Today, we are facing very high inflation which, together with contractionary monetary policies and the risk of recession, will have an impact on the entire productive fabric. The real estate sector will be no exception to this outlook, although it will continue to demonstrate its strength as a “safe haven sector” in the context of rising interest rates.
Forecasts indicate that, over the coming months, the European Central Bank will maintain the upward trend in interest rates that it has been applying since July. It is expected that, as a consequence of the rise in rates and the increase in the risk of default, fixed income will experience an increase in its profitability compared to variable income. Thus, a few days ago the ECB indicated that the yield on the Spanish ten-year bond stood at 3.31%.
Nevertheless, with the threat of recession looming, investors are looking to the real estate sector as a safe haven. It is worth noting that, in the case of the retail sector, shopping centres maintain a yield of around 5.30%, two points above the Spanish bond. Retail parks, meanwhile, have shown their resilience during the pandemic and maintain a yield of around 5.45%, making them one of the most attractive assets in real estate.
In addition, the Spanish retail sector, unlike other segments, does not have a regulatory constraint that prevents it from compensating for inflation. In the case of Lar España, almost 100% of the contracts are indexed to the CPI and our effort rate is the lowest in the sector, which gives us an additional margin for negotiation when considering rental agreements. Even in situations of adverse context, the dominant centres and parks (and ours are) are able to maintain their attractiveness, even in the case of hypothetical declines in consumption.