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Bet on Flagship Stores Causes Smaller Establishments to Shut Down

12/12/2014 – ExpansionPro

From Serrano to Paseo de Gracia, through Gran Via and Rambla de Catalunya. High-streets of Madrid and Barcelona, and also of Bilbao and Seville, have transformed into a battlefield for the most prominent operators, in majority from the clothing industry, striving to open their flagships in these coveted locations.

‘All of them strike over 4.000 retail spaces on the Preciados, the Gran Via and the Serrano streets in Madrid, and the Paseo de Gracia, the Portal del Angel streets in Barcelona’, specified the Head of Retail High Street of JLL Spain, Angeles Perez.

The mega-store fever, though, results in shutting down smaller shops. ‘Average H&M stores in Spain span over 2.500 square meters, which implies that in order to open a new, larger shop, the chain has to close some other. Also, Mango could start closing its establishments as it is currently buying many properties for its innovative concepts’ , said the executive woman. For instance, Mango is planning to open a 3.000 sqm store at 13 Orense street, Madrid.

Furthermore, the odds are low that Inditex would close any shop as when it removes one, it replaces the establishment with another brand. For example, the 46 Serrano property formerly housing Zara is now occupied by Massimo Dutti (pictured), and that in turn was replaced by Oysho.

Recession had little or no impact on the high-streets’ rental prices. Just the opposite, there even have been some rebounds. Thus, a prime area square meter costs 228 euros in Madrid (up 8 euros from 2013, and up 18 euros from 2010), JLL reported. In case of Barcelona, the increase is even more notable as today’s price, 233 euros per square meter, has been increasing constantly since 2008.

Investment in retail assets has reached 330 million year-to-date, and the forecasts are that at the end of 2014 the amount will show 450 million euros. ‘Private investors and family offices look to buy shops from between one and ten million euros, whereas funds like Axa are ready to pay more than ten million euros’, remarked Borja Ortega, JLL’s Real Estate Director. ‘The operations are 60%-70% financed’, he added.

Along with the end of the year, the old-system rental contracts, i.e. signed before 1985, will have to be rectified and renewed.

 

Original story: ExpansiónPro (by Rocío Ruiz, Jueves 11 de Diciembre, pp 14)

Translation: AURA REE