José Luis del Valle, Chairman of Lar España. Image: Lar España
Opinion

NEW TRENDS IN SPAIN’S SHOPPING CENTER MARKET

Investment in the Spanish real estate sector has grown steadily in the last few years as the economy has recovered from the crisis.

By José Luis del Valle

Shopping centers have been key in this recovery and we believe they will be the drivers of the ongoing investment expected in the next few years. Investment in retail centers in Spain amounted to €3.5 billion in 2016, a 59% increase over the previous year. Moreover, the latest reports show that the figure for the first quarter of 2017 has already reached €1 billion, so 2017 could easily exceed the record figure of 2016.

The recovery of Spanish consumers’ expenditures is behind the growing interest of investors in malls. Exports have propelled the country’s economic recovery in the past few years, but the increasing confidence of Spanish consumers is consolidating this recovery and will soon lead economic growth. Job creation (April saw a record fall in the jobless rate) is an important driver of rising consumer expenditures.

Investment is not only based on growing consumer expenditures, however. It is also based on the quality of the assets and the potential for higher returns via active management. In our opinion, the possibilities for improving variables like occupancy rates or rental incomes are extremely relevant when acquiring a shopping center. Spanish REITs, like Lar España, are playing an important role in this process.

Our capacity to adapt shopping centers to the new trends and challenges the sector is facing will be key for its future. Online shopping is probably one of the biggest challenges for the retail sector. As with other industries, we can choose to see the internet either as an enemy—a bad choice, as there is little chance of beating it outright—or an ally—a good choice, because this is the only possible way through.

Digital transformation is a must for the shopping center market. In this area, we are developing an e-commerce platform where customers will be able to purchase products and services offered by the different operators established in our malls. Customers will be able to buy items in the stores, book a table at a restaurant, order take-away food, or buy cinema tickets on this website. Our estimates are that this initiative could boost total sales in our shopping centers by almost 5%.

If we want our customers to come to our malls, we need to improve their experience. It is not enough to offer different products and services. Customers also need to have a variety of options for their leisure. The launch of entertainment centers within shopping areas is a very interesting way of attracting customers and offering them leisure options. This customer experience can also be improved by making the shopping center a nice place to spend time, including attractive outdoor areas like artificial ponds.

The shopping center market in Spain has experienced solid growth in the last few years, with increasing investment and an improvement of the assets’ quality. The outlook is good: consumer expenditure is going up and the sector is aware of the challenges ahead, mainly digital transformation and the need to improve the customer experience. I believe the Spanish sector is well-positioned to succeed in the years ahead.

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