High demand for Spanish retail park investment

International property investors have turned to Spanish retail parks in search of yield, with 2010 transaction volumes seen more than trebling to 70 million to 100 million euros, data out on Thursday showed.

Real estate consultant Savills said investor demand was driven by yields of 7 to 7.25%, against 6% in the United Kingdom, although these yields would trend downwards on higher demand and a supply shortage.

Retail park transaction volumes totalled 19 million euros in 2009, Savills said, adding retail warehouse stock represents a density of 73 square metres per 1,000 people, compared with 257 sq m in the UK.

"They (international investors) seek well anchored parks in principal Spanish cities at market rental levels with good lease lengths and minimal vacancy," said Luis Espadas, Savills' retail investment director in Madrid.

"What many investors are not aware of is how scarce this product is and the lack of projects under construction," Espadas said in a statement.

Savills said between 2010 and 2011, 355,000 sq m of retail parks will be added to Spain's existing retail park stock of 1.29 million sq m.

At the end of 2009, prime retail rents were 16 euros per sq m per month, down 27 percent from the 2007 peak of 22 euros.