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MADRID-Spanish retail property developers have reacted quickly to the global downturn, cutting project volume in 2009 from the original forecast of 1.1 million square meters to an end figure of 360,000 square meters. As a result, rents should rise when the market begins to recover, says realtor Savills.

Of new retail development in 2009, which followed a record delivery of 1.1-million square meters new retail space in 2008, the highest proportion at 33% comprised small shopping centers followed by retail warehouse space at 29%. A further dip in the development pipeline is anticipated in 2010 as many Spanish developers are delaying projects as they expect a recovery in retail demand and financing facilities in 2011. Development activity is expected from 2011 onwards with many developers picking up on previously postponed schemes.

Luis Espadas, director of Savills retail investment in Spain, commented: “The economic crisis has impacted heavily on Spain, with consumer sentiment at a low level and spending significantly down. As with other countries there is now stronger pressure on rents and some larger retailers are using this as leverage to renegotiate current rents.

A decline in development will help to control vacancy levels but once the market goes into recovery it should result in upward rental movement as demand puts pressure on a lack of new supply.”Spain ranks number five in Europe, according to gross lettable area of retail per 1,000 inhabitants. Savills research puts Norway in lead position followed by Sweden, Netherlands and Austria respectively, with the UK at number six.

Allan Saunderson is a managing editor of Property Finance Europe and a contributor to GlobeSt.com.

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