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LUXURYIN THE RETAIL

SECTOR

WHO'S SELLING AND WHO'S BUYING LUXURY? | SPAIN'S TOP LUXURY HIGH STREETS

RETAIL RESEARCH

WHAT IS LUXURY?

Luxury is synonymous with exclusivity,and everything that is out of the ordinary and that goes beyond the merely practical. It conveys high social status and is unique. It is quality, well-being and pleasure combined.

Luxury can only be custom-made and bespoke. Luxury items are characterised by their rarity and the desire to attainsomething truly unique. Less is more with luxury, with the superfluous being viewed as ostentatious.

Luxury is about striking the perfect balance between the visual and the emotional and fulfilling ambitions, whilst allowing the dream to continue,providing the customer with an emotional and personal satisfaction that merits a considerable premium.

Luxury fulfils a desire rather than a need and therefore, purchasing a luxury item goes far beyond acquiring a quality product; it is about personal pleasure,

self-indulgence, and about being one of a select social group.

The brand story and values are key in the luxury segment. The consumer must be able to identify and want to be associated with them.

The cornerstones of new luxury are:Custom-madeOffering handcrafted custom-made products that incorporate the latest techniques, as a new way of creating value and exclusivity.

Experiential luxuryProviding unique and unforgettable experiences that create memories and purvey a sense of identity, lifestyle and social position.

E-commerce and technologyIntegrating e-commerce and technology into bricks-and-mortar stores makes for a more exclusive in-store experience.

HIGH QUALITY, EXCLUSIVE, TIMELESS, AND RARE PRODUCTS THAT TELL THEIR VERY OWN STORY.THEY REPRESENT SUCCESS AND THE UNATTAINABLE. THEY REFLECT A LIFESTYLE FOUNDED ON WELL-BEING AND THE ABILITY TO ENJOY ALL THE PLEASURES LIFE HAS TO OFFER.

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Source: Bain & Company

GRAPH 2GLOBAL MARKET FOR PERSONAL LUXURY PRODUCTS1996-2020 (E). Billions of Euros

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GRAPH 1TOP INFLUENCERS IN THE WORLD OF LUXURY2017

Source: Deloitte «Luxury Multicountry Survey for Global Powers of Luxury Goods 2017»

Glamour

Actors

VIPsDesigners Stylists

Youtubers AthletesPoliticians Nobility

Bloggers

Top modelsFootballers

Architects

Fashion bloggersHigh society

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X-MADRID SC

NEW LUXURY IS BUILT ON CONTEMPORARY CRAFTSMANSHIP.

A MODEL THAT INCORPORATES NEW TECHNIQUES AND THE LATEST TECHNOLOGY, REMAINING AUTHENTIC AND USING NATURAL MATERIALS WITH DEEP-ROOTED CRAFT TRADITIONS.

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LUXURY OVER TIME

Exclusive or traditional luxury can be traced back to aristocratic times. Luxury was once only accessible to an elite few who set the trends for the other social classes. The role of the designer, who formed part of this elite, was key; people identified with their name which became their own brand. This was a type of luxury based on the ideals of craftsmanship; on applying know-how and creating exquisite designs. For some, this is true luxury.

The democratisation of fashion began back in the 60s, and subsequently luxury started to become accessible to other social classes who wanted to consume, thus giving way to modern luxury.

In the 70s, luxury moved towards innovation and there was suddenly a need to make quality available on a grander scale. The industry turned from exclusivity to selectivity in order to meet the growing demand for luxury items; it

was at this point that brands became the key players.

As such, they started to develop on an international scale, diversifying their product lines, creating large-scalemarketing campaigns and merging with other major brands in order to stay ahead of the market, and even creating large groups.

In the 90s, emerging markets started to gain access to luxury during what has been termed “the golden age of luxury”. Shopping tourism was born, and luxury began to overlap with other market segments. This prompted many brands to create premium ranges in order to maintain an air of prestige. The democratisation of luxury raised the bar even further in this segment.

Since then, “experience” has taken centre stage in the luxury segment.

Luxury is no longer something that isowned, but something that is lived.

Experiential luxury piques our emotions.Brands are constantly interacting with their customers, before, during and after the sale, looking to create unforgettable moments. The shopping process becomes an experience to remember, making the consumer the brand’s guest.

A new order of luxury has arisen in recent years. A more ethical luxury, based on self-realisation, well-being, sustainability and discretion, one that places an emphasis on feelings and that reflects a consumer’s actions and who they really are, rather than merely their consumer habits: the individual takes centre stage. Big Data allows for maximum customisation, offering customers everything they need to reach their most personal of aspirations. Itsabout focusing on improving our lives, about having a more optimistic outlook.

Source: Susana Campuzano “La fórmula del lujo” 2016. IE Publishing.

GRAPH 3THE LUXURY FORMULA: CATEGORIES AND COMPONENTSBy type of luxury

PURPOSEFUL LUXURY

EXPERIENTIAL OR EMOTIONAL

LUXURY

EXCLUSIVE OR TRADITIONAL

LUXURY

MODERN OR ASPIRATIONAL

LUXURY

Wellness-luxury

Purposeful luxury

Personal luxury

Artisanal luxury

Luxury-design /style

Exclusive luxury

HIGHER PRICE

Symbolic luxury

Cultural luxury

Designer luxury

Service luxury

Sensory luxury

Experiential luxury

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TRENDS

Society’s values change, and brands must follow suit and adapt to these new values. Luxury is not just about the pleasure of buying a highly exclusive product, but rather the ethical values that embody it, and its importance as a symbol of status.

Today’s society values sustainability and respect for the environment and animals. Consumers are increasingly happier to buy a product from a brand with a Corporate Social Responsibility policy that respects the environment. In fact, brands such as Jimmy Choo, Michael Kors, Armani, Gucci and Hugo Boss have already committed to stop using animal products.

Some brands such as Stella McCartney have opted to actively speak out and make their customers think, promoting a back-to-basics attitude to reduce waste. Armani has decided to try to educate the public about access to water in developing communities, and Chopardhas promised a living wage for the

communities where they source the stones used to make their jewellery.

In order to spread their message far and wide, brands like Louis Vuitton and Hermès are crossing over into the world of culture, turning themselves into true purveyors of art.

Concepts such as well-being and a healthy lifestyle form part of new luxury. In an extremely fast-paced society, in which time is precious and ever harder to come by, finding that special moment to go back and revisit the truly personal - emotions and self-discovery – has now overtaken exclusivity as the true essence of luxury.

The rise of millennials and Generation Z is altering the concept of luxury once again, as they have a different approach to luxury. They are more rational and critical, they interact with the creators of new luxury, and are attracted by anything that breaks away from the norm.

Luxury and the impatience of the modern-day consumer

E-commerce has altered consumer expectations as a wide variety of items can now be accessed at any given time.

In the luxury sector, some brands have broken the mould and put their products on online platforms. However, in many cases, these have become more of an investment. Luxury is timeless.

The consumer doesn’t need to buy the product immediately. In fact, a short wait can even improve the shopping experience. The consumer doesn’t just obtain an item, they receive the chance to convey their lifestyle, values, a concept and an aesthetic that forms part of their identity.

GRAPH 4GLOBAL ONLINE MARKET FOR PERSONAL LUXURY PRODUCTSBillions of Euros

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


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THE VALUE OF A BRAND

GRAPH 5MOST POPULAR FASHION RETAILERS* AND THE VALUE OF THEIR BRAND2017

WHO IS SELLING LUXURY?

$4.5 billion

$4.7 billion

$5.1 billion

$5.3 billion

$7.5 billion

$9.9 billion

$14.2 billion

$22.9 billion

Source: Interbrand «Best Global Brands 2017 Rankings». *By their monetary value and ability to influence the decision of the customer.

Loyal customers, the more traditional clientele, new generations, luxury shoppers, innovators, tech-savvy buyers... they all have different points of view when it comes to brand expectations. Consumers must be able to identify with a firm’s aims and values, and see their own personality and beliefs reflected in the products. As the world changes, so do people’s priorities and what they want, and as a result, so too do brands and their followers.

In today’s global market, the companies occupying the top spots for brand value are tech firms, such as Apple, Google and Microsoft. In the luxury market, the brands with the greatest customer influence are primarily fashion retailers.

