierre Plus Real Estate (2018) Socimi yield compression trend, which is more pronounced for prime assets. Medianas Forum en C. C.Artea y 19 Ores Socimi confidencial ■ The growing interest in demand and the lack of product Parque Galaria* on the market suggest that current prime product transactions may end up recording below 5%. The Parque Polígono secondary product would remain around 6%-6.50%. Lanbarren 16 Savills IM Privado ■ Near €300m have already been identified in retail warehouses, which could be completed by the end of Pinatar Park 11 Castellana Properties Active-Group Socimi the year.

Source: Savills Aguirre Newman Research / *advised by Savills Aguirre Newman

Savills Aguirre Newman Team For further information please contact

Luis Espadas Salvador González Gema de la Fuente Alicia Corrales Capital Markets Retail Investment Research Research +34 91 310 10 16 +34 91 310 10 16 +34 91 310 10 16 +34 91 310 10 16 [email protected] [email protected] [email protected] [email protected]

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