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Flagship Stores Become The Bastion Of Large Retailers

19 October 2017 – Expansión

The unstoppable rise of e-commerce, the tsunami of digitalisation and the new buying habits of consumers have revolutionised the retail sector forcing operators to adapt to the new times to stay competitive.

The e-commerce sector is now turning over €24,000 million per annum in Spain, with a growth rate of 20% p.a. In this context, consumers are increasingly using the internet to manage their purchases, resolve queries and optimise their visits to stores. As such, they are visiting stores less frequently but they are spending more time there when they do go, according to a report from CBRE about the retail sector.

In this context, large international brands are backing the flagship store model as a gateway into Spain; and operators that have traditionally based themselves on the outskirts of cities are now moving into flagship stores in the centre. By way of example, the French firm Kiabi opened a store on Paseo de Gràcia a few months ago. In the same way, operators who have traditionally had stores in retail parks are now making space for themselves in the city centre, such as Media Markt, which opened two stores in the centre of Barcelona in 2016. Before the summer, the electronics firm also opened its new its flagship store in Plaza del Carmen, Madrid, just a stone’s throw from Gran Vía.

Ikea is joining this trend too, with a store on Calle Serrano; as is Leroy Merlin, which is planning to open a shop on Calle Fontanella, next to Plaza de Catalunya in Barcelona

Interest in Spain

“Physical stores are still the favourite channel for consumers, but it is harder to get people out of the house. To attract them, retailers are opening large flagship stores focused on the shopping experience and expanding the range of services, supported by new technologies that allow marketing strategies to be customised”, explains Gonzalo Senra, National Director of Retail at CBRE España (…).

Given the interest from large brands in Spain and encouraged by the upwards cycle of the economy and the improvement in consumption, many overseas institutional investors have decided to back the Spanish market. For example, the US investor Hines has purchased four important prime premises in Madrid and Barcelona in the last year.

These types of investors are the main buyers of flagship stores in well-located premises, involving investment volumes of more than €20 million. Moreover, sources at the consultancy firm have noted a change in the trend in this market with the entry of several insurance companies bidding for large prime assets.

By contrast, the market for smaller acquisitions is dominated by Spanish private investors and family offices – they tend to be particularly interested in assets worth less than €10 million.

Overall, investment in high street premises amounted to €800 million in 2016. The rate of investment continued during the first half of this year, with an investment volume of €515 million, according to data from the consultancy firm (…).

The high level of demand has accentuated the typical shortage of well-positioned products and resulted in a reduction in returns. According to the report, the downward trend in yields continued in 2017 to reach 3.25% in some cases for the most prime products in Madrid and Barcelona (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake