Corio - Why people buy

Retail

The theoretical rent of the retail portfolio (excluding associates) rose by 15.3% from € 293.8 million at year-end 2007 to € 338.7 million at year-end 2008. The theoretical rental income rose partly through net acquisitions and disposals and partly through indexation and new and adjusted rental contracts.

Net rental income rose by 14.6% in 2008 (2007: 14.7%) to € 283.9 million. The increase of € 36.1 million was mainly attributable to acquisitions and disposals. The acquisition of the Grand Littoral shopping centre in Marseille in March 2008 and of the IKEA outlet at Le Gru in Turin in December 2008 contributed a total of € 11.6 million to net rental income, for instance. The handover of new shopping centres or the expansion and renovation of the following projects had a net positive effect of € 17.5 million on rental income in 2008: the Campania shopping centre in Marcianise (September 2007), the Pieter Vreedeplein in Tilburg, the Quais d’Ivry shopping centre in Ivry-sur-Seine, some outlets in the Charras shopping centre in Courbevoie and Capteor in Orgeval. At the same time, € 2.3 million in net rental income was lost through disposals. This primarily involved smaller properties in the Netherlands, 13 of which were sold in the final quarter of 2008.

Furthermore the net rental growth of properties under management in both 2007 and 2008 (‘like-for-like’) was 4.0% (2007: 5.9%). This was higher than the 3.3% average consumer price index for the EU15 and the nominal growth in retail spending, which was 1.2% in the EU15.

The highest net rental growth was achieved in France, through the relatively high indexation. The increase in net rental income as a result of new and revised leases was highest in Italy. The increase in the Netherlands is always relatively low, due to rent control legislation that does not permit direct adjustment to market rates. Total sales-based rental income amounted to 1.1% and other income (including kiosks and advertising) to 2.3% of the theoretical rent. In Spain, despite good new and revised leases, the net ‘like-for-like’ rental income was negatively affected by a combination of higher vacancies, higher operating expenses and lower other rental income due to exceptional income in 2007.

Depending on the rent levels (or market rents) and revenue growth in the centre, rent increases or replacement of tenants can be achieved when leases expire, in excess of the indexation that has already taken place. In comparison with 2007 the same amount of relet or renewed leases more or less matched that of 2007 (8.3%), but the 16.6% rent increase achieved was slightly lower (2007: 18.7%).

The expiration of retail leases is well spread over the years, and in addition to which only a relatively small proportion (10%) will qualify for renewal or reletting.

Considering the economic conditions, the occupancy rate held up well in the second half of the year. Only in Spain was there an increase in vacancies, as a result of falling consumer spending. The lower occupancy in France resulted from acquisitions: the occupancy rate of the portfolio that was also operational in 2007 remained more or less unchanged.

Source: Annual Report 2008, Chapter Review of operations, page 39 (PDF, 2,1 MB)

Add to My report