Today’s luxury shoppers are not the same as in decades gone by and they need inspirational brands that are akin to their own beliefs, and that offer a certain element of aspiration.

BRANDS CONNECT COMPANIES WITH PEOPLE, CREATING A STRONG ALLIANCE BUILT AROUND THE SAME VALUES AND DESIRES.

Grow. Change. Grow. Interbrand “Best Global Brands 2017”

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According to data from Bain & Company, the global luxury segment grew 5% in 2017, with increases in every product except for private jets and yachts. In contrast, luxury cruises grew the most in the last year, up by almost 14%, although the individual spend is lower.

Luxury cars produce the greatest revenue for luxury products in the world. In 2017 they accounted for 40% of the total due to their higher price per unit and, although sales have tapered off slightly, in the last few years they have become a good investment alternative.

Personal products are the second most important segment, accounting for almost a quarter of the total. Accessories, particularly shoes and jewellery, grew the most over the last year.

These products, along with perfumes, often act as a gateway into luxury shopping, despite the fact that they have a lower average spend.

In line with the boom of experiential luxury and unique journeys, holiday homes occupy third place, with almost 20% of the total spend for luxury products worldwide.

Following the trend of linking luxury with well-being and personal-care, the average spend on gourmet food is also enjoying considerable growth worldwide.

Designer furniture, which is an expression of lifestyle, is becoming one of the main luxury products on a global scale. Some haute couture designer brands have already joined this market, such as Armani, with its own Armani/Casa furniture range.


GRAPH 6GLOBAL MARKET FOR PERSONAL LUXURY PRODUCTS%. 2017 (E)

THE BEST-SELLING LUXURY PRODUCTS

-5% 0% 5% 10% 15%

Personal luxury goods

Luxury cars

Luxury hospitality

Fine wines & spirits

Fine food

Fine art

Designer furniture

Private jets & yachts

Luxury cruises

7

23%

42%

17%

6%4% 3%

3%2%

0%

Personal luxury goods Luxury carsLuxury hospitality Fine wines & spiritsFine food Fine artDesigner furniture Private jets & yachtsLuxury cruises

GRAPH 7GROWTH BY PRODUCT2016 - 2017


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The luxury market is highly appealing to investors, given that it is a robust market in constant growth, even during periods of economic crisis, and one that is also capable of creating significant long-term returns.

There are various ways of investing in luxury, one way is via brands that are already well established in this sector, as Chinese investor Fosun did with the purchase of Lanvin.

Other ways include investing in luxury via listed companies specialising in this segment, working with specialist investment funds or buying high-end products such as cars, art, jewellery or wine, which are highly valuable and have long-term value uplift potential.

In many cases these objects are collectable, rare pieces that have passed through the hands of famous owners, making them utterly unique. The lower the production and the rarer a model, the higher the demand to acquire it making these prestigious items, that bring emotional satisfaction simply through owning them, whose value is determined by changing market tastes.

Over the last ten years, the sector that has grown the most isclassic cars, although recently this growth has been overtaken by

other luxury products such as wine and art.

The classic car investor is not just looking for a return on their investment, but also wants to enjoy a rare model. Maintenance tends to be costly, but even so, investment in this type of car has surged in the last decade.

Wine has its own index on the international markets, the Liv-ex, which tracks the price performance for bottles of wine from 5 Bordeaux wine cellars, comprising 10 different vintages. Of all the luxury products, investment in wine grew the most last year, thanks to the recovery of investments in Bordeaux wine, after the decline in Chinese demand, and the increasing interest in investing in wines from Burgundy and the north of Italy.

Purchases of artwork have also surged lately, so much so, that it is one of the luxury products that has seen the highest growth. With this type of investment, it is important to know how to choose the right artist. Some of the investors in this area are art collectors, meaning they do not buy a work of art for the work itself, but rather to complete a collection, as the value of the collection as a whole is far greater than the price of each individual piece.

Source: Knight Frank

GRAPH 8LUXURY INVESTMENT INDEX2008 - H1 2017

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Index 12-month variation 5-year variation

INVESTMENT IN LUXURY

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CLASSIC CARPURCHASES HAVE DOMINATED LUXURY INVESTMENT OVER THE PAST DECADE.

