Is it beneficial to invest in street retail in Spain?

Is it beneficial to invest in street retail in Spain?

According to statistics for the first half of the year, the investment attractiveness of real estate in Spain continues to grow in 2022. Commercial premises with 10.9% profitability are the most profitable units. The hottest trend in the Spanish commercial real estate market is street retail. What it is, what profitability it brings, and how the pandemic waves and other international factors have influenced it, will be discussed below.


What is street retail?

As a rule, the street retail format involves a commercial premises on the ground floor of a residential house in Spain. It can be loosely translated as “street trading” in the English language.

Location is the key factor that determines its profitability. If a retail shop is located in a quiet, undeveloped place, it will only bring expenses to its owner or tenant. So, in most cases, street retail units are in high demand in the real estate market only if they are situated in the central parts of the city with high pedestrian activity.

Commercial real estate in the “trade corridors” has the greatest investment attractiveness. “Trade or shopping corridors” refer to the streets in the city’s central areas that attract residents, office workers, tourists, and other groups of potential buyers. These places are the best points for any type of entrepreneurial activity, from trade to restaurant enterprises.

For example, the following streets can be distinguished among the best shopping corridors in Madrid:

  • Calle Gran Via
  • Calle de Preciados
  • Calle de Serrano
  • Calle de Fuencarral
  • Calle de la Ribera de Curtidores

Before purchasing commercial space in one of the most popular shopping corridors in Spain, you need to understand that street retail units in these locations are the most expensive. Most often, large companies and sellers of exclusive goods (branded clothing and accessories, luxury cosmetics, perfumes, etc.) own them.

However, this is not to suggest that modest budget investors should not consider street retail. Trade corridors in neighborhoods near the city’s outskirts can also bring a good profit if you carefully select the right location.

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What profit does street retail bring in Spain?

Renting out commercial real estate for trade is a fairly profitable activity. A large number of investors specialize in this. Even though street retail is a complex asset affected by external and internal factors, it remains in great demand. Among its many advantages are the following:

  • High rental yield
  • Short-term return on investment
  • A higher level of organization in the market compared to the residential real estate market which is partially controlled by private individuals.

The average yield of a Spanish street retail property is 9.3%. In terms of rental businesses, the most lucrative are commercial facilities in the following locations:

  • Oviedo (10.7%
  • Avila (9.9%);
  • Huelva (9.9%)
  • Zaragoza (9.3%)
  • Seville (9.3%)
  • Alicante (9.3%)
  • Barcelona (8.5%)
  • Madrid (8.3%)

On the opposite side of the yield, scale are such locations as Segovia, Jaen, A Coruña, and Albacete.

How the COVID-19 pandemic has affected street retail in Spain

In the reality of the modern world, the COVID-19 pandemic and various other diseases, have changed investors' requests for this type of commercial property. Currently, they invest mainly in housing, in which tenants will be able to work despite quarantine precautions. These types of premises include grocery stores, banks, pharmacies, or industrial premises operating by online sales.

As a result of two years of the pandemic, the demand for hotel spaces, shopping, and entertainment centers has dropped significantly. According to information published by the CBRE Group, in June 2020, demand for the first property type decreased by 68%, and by 76% for the second type.

In the second half of 2021 and early 2022, during the initial management of the epidemic by the government, demand for these premises gradually returned to the previous level. However, as a result of disappointing forecasts for a new wave of COVID-19 and the WHO's warning about the threat of a monkeypox outbreak, demand for hotels and shopping centers has begun to decline once more.

Today, the more opportunities for conversion (licenses, permits, and space for redevelopment) commercial properties offer, the more valuable they are for investors. For example, since the start of the pandemic, a grocery store has appeared in the center of Barcelona, in the area where Gran Vía street and the Paseo de Gracia avenue cross. Previously, only fashionable boutiques popular among wealthy shoppers could be found in this location, but the facility owners were forced to redesign it to adapt to modern realities.

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Assistance with buying property in Spain

The Spain-Real.Estate catalog contains the best offers in the commercial and residential real estate markets, ranging from shops and restaurants to villas and apartments in Spain. Visit the aggregator’s official website and contact its representatives to receive help with selecting the best commercial premises in Spain, to meet your needs, and receive support during the transaction.

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