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S hopping Centers in Puerto Rico Challenges and Opportunities 2006-2010 International Council of Shopping Centers February 3, 2006 The Puerto Rican Paradox An island that measures 100 x 35 miles Population of 3.9 million people Unemployment rate of 11% Income per capita is 1/3 of US

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slide1

Shopping Centers in Puerto Rico

Challenges and Opportunities 2006-2010

International Council of Shopping Centers

February 3, 2006

the puerto rican paradox
The Puerto Rican Paradox
  • An island that measures

100 x 35 miles

  • Population of 3.9 million people
  • Unemployment rate of 11%
  • Income per capita is 1/3 of US
  • Average sales per square foot in PR malls is 23% > US
world renowned retailers have their highest revenue stores in pr
World – renowned retailers have their highest revenue stores in PR
  • JC Penney
  • Sears
  • Office Max
  • Western Auto
  • Pep Boys
  • Blockbuster Video
  • Taco Maker
top 20 shopping centers in puerto rico by square footage

Location of Top Shopping Centers

365,125

Plaza Guayama

Centro Gran Caribe Norte y Sur

420,000

San Juan (2)

436,440

Plaza Palma Real

Carolina (3)

Mayagüez (2)

450,000

Ponce Towne Center (Ponce 2000)

Caguas (2)

450,000

Rexville Towne Center

Santa Rosa Mall

465,667

Ponce (2)

Hatillo (1)

Plaza Rio Hondo

500,000

Bayamón (4)

San Patricio Plaza

520,597

Guaynabo (1)

Western Plaza

550,000

600,000

Humacao (1)

Montehiedra Town Center

Vega Baja (1)

Las Catalinas Mall

600,000

Guayama (1)

600,900

Plaza Escorial

Plaza del Sol

670,180

670,218

Plaza del Norte

Plaza del Caribe

683,000

Los Colobos Shopping Center

800,200

Plaza Centro Mall

980,000

Mayagüez Mall

1,100,000

Plaza Carolina

1,124,000

2,358,000

Plaza Las Américas

Top 20 Shopping Centers in Puerto Rico (by square footage)
slide7

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

-2.00%

-4.00%

Puerto Rico’s Economy: Historic Growth

Historic Average: 4.1%

51

52

53

54

55

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57

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87

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89

90

91

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93

94

95

96

97

98

99

00

01

02

03

04

per capita income 2000 2005
Per Capita Income 2000-2005

45,000

40,100

40,000

2000

34,897

35,000

2005

30,000

25,000

20,000

15,000

12,947

10,877

10,000

5,000

-

Puerto Rico

U.S.A.

families under poverty level 2000

48.2%

50%

40%

30%

20%

12.4%

10%

0%

Puerto Rico

U.S.A.

Families under Poverty Level – 2000
shopping centers sales per square foot

$500

$400

$350

$285

$300

$200

$100

$0

Puerto Rico

U.S.A.

2000

2003

Shopping Centers – Sales per square foot
puerto rico underground economy estimates

25%

23.3%

20%

17.6%

16.7%

15.6%

15%

10%

5%

0%

1984

1992

1997

2003

Puerto Rico – Underground Economy Estimates
labor force participation rate

47.5%

47.0%

47.0%

46.5%

46.2%

45.9%

46.0%

45.4%

45.5%

45.0%

44.5%

1990

1995

2000

2005

Labor Force Participation Rate
employment

Total Employment (000)

1,238

1,240

2.6%

1,230

1,220

1,210

1,206

1,200

1,190

1,180

2004

2005

155

156

154

152

150

147

148

146

144

142

2004

2005

Employment

July – February FY 2004 and 2005

Unemployment (000)

employment in puerto rico by major industrial sector
Employment in Puerto Rico by Major Industrial Sector

6.8%

11.2%

Manufacturing

6.9%

Construction

22.6%

Trade

Finance, Insurance and

Real Estate

21.2%

Services

Government

3.6%

27.7%

Others

tourism

210,000

205,099

205,000

200,000

195,000

187,621

190,000

185,000

180,000

175,000

2004

2005

68.8

69

69

68

67.7

68

67

2004

2005

Tourism

July – February FY 2004 and 2005

* Tourism is approximately 6% of GNP.

Hotels Registration

Occupancy Rates

retail sales

1,600,000

1,546,529.5

1,550,000

1,500,000

1,433,402.7

1,450,000

1,400,000

1,350,000

2004

2005

Retail Sales

FY 2004 and 2005

Retail Sales (000)

8.0%

slide17

Retail Sales

Sales Growth by Retailers

FY 2005 vs. 2004

Sales In Department

8.2%

Stores

Sales in Shoe Stores

4.2%

Sales in Furniture Stores

5.4%

Miscellaneous and

7.1%

Articles Stores

Ladies Apparel Stores

5.7%

Sales in Jewelry Stores

7.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

slide18

Sales in Supermarkets

8.2%

Sales in Drugstores

7.1%

Sales in Restaurants &

4.4%

Cafeterias

Sales Hardware &

6.4%

Construction Material

Sales in Gas Station

11.5%

-17.5%

General Merchandise Stores

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Retail Sales

Sales Growth by Retailers

FY 2005 vs. 2004

slide19

Personal Consumption Expenditures

13.5%

14.1%

6.9%

6.7%

3.2%

15.2%

12.3%

11.1%

17.1%

Food

Clothing and accessories

Housing

Household operations

Medical care and funeral expenses

Transportation

Education

Business services

Others

construction

Value of construction permits

($000)

0.1%

245,500

245,400

245,300

245,200

245,100

245,000

244,900

2004

2005

Number of construction permits

Cement Sales In Puerto Rico Total

(94 lbs bags)

-3.1%

840

4,500

4,000

830

3,500

820

3,000

2,500

810

2,000

800

1,500

1,000

790

2004

2005

Jul

Sep

Nov

Jan

Mar

May

2005

2004

Construction

FY 2004 and 2005

demand for housing
Demand for Housing

Sales Distribution

2005-2009

  • Housing priced over $300,000 is 11% of the total.
  • Social interest housing is roughly 50% of total demand.

Units

From

To

%

0

90,000

51,896

52.0%

91,000

180,000

19,410

19.4%

181,000

300,000

17,252

17.3%

301,000

480,000

10,051

10.1%

481,000

600,000

898

0.9%

601,000

294

0.3%

or more

99,800

100.0%

Median Price

Median Price

Total

$85,278

IN-MARKET

$196,661

slide23

20,000

20,000

17,911

17,419

18,000

18,000

15,636

16,000

16,000

14,891

14,376

14,236

13,770

14,000

14,000

13,237

13,200

12,000

12,000

10,797

10,000

10,000

7,952

8,000

8,000

6,000

6,000

4,000

4,000

2,000

2,000

-

-

1995

1995

1996

1996

1997

1997

1998

1998

1999

1999

2000

2000

2001

2001

2002

2002

2003

2003

2004

2004

2005

2005

Personal Bankruptcies

FY 2004 and 2005

manufacturing

Growth of Merchandise Exports

in fiscal years 2003 thru 2005

18.0%

17.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.7%

2.0%

-0.2%

0.0%

2003

2004

2005

-2.0%

Manufacturing

Manufacturing Employment

Annual Growth for fiscal years 2003 thru 2005

0.0%

-0.5%

-1.0%

-1.5%

-2.0%

-2.5%

-3.0%

-3.5%

-4.0%

-4.5%

-5.0%

2003

2004

2005

Manufacturing continues to grow at a moderate pace. Employment in the sector is declining, but output, as indicated by merchandise exports, is growing at about 2.7% per year. This trend is expected to continue in the near term.

inflation

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

1

2

3

Inflation

INFLATION

Annual Change of Consumer Price Index

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

INFLATION

Annual Change in Costs of Private Transportation

2.0%

0.0%

2003

2004

2005

Inflation has risen sharply in the past twelve months, owing to the rise in energy costs. The outlook is for inflation to abate rapidly once oil prices start to recede. Within three years, inflation should be roughly the same as in the United States, or about 3% annually.