INTERNATIONAL FASHION INVESTORS ARE ALREADY LOOKING AT LUXURY BRANDS, AS DEMONSTRATED BY GRUPO FOSUN’S RECENT ACQUISITION OF LANVIN.

Not all luxury buyers are driven by the same passions. Different groups are driven by different motives. Personality, education, personal background andcircumstances are the key factors that define what type of buyer someone is.

Luxury companies are well aware of this, and although they all market to the same general profile - the luxury buyer – they each try to refine their image and direct their global strategy to a more specific target audience.

It is paramount for brands to not only know their preferences within the sector in which they operate, but also to unlock more data about consumption and general lifestyle. How their target audience dresses, travels, where they live and how they decorate their homes, etc. The more detailed information they have, the greater quality they can offer and the more they can tailor their products to suit their exact needs; the key to achieving brand loyalty.

When it comes to making decisions and directing their specific marketing campaigns, the most successful luxury brands apply all of this via customer intelligence tools. This is reflected in their followers, who always have something in common and share the same interests.

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GRAPH 9WHO CONSUMES LUXURY FASHION AND ACCESSORIES?Report “Lens on the worldwide luxury consumer”

Curious and impulsive. Highly influenced by social media. Young, aged between 20 and 30. The brand is one of their priorities. Likes giving presents and favours jewellery and watches.

TRAITS OF THE LUXURY SHOPPER

THE OMNIVORE

THE KNOW-IT-ALL

THE INVESTOR

THE HEDONIST

THE DISENCHANTED

THE “WANT BUT CAN’T”

THE CONSERVATIVE

Extremely well-informed thanks to the information they receive online. Aware of the differences between brands, they tend to buy in the city they live in, and items of preference include watches and leather goods.

A research enthusiast that bases their purchases on future returns and on items that can be passed down from one generation to the next. Demands quality and durability above all else.

Seeks quality, durable items, and is not influenced by advertising. Relates to the so-called “luxury fatigue” of the baby boomers. Does not shop frequently and prefers the online channel.

Needs to buy luxury and flaunt it. Heavily influenced by advertising, they are very interested in brand logos. However, they are the least loyal and their brand preferences can shift quickly as a result of varying external factors.

Interested in beauty products and footwear above all, that act as a gateway into the world of luxury. Impulsive and not overly loyal to any one brand, they usually combine luxury with other more accessible products. They are influenced by their friends’ opinions and fashion magazines.

A more mature and conventional buyer. They favour watches and designer jewellery. They follow family members or friends' recommendations when it comes to choosing between brands.

A WELL-DEFINED CONSUMER

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KEY FACTORS SUCH AS PERSONALITY, EDUCATION, PERSONAL BACKGROUND AND CIRCUMSTANCES DEFINE THE BEHAVIOUR OF THE LUXURY SHOPPER.

17%

18%65%

OthersJewellery and watchesFashion and accessories

SHOPPING TOURISM, A NEW WAY OF TRAVELLING

Up until recently, tourism was driven by a need to discover new places and dive into the culture, landscape and food of another country or city. Nowadays there is another type of tourism, one that is driven purely by a desire to shop.

According to the World Tourism Organisation, there are four variables that make people want to shop in a certain destination: the quality of the product, the experience, the value on offer and the entertainment.

There are some key aspects to becoming a shopping destination:

• Good airline connections.

• Flexible opening times and sales periods.

• Consolidated image as a tourist destination with a good offering in terms of food, accommodation, culture and leisure.

• Tax Free shopping policy.• Quality product offering, both locally

and internationally produced, and large retail brands.

• A well-adapted offering with excellent tourist customer service, offering different languages and international payment methods.

Chinese tourism is hugely important in Spain, accounting for more than 30% of tourist purchases, according to the latest report from Global Blue.

The rising value of the yuan, the Chinese State’s policy to drive overseas tourism and the high price of luxury products in China, along with other prevailing factors, have all helped to place China in the top spot for international shopping tourism.

