Trade Premises Market Stirred Up by the End of the Old Rental System

25/08/2014 – Expansion

The deadline for re-negotiating of many rental agreements which were signed before 1985 will pass on December 31st. The ambiguous system has caused many unprecedented situations over the years, especially when it came to the most desired commercial spots in popular streets of Madrid and Barcelona.

Cases are known when a tenant of a shop located in a prime area of Madrid has to pay 200 Euros for a square meter in monthly terms‘, says Robert Travers, Retail Director at Cushman & Wakefield. In Barcelona, the prices rise to 211 Euros/sq m/month.

‘Currently, in the streets where the habitual monthly price ranges from 200 and 350 Euros, there are tenants who for the fist-line commercial premises pay 10 Euros per square meter monthly’, specifies Eduardo Rivero, the CEO of advisory firm Ascana.

Although the contracts will remain valid until December 31st, their effect started to shake the market some time ago. Above all, high street trade premises whose agreements are unnegotiable, come as the target of investors.

Moreover, as usual in the real estate market, the impact is noted differently in the downtown streets than in the secondary areas. ‘The expiration of the contracts has been awaited by landlords for many years. Now, their returns will multiply by 1.000’, Rivero assures. ‘Spain’s prime areas will see pockets of opportunities. The legal amendment will for sure enhance many premises to go out to the market but it will not mean a boom in availableness’, says Noelia Lopez, responsible for the Commercial Streets at JLL Spain. 

‘Today, there are still well-located businesses that fared great over all these years thanks to low rental costs. Unfortunately, they would lose their viability if they had to pay the present quotes. This kind of tenants will be replaced with new investros’, explains Sergio Agüera, Corporate Partner at the Perez Llorca lawyers’ office. 

The opportunities will not go unheeded among the investors who seek well-situated but not necessarily big commercial spaces. ‘In Madrid, in-demand destinations are the Gran Via, the Preciados, the Serrano and the Fuencarral streets. Giant clothing brands and restaurants will look for over-400 square meter space, whereas smaller traditional companies will be pleased with 50 square meter areas’, tells the JLL expert.

Non-Downtown Areas

However, if it comes to secondary or peripheral zones, vacancy rates are believed to go up as the majority of landlords in these areas will probably opt for not renewing the rental contracts in fear of losing their long-term tenants.

 

Original article: Expansión (by R. Ruiz)

Translation: AURA REE

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