slide26
GDP

Gross Domestic Product by major industrial sector

2004

42.9%

0.5%

2.2%

6.7%

9.3%

12.1%

9.9%

16.4%

Agriculture

Manufacturing

Contract construction and mining

Transportation and other public utilities

Trade

Finance, insurance and real estate

Services

Government

consumer debt

24.3%

20.3%

32.0%

6.5%

0.8%

6.3%

3.8%

3.5%

0.9%

1.6%

Consumer Debt

Consumer Debt

2004

Commercial Banks

Installment Sale Companies

Local Credit and Savings Unions

PR Commonwealth Employees‘ Association

Small Personal Loans Companies

Pension Public Funds

Revolving credit cards and deferred installments

Federal Credit and Savings Unions

Insurance Companies

Student Loan Marketing Association

Total consumer debt is approximately 42% of Personal Income

fiscal situation in puerto rico
Fiscal Situation in Puerto Rico
  • Structural deficit around $1.3 billion = 2.6% of GNP
    • Extraordinary growth in public expenditure
    • “Diminishing” income tax system
    • “Unhealthy” financing of the budget
  • Downgrading by credit classifying agencies
  • Governor’s projects
    • Short term > transition measures
    • Medium and Long Term > Fiscal Reform
  • Disconnection Executive / Legislature
changes in the economic context

12,000

10,098

9,804

9,742

10,000

9,041

8,528

8,057

7,966

8,000

7,364

7,077

6,519

5,912

6,000

4,000

2,000

-

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Changes in the Economic Context

Total Transfers

Federal Government

short run prospects

Real GNP Growth –Fiscal Years

3.5%

3.0%

2.5%

Risk

2.0%

1.5%

Base

1.0%

0.5%

0.0%

-0.5%

2002

2005

2006

2007

2008

2009

2010

2004

2003

Short Run Prospects
the demographic dimension

2005

2020

>75

70-74

65-69

80+

60-64

75-79

70-74

55-59

65-69

50-54

60-64

45-49

55-59

40-44

50-54

35-39

45-49

30-34

40-44

25-29

35-39

20-24

30-34

15-19

25-29

10-14

20-24

5-9

15-19

0-4

10-14

200,000

150,000

100,000

50,000

0

50,000

100,000

150,000

200,000

5- 9

0- 4

150,000

100,000

50,000

0

50,000

100,000

150,000

200,000

The Demographic Dimension

Age Composition of the Population

1990

75-79

70-74

65-69

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

10-14

5- 9

0-4

200,000

150,000

100,000

50,000

0

50,000

100,000

150,000

200,000

internet incidence in puerto rico
Internet Incidence in Puerto Rico

Internet access in 2005 is 33% among persons 12+ (1,016,500)

Access to

Internet

32.9%

No access to

Internet

67.1%

internet incidence by educational level
Internet Incidence by Educational Level

120%

100.0%

100%

85.7%

80%

60%

54.3%

52.6%

40%

35.9%

26.9%

20.0%

20%

9.5%

0%

Eight or

less

High school

level

High school

Associate

College level

Undergraduate

Masters

degree

Doctoral degree

degree

graduate

degree

internet incidence by family income
Internet Incidence by Family Income

The media income of Internet users is $26,818 as compared to the general population ($16,543)

100%

92%

90%

78%

80%

70%

60%

55%

50%

44%

40%

30%

18%

20%

10%

0%

Less than $15,000

$15,000 to $30,000

$30,000 to $49,000

$50,000 to $74,000

$75,000 or more

annual internet shopping expenditure

45.0%

41.9%

40.0%

35.0%

30.0%

25.0%

25.0%

20.0%

16.9%

15.0%

10.0%

7.3%

6.2%

5.0%

2.7%

0.0%

Less than $100

$100-$499

$500-$999

$1,000 - $1,999

$2,000 - $2,999

$3,000+

Annual Internet Shopping Expenditure

The median expenditure is $388

most frequent purchases in internet

Cruise ships and airplane tickets, hotel and auto reservations

35.0%

Books

34.2%

Electronic Products

31.2%

Tickets (cinemas, events)

30.8%

Music

25.8%

Clothing and Accessories

25.0%

Computers and Software

24.6%

Movies and DVD

23.8%

Decoration and Articles for the House

23.1%

Office Articles

18.5%

Gifts

15.4%

Collection Articles

11.2%

Vehicles

11.2%

Vitamins and Health Products

10.4%

Games

10.0%

Toys and Kid Articles

9.6%

Most Frequent Purchases in Internet
reasons for puerto rico s high retail revenue
Reasons for Puerto Rico’s high retail revenue
  • High level of consumerism.
  • Consumer debt is 42% of Persona Income
  • Credit Card Market > $4,000 million a year
  • 400,000 consumers have credit cards from Banco Popular, (34% SOM)
  • Lack of competition among retailers
  • Underground economy
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