Market
Spain was one of the first countries to notice the recession, as the credit crunch coincided with the bursting of an economic bubble that had been long building up in the domestic economy, with a high degree of household debt and an overheated housing sector. The Spanish economy has been adjusting since the second half of 2008. While Spain still managed to show a positive GDP growth in 2008 (0.9%), the economy contracted -3.7% in 2009. A major negative contributor to the fall was domestic demand. Domestic demand fell sharply in 2009, driven by strong contraction in both investment, down 15.3%, and private consumption, minus 5%. The 19% steep fall in imports is also a symptom of shrunken domestic demand. The downturn caused heavy job losses, especially in the construction sector, where almost one out of four jobs was lost. The unemployment rate rose significantly to 18.1% in 2009 (2008: 11.3%). Although the long-term unemployment rate has always been relatively high in Spain, it was the highest in the Euro Area, and outstripped only by the mid 90’s unemployment rate. In general, consumer prices in Spain slightly receded in 2009 as inflation was a negative 0.3% and thus deflation became manifest. As a result, retail sales contracted more in nominal terms (-6.5%) than in real terms (-5.1%). The recession was also felt in the Spanish shopping centre industry. With declining footfall and retail sales alike, some retailers struggled. This has led to increasing vacancy. Also, retailers have been revising their strategies, carefully rethinking their expansion plans and the locations where they need to be. Together with the increase in supply – quite a few projects came on stream in the past two years – this has led to weaker demand and the increase of vacancies as mentioned. Owners have responded by offering some free rent periods, and new contracts have been negotiated at lower rents. In short, rental levels are under downward pressure.
Source: Annual Report 2009, Chapter Review of Operations, page 62 (PDF, 6.362 kB)
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