Analysis: The sun is shining on Spain’s retail scene

The market

In a world of finite resources, periodic geopolitical instability and constant change, Spain is an international retail location where the sun is shining brightly.

During the dark days of the recession, Spain was one of the markets that lost some of its appeal to many retailers who preferred more economically stable markets such as Germany and the UK, although much of the latter’s attraction was restricted to London.

Now, however, Spanish consumer confidence is back, fuelled by strong economic data, falling unemployment and a spike in tourism – this in a country already ranked seventh in the global tourism market.

Why is Spain now seen as a hotspot?

Spain has a natural advantage of two world class cities – Madrid and Barcelona – where much of its revival is centred.

It also has a healthy second tier of coastal and significant cities such as Valencia, Bilbao and Malaga, giving plenty of scope for retailers to achieve scale relatively quickly.

Year-on-year, 2015/16 like-for-like sales are up 5.5% and online sales jumped 22% over the past five years, all of which is driving positive consumer growth for the first time since 2010.

The smart retailer would see this as the point to surround themselves with optimism.

Which retailers are operating there and where?

If Madrid and Barcelona give us the macro picture for Spain, there are two distinct streets that symbolise the micro climate.

Gran Via in Madrid saw the truly magnificent 133,470 sq ft Primark open last October, where it joined flagships from New Balance and Adidas.

However, it was the eclectic Fuencarral street that registered 32% of new store openings in the city last year, slightly ahead of Gran Via and Serrano with 25% each.

Fuencarral provides an intimate, pedestrianised shopping street with units of modest proportions for brands wanting prominence, without the outgoings of a true flagship. Think Carnaby Street instead of Regent Street.

Barcelona, never wishing to be outshone by the capital, has its own retail revolution happening on Las Ramblas, which took 37% of all new retail deals in the city in 2015.

Even Barcelon’s footballing arch-rivals Real Madrid chose it as the location for their club shop, where it joined emerging brands such as Friday’s Project, Flormar and Double Agent.

The Las Ramblas branch of department store colossus El Corte Inglés is the local test pitch for Gap and Victoria’s Secret is also testing the water through fellow department store ECI, which is widely respected as an excellent trading partner for emerging brands.

Uniqlo will open its first flagship store in Barcelona too and is already hunting for more stores, as are Italian brands Terranova and OVS.

The Salamanca district in Madrid is home to international luxury brands, with many high-end retailers situated on Ortega y Gasset street including Brunello Cucinelli, Chanel and Bulgari, while Barcelona saw the return of Balenciaga on Passeig de Gràcia.

Rents and development opportunities

With all that good news, surely rental costs are going through the roof?

Rents may be high by Spanish standards, but they are not out of control, showing growth of 5-10% in the past 12 months off a comparatively low base.

The development pipeline of 3.7 million sq ft of shopping centre space is helping to absorb the burgeoning demand and a footfall increase of 4.1% in 2015 is helping to paint a very healthy picture for the excellent existing shopping centres.

What are the remaining gaps in the market?

In short, there are few mature retail markets that have enjoyed such a purple patch as Spain over the last two to three years.

It only remains for international brands to recognise Spain as a mature retail market that has truly thrown off the shackles of the past and see it as a confident and profitable place to do business.

The ‘affordable luxury’ sector has perhaps the greatest gap in the market, so take note Ted Baker, Claudie Pierlot, et al.

• Mark Burlton is global executive, retail occupier, EMEA at CBRE