Retail property "one of spain's biggest success stories"

Photo: David Hurt

The estate agency's latest report highlights the rapid turnaround that has been made by the country's commercial real estate sector, fuelled by the recoverying economy.

"While there remain various headwinds such as a slowly recovering housing market, high youth unemployment and general elections later in 2015, key economic indicators point towards a broadly based and sustained recovery over the next 12-18 months," says Brynn Evans, Capital Markets Consultant at Knight Frank España.

Indeed, GDP recorded its seventh consecutive quarter of growth in Q1 2015, at 0.9 per cent and the overall rate of unemployment has peaked and has edged down over the last 18 months to reach 23.8 per cent in Q1.

Knight Frank highlights the manufacturing sector, notably the car industry, as an area of key growth, thanks to a sharp rise in exports, driven by the weaker euro and international demand.

The dominance of mega fashion groups Inditex, H&M and Mango, both on the high street and in shopping centres, has increased during the crisis years. The rise of fast fashion has coincided with a reduction of independent retailers, and the
recession pushed many foreign brands such as PC City, GameStop and Darty to leave the market.

"In their absence, we have overwhelmingly seen larger retailers, who were perhaps more comfortable with the medium to long term outlook for Spain, re-entrench themselves in the best locations, in many cases consolidating locations into large flagship stores," reads the report.

"In line with strengthening position of the largest retailers in Spain, they are also developing separately branded lines to target key consumer demographics."

As a result, consumer confidence has increased too, which has also boosted retail sales growth to 2.8 per cent in March 2015. Major fashion brands have also seen annual growth in sales in 2014, from Inditex (5 per cent) and H&M (12 per cent) to Mango (15 per cent) and Primark (29 per cent).

The retail investment market has been a "standout performer" in the past two years, notes Evans, with more than €2.9 billion invested in shopping centres in 2014 - a Spanish record. Madrid has seen the most investment, with €800 million spent on shopping shopping centres, followed by Aragon and Galicia with over €400 million in investment.