Santiago’s Mini-Malls See Rapid Growth

Mini-malls are quickly emerging as a significant new retail sector segment in Santiago as a result of rising large-format retail store saturation levels and rising populations living in new residential areas far away from larger retail centers. In 2012, the market for mini-mall retail space saw an influx of about 26,000 square meters, according to a report in the Chilean newspaper Diario Financiero.

Retail demand has increased significantly as a result of Chile’s ongoing economic expansion, close to full employment, low inflation, and availability of commercial credit. The Chilean Central Bank’s measure of retail sales in Chile increased from 127.35 in January 2012 to 204.60 in December 2012, a rise of about 60%. The Central Bank of Chile’s index of supermarket sales increased by 45% from 107.15 in January 2012 to 155.69 in December 2012.

Consumer credit availability has also been a major driver of retail spending. According to information from the Chilean Ministry of Finance, there were 6,214,178 credit cards in circulation as of the third quarter of 2012, and total credit card purchases totaled about 1.3 trillion pesos. As of the third quarter of 2011, 5,460,609 credit cards had been issued and a total of roughly 199 billion pesos had been spent on purchases.

Although the retail industry has expanded, there has nonetheless been an increase in retail saturation, especially for larger retail formats. Chile was ranked second globally in the A.T. Kearney Retail Global Retail Development Index, but it only received a score of 17.4 for its market saturation level, indicating that it is heavily saturated. Many large retailers have been aggressively expanding outside of Chile, partly as a result of rising saturation levels.

Mini-malls have a number of advantages from an investment standpoint, aside from urban sprawl and the desire of many Santiago residents to reduce shopping commute times in a city where rapidly rising car ownership levels are clogging roads. One of them is the prevalence of older, underutilized retail space in many locations throughout Santiago and Latin America as a whole.

Compared to the large plots needed for larger malls, these plots are frequently simpler to acquire and turn into new retail space. Strong retail segments, such as banks and pharmacies, which are more likely to withstand economic downturns than higher-end stores found in larger malls, frequently serve as the anchors of mini-malls in Chile. Mini-malls can be constructed much more quickly and affordably than traditional shopping malls, which is a crucial consideration in an environment where development costs are steadily increasing and protracted development times can reduce investment returns.

According to demographic trends, the demand for smaller retailer formats should continue to be driven by convenience. Preliminary census data from Chile shows that between 2002 and 2012, the population of Quilicura, a commune on Santiago’s northern outskirts, increased by more than 61%. Between 2002 and 2012, the population of Lo Barnechea, a commune in Santiago’s northeastern outskirts, increased by 33.3%. These areas’ rising population densities have given rise to numerous opportunities for different kinds of mini-malls.