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INVESTING: The retail space comeback

2013: A block in Barcelona's Eixample district with shops all closed down
2013: A block in Barcelona’s Eixample district with shops all closed down

Retail space is the most profitable real estate investment in Spain against a background of rising yields for all categories of property, claims a new report from Laborde Marcet – an investment advisory firm. If you accept the figures at face value, the remarkable thing is the recovery of retail space as an investment, given how bad things were just a couple of years ago.

I read about this Laborde Marcet report in the Spanish press, and as often happens I was a bit confused by some figures mentioned in the article that didn’t seem to add up. However,the discrepancy in the figures doesn’t materially change the main points of the report, namely that gross yields are rising in all property categories, and that retail space delivers the best returns, though results vary significantly by location.


In terms of gross yields, retail property offers investors get the best returns we are told. Retail space in prime areas earns a gross rental return of between 4.5% and 6%, though later on we are told that returns can be as high as 7%, presumably depending on location.

Just a few years ago the retail space market in Barcelona looked like a disaster. Admittedly Paseo de Gracia was doing fine thanks to the tourist trade, but if you walked half a block away on many streets in prime parts of Barcelona at least 30% of shops were empty. The photo above illustrates the point. Almost every shop on this stretch of road in Barcelona’s Eixample was empty, and I was told at the time I took the photo, in January 2013, that retail rents in the area had collapsed. Now, on the same streets, almost all retail space is occupied, so that is a visible sign that things have improved.


Garage space was yielding 4.6% at the end of Q2, up from 3.6% a year ago, they say. If true, That makes parking space an interesting investment in my book. Just under 5% is a reasonable gross return in this day an age of negative interest rates and negative inflation, and you rarely have trouble with tenants when it comes to renting out parking spaces, which also cost little to maintain.

Though improving, housing currently delivers the least attractive returns according to this report. Buy-to-let residential gross yields have increased to 4% in Madrid and 3.8% in Barcelona, though one also has to bear in mind the extra hassle and risk of being a residential landlord in Spain. These figures refer to the primary rental market, not holiday-rentals.

A few more things included in the report: Madrid and Barcelona are still the preferred location for investors. Location makes all the difference, regardless of category. Gross returns vary from 3% to 7% depending on location. Total investment in Spanish real estate reached €22 billion in 2015, down from €23 billion the year before, and Spanish real estate prices are still down 37% from the peak, falling from 1,626 €/m2 to 1,190 €/m2 in seven years.