CHINESE TOURISTS PLAY A DEFINING ROLE IN SPAIN'S LUXURY RETAIL MARKET, SPENDING AN AVERAGE OF €1,000 EACH TIME THEY STEP FOOT INA STORE IN SPAIN

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GRAPH 10COUNTRIES THAT SPEND THE MOST MONEY ON INTERNATIONAL SHOPPING 2017

TRAITS OF THE LUXURY SHOPPER

GRAPH 11TOURIST SPEND BY CATEGORY IN SPAIN2016

CHINA

RUSSIAUNITED ARAB

EMIRATES

U.S.A.GERMANY

FRANCE

JAPAN

Source: Global Blue "Impact of the new world order on shopping tourism" Source: Knight Frank

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FOR EVERY 100 EUROS THAT A LUXURY BRAND SELLS, A VERY HIGH PERCENTAGE IS SOLD TO NON-EU TOURISTS.

Luis Llorca, Country Manager at Global Blue, international Tax Free operator

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GRAPH 12HIGHEST SPENDING NATIONALITIES IN SPAIN% OF TOTAL. 2016

Source: Global Blue «Impact of the new world order on shopping tourism»

CHIN

A

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IA

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ENTI

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SPAIN IN THE LUXURY SECTOR

INTRODUCTION

The luxury market in Spain has an annual turnover in excess of €6 billion. The top markets are Madrid, Barcelona, Marbella and the Balearic Islands. Barcelona is number one in terms of shopping tourism.

Their main players comprise fashion and accessories and Spain is internationally acclaimed for its luxury Spanish footwear. Another core factor is real estate; Spain’s climate and appeal make it a world-renowned destination when it comes to choosing a first or second home, as well as investment in prime properties.

Cosmetics and perfume also play a highly important role in the Iberian market. Spanish group Puig, who work with both fashion and perfume, are one of the highest ranked companies in the global luxury market. The group operates under renowned brands such as Nina Ricci, Carolina Herrera, Paco Rabanne, Prada, Valentino, Massimo Dutti among others.

Another Spanish company, Festina Lotus, now has the highest turnover of watch companies in the country, recording over €151 million at YE 2016.

According to figures from the Spanish Luxury Association, on average €2,500 is spent on art and €2,300 on jewellery every year; two luxury classics. However, gourmet dining still draws the highest spend, close to €2,800 per year. The annual luxury fashion spend is close to €2,300, whilst the beauty product spend stands at around €2,000.

Spanish luxury manufacturing and sales levels remain steady, and in some cases are even growing, largely thanks to exports and tourism.

Catalonia is one of the top locations for international tourists, but the highest average daily spend is in Madrid.

€169CATALONIA

€219MADRID

Source: INE

GRAPH 13AVERAGE DAILY INTERNATIONAL TOURIST SPEND IN SPAIN2017

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ON AVERAGE, €2,800 IS SPENT EVERY YEAR ON GOURMET DINING IN SPAIN.

Spanish Luxury Association

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2%

21%

22%

19%

18%

18%< 100

100-300

300-500

500-1,000

1,000-2,500

> 2,500

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LUXURY HIGH STREETS

Midway through the 19th century, the investor José de Salamanca created the neighbourhood that today bears his name. Given the improved living conditions in the area at the time, the area became a magnet for the middle and upper classes.

Right from the onset, Calle Serrano was an avenue with a large number of period residences, and the prestige of this street has naturally attracted many luxury fashion brands.

Serrano stretches 4 km, however, the main retail units are located along the initial one and a half kilometres, between Plaza de la Independencia and Calle Juan Bravo. The Plaza de la Independencia benefits from an exceptionally high footfall, due to its access to the Retiro Park, Calle Serrano and Calle Alcalá.

Given its length, Serrano features some prime areas and other more secondary areas. This wide variety has had a knock-on effect on rents. The area with the highest footfall is between Goya and Ayala.

The two most exclusive stretches of Serrano are between Calle Jorge Juan and Calle Goya, and the retail units where Ortega y Gasset and Serrano meet. Average rents for these retail units stand at around €265 per sqm/month.

It is worth highlighting that the east side of Calle Serrano, where Cartier and Louis Vuitton are located, generally has considerably higher rents than the west side. There is a 20% difference between rents for units on the best stretches of either side of the street, although the more secondary stretches can cost 40% more on the east side than the west side.

