According to the Forcadell Commercial Premises report for the second half of 2016, the city of Barcelona has experienced a remarkable increase in rental requests due to the improvement of the economy and the increase in consumption by families.
Restaurants, bars, modern bakeries and coffee shops have increased the influx of their customers, becoming a clear example of the good shape of the Commercial Premises Market in Barcelona. Fashion and Household are also registering outstanding levels of growth since these retailers are opting to expand.
DEMAND
According to the Forcadell report, during the second half of the year, and also for overall of 2016, retail in Barcelona has recorded very positive figures confirming its stabilization and consolidation, as pointed out by Forcadell in the previous market report. Rental demand has increased 3.5% over the first half of the year. In fact, the Consumer Confidence Index (ICC-CIS) in December stood at 100.7 points, the highest level of 2016 due to an improvement in the market consumer perception. However, this figure is still behind the best data for 2015. On the other hand, the consumption of luxury has registered a slight decrease, while the volume of demands of luxury premises has stabilized, waiting for market inputs.
Forcadell data indicates that, in terms of demand for surfaces, those from 0 sqm to 200 sqm remain the most requested from first lines to secondary lines. The operators have shown their interest in continuing to grow in number of points of sale. In addition, many brands have come back to having store front premises in addition with the ones already found in shopping centers. By sectors, Fashion continues to evolve positively, especially in the first lines, with active operators and good levels of consumption. Household is also going through a moment of growth in Barcelona with urban layouts in expansion. It should be noted that some fashion operators are expanding their premises to offer also Household products (Zara Home, Primark or H & M recently). The demand in Restaurtants and Bars continues to grow since the consumption of families in this sector has increased both during the week and at the weekend. At the same time there has been a boom in modern bakeries that also offer coffee shop and pastry services (Uvepan, Santa Gloria, Grannier, Pannus or Panaria). Finally, the automotive sector opts to have more visibility by opening a greater number of points of sale.
Forcadell’s research for the second half of 2016 highlights that the demand for the purchase of commercial premises in Barcelona by the end customer has grown by 5% respect the previous semester. However, the volume of requests for this type of product remains residual respect the total volume of sales, which has recorded considerable increases in the entire retail market.
AVAILABILITY
The Forcadell report reveals that in 2016 Barcelona has had to face again a scenario of product shortage while demand for rent has continued to push the market to find suitable locations. Just as in 2013, there were announced increases in availability, reaching even a high percentage depending on the area, now the market is experiencing a contraction in availability in all lines, especially in the 1st and 2nd lines. It should also be noted that the positive socio-economic context has contributed to the dynamization of great consumption, both by city residents and tourists, impacting on all commercial lines. Retail sales, on the other hand and according to data from the INE Dec. '16 (Office for National Statistics), rose by 2.3% year-on-year in Catalunya in November, while occupancy rose by 1.3%.The project Circuit Social del Comerç, promoted by the Barcelona City Council, which will stimulate small business and generate wealth and occupation for its citizens should also be taken into account.
The supply of premises for sale in the first lines is still scarce and the few spaces that are still on the market remain available for a short time. Following this positive situation of the retail sector, prices are closing above their original budget. The premises of 2nd line, which are nourished by the dynamic rhythm of consumption of the first lines, register more rotation and the period of vacancy is shorter. 3rd and 4th lines continue to concentrate the majority of the supply with the exception that the premises of 4th Line have a low interest for investors and only nourish the final customer. Local leading long term investment companies tend to keep their well-located properties, even if it means having to let go of interesting opportunities.
PRICES
The Forcadell report for the second semester indicates that the good shape the sector is experiencing and the lack of space continues to increase the price of rentals in all lines. In 1st Line Mixed, the average rental has registered a 5.25% inter-semester variation and 6.58% year-on-year increase. 3rd line has increased the average rental by more than 5% compared to the first half of the year. Portal de l'Àngel (1st line Very Busy) continues to be at the top of the list as the most expensive commercial street in Spain with €270/sqm/month, followed by the calle Preciados in Madrid at €255/sqm/month.
The prices of the commercial premises for sale in the Catalan capital have advanced along the same lines as the rental prices, rising slightly between 4% and 5% in the different commercial lines. This evolution is clearly a sign of stability and consolidation of the retail market in Barcelona. As pointed out by Forcadell in previous reports, the improvement in the sector's outlook has meant that in some local sales, the closing price has been increased. In terms of prices for the current half of the year, the highlights are those of the 3rd quarter, where € /sqm is 1.775 (6.29% semestral increase and 9.57% year-on-year increase).
INVESTMENT
Forcadell emphasizes in its retail report that the shopping centers and commercial premises at street front have been the top products for real estate investors this year. Shopping centers have attracted interest in 2016 (and in 2017 too) from foreign investors, whose main objective is the achievement of large-scale operations in cities such as Barcelona or Madrid. Small investors have opted for the commercial premises at street front for the flexibility they offer, regardless of the volume invested, in addition to interesting returns. In the second half of the year, the sector again saw a compression of yields, mainly in Prime, not only in Barcelona, but also in the rest of the country. In Prime, profitability has been reduced significantly to reach 4% while in 1st Line Very Busy, Mixed and 2nd Line it stands between 4% and 6%. The positive evolution of retail these past 2 years has made the achievement of €4.300M at the end of 2016 become a reality. The constant improvement of the retail market, both in sales and job creation, has also contributed to the growth and stabilization of the investment client. The lack of product is the main problem of the sector.
The main market players in 2016, according to Forcadell, have been REITs and international funds. As an example of the dynamic activity in investment of the Catalan market, it is necessary to emphasize the start-up of The Style Outlets shopping center in Viladecans in mid-October that will have, after the second phase, a total of 26,500 sqm of rentable area. This is a private investment of more than €80M managed by Neimber. Its implementation is a challenge to Value Retail, a company that manages La Roca Village (24,000 sqm). Both bet on the Outlet style, one in the luxury strip and the other in the middle fringe and focus their interest in the foreign tourists that visit the Catalan capital.
The retail sector has evolved positively throughout 2016 managing to circumvent the unknowns and difficulties posed by the political, social and economic environment in Spain, as pointed out in the Forcadell report. The sector's forecast for 2017 shows that the investors’ interest, mainly by REITs, will remain firm while the economic situation will allow families to maintain the rhythm of consumption carried out until now.
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