MADRID. CALLE SERRANO

GRAPH 15NUMBER OF RETAIL UNITS BY SIZECALLE SERRANO

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< 100 100-300 300-500 500-1,000 1,000-2,500 > 2,500

GRAPH 14GROSS LETTABLE AREA BY RETAIL UNIT SIZE CALLE SERRANO



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Almost 50% of retail units on Calle Serrano are small or medium-sized, comprising between 100 and 300 sqm. Thus, with just 7% of retail units on Serrano comprising over 1,000 sqm, the street’s mass market supply is limited.

Given the limited range of retail unit sizes available on Calle Serrano, high-end luxury brands occupy the street’s larger units, which is slightly above the average size occupied. Examples of this include retail units let by Carolina Herrera, Gucci and Louis Vuitton, which are double the average retail floor space on Calle Serrano.

Department stores on this street are occupied by tenants with a more varied retail mix, such as El Corte Inglés and the ABC Serrano shopping centre.

New retailers opening stores in the area (Bottega Veneta, Malababa, MiuMiu, Reliquiae and Tesla) are proof of just how attractive this high street is for the luxury and affordable luxury segment.

GRAPH 16RETAIL UNITS - LATEST COMINGS AND GOINGSCALLE SERRANO

NEW ARRIVALS

GRAPH 17DISTRIBUTION OF GROSS LETTABLE AREA BY TYPE OF RETAIL UNITCALLE SERRANO


GRAPH 18AVERAGE GROSS LETTABLE AREA BY PRODUCT TYPECALLE SERRANO

35%

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Luxury

Accessible luxury

Mass market

Restaurants

Other services

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Luxury Accessibleluxury

Mass market Restaurants Otherservices

5 RETAIL UNITS

1,600 sqm

RELOCATIONS1 RETAIL UNIT 700 sqm

Average floor space


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19

Back in 1820, when Paseo de Gracia was still a rural thoroughfare linking Barcelona with the old city of Gracia, the road underwent a major redevelopment that turned it into a more than 40-metre wide avenue, where aristocrats could flaunt their grandiose horse-drawn carriages.

Throughout the years, the street has remained synonymous with luxury and is now one of the most expensive high streets in Barcelona and Spain. Retailers benefit from the plethora of architectural delights that line either side of the street, such as the iconic buildings designed by Antoni Gaudi that attract millions of tourists each year.

Towards the Plaza de Cataluña end of the street, mass market brands such as Zara, H&M, Apple and Adidas act as anchor tenants, drawing footfall from the Plaza towards Paseo de Gracia.

The highest levels of footfall are between Carrer de Valencia and Carrer del Conseil de Cent, a stretch that offers a combination of fashion and accessories retailers and restaurants and that benefits from fruitful synergies with boutique brands on the neighbouring Rambla de Catalunya.

The majority of the most luxurious brands are located at the top end of the street, between Calle Valencia and Avenida Diagonal. The highest rents are in this the stretch with an average rent of 275 €/sqm/month. While in the lower stretch, near Plaza de Cataluña, the average rent is 230 €/sqm/month.

On Paseo de Gracia, just like on Madrid’s Calle Serrano, the majority of retail units (36%) comprise between 100 and 300 sqm. However, more than 48% of retail units on Paseo de Gracia comprise between 300 and 1,000 sqm, compared to just 37% on Calle Serrano, whilst 30% of its GLA falls within the 1,000 to 2,500 sqm bracket, compared to just 18.5% on Calle Serrano. Hence, on average retailers are much more likely to find a larger space to let on Paseo de Gracia than they are on Calle Serrano.

BARCELONA. PASEO DE GRACIA

LUXURY HIGH STREETS

GRAPH 20NUMBER OF RETAIL UNITS BY SIZEPASEO DE GRACIA

0

10

20

30

40

50

60

70

< 100 100 - 300 300 - 500 500 - 1,000 1,000 -2,500

> 2,500

GRAPH 19GROSS LETTABLE AREA BY SIZE OF RETAIL UNITPASEO DE GRACIA

1%

14%

17%

29%

30%

9%< 100

100 - 300

300 - 500

500 - 1,000

1,000 - 2,500

> 2,500



30%

18%39%

5% 8%

Luxury

Accessible luxury

Mass market

Restaurants

Other services

20

A wider variety of retailers can be found on Paseo de Gracia than on Calle Serrano, given the street’s broader range of retail unit sizes. Almost 40% of Paseo de Gracia’s GLA is occupied by mass market brands, compared to the 30% that this segment occupies on Calle Serrano.

The largest retail units on Paseo de Gracia are occupied by mass market retailers, with these retailers occupying units that are on average 60% larger than luxury retail stores. By way of comparison, the average floor space occupied by mass market retailers on Calle Serrano is just 6% larger than luxury retailers.

There is also a broader range of new retailers opening stores on Paseo de Gracia compared to Calle Serrano. The street has welcomed high-end luxury brands such as Bvlgari and Céline, along with other more mass market retailers such as H&M, and services such as Caixa Bank.

GRAPH 21RETAIL UNITS - LATEST COMINGS AND GOINGSPASEO DE GRACIA

GRAPH 22DISTRIBUTION OF GROSS LETTABLE AREA BY TYPE OF RETAIL UNIT PASEO DE GRACIA


GRAPH 23GROSS LETTABLE AREA BY PRODUCT TYPE PASEO DE GRACIA


0

100

200

300

400

500

600

700

800

Luxury Accessibleluxury

Mass market Restaurants Otherservices

NEW ARRIVALS

11 RETAIL UNITS

9,900 sqm

RELOCATIONS2 RETAIL UNITS 1,700 sqm


Average floor space

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110

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21

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22

The lion’s share of shopping purchases on both Calle Serrano and Paseo de Gracia are made by domestic shoppers; almost 75% on the luxurious Madrid high street and 63% on its Catalan counterpart, where tourists and international shoppers hold a heavier weighting.

The average Spanish consumer who shops on Calle Serrano lives in the Salamanca or in other neighbouring districts, where the average household income is one of the highest in the city. In contrast, customers who shop on Paseo de Gracia - which is within striking distance of the most popular tourist area and a long way from the residential areas with the highest

household incomes (Pedralbes, Sarrià, Tres Torres and Sant Gervasi) - do not live in the same district, but rather in other districts in the Eixample area of Barcelona, such as Sagrada Familia.

If we look at shoppers by age bracket, it is clear that millennials account for the largest spend on Calle Serrano, in line with current trends. However, the 65 and over age bracket also accounts for a significant number of shoppers given that this area is home to a large number of senior citizens.

In contrast, Generation X (i.e. those born between 1965 and 1984) is the most prevalent on Paseo de Gracia.

SHOPPING ON SPAIN'S LUXURY HIGH STREETS

GRAPH 24SPEND BY PURCHASER AGE BRACKETCALLE SERRANO AND PASEO DE GRACIA

CALLE SERRANO PASEO DE GRACIA

6%

24%

18%16%

16%

20%≤ 24

25 - 34

35 - 44

45 - 54

55 - 64

≥ 65

2%17%

22%

24%

18%

17%≤ 24

25 - 34

35 - 44

45 - 54

55 - 64

≥ 65

OVER THE NEXT FEW YEARS, BRANDS WILL BE DRIVEN BY MILLENNIALS, WHO ARE MORE INTERESTED THAN THE PREVIOUS GENERATION IN THE OVERALL SHOPPING EXPERIENCE AND ESTABLISHING AN EMOTIONAL CONNECTION WITH BRANDS

Source: Knight Frank from Geoblink data

23

On both streets, fashion accounts for the majority of purchases due to the high number of fashion stores and the sector’s suitability for the mass market. On Serrano, where the average spend per person in fashion stores is slightly higher, fashion accounts for 84% of the total spend, compared to 74% on Paseode Gracia.

On Calle Serrano, the number of purchases peaks during mid-morning and after 7pm, whereas on Paseo de Gracia purchases do not fall so much during the early hours of the afternoon, thanks to the higher number of tourists. In the case of jewellery and watches on Paseo de Gracia, the number of transactions between 10am and 7pm only varies slightly.

In terms of average spend per person, this remains more or less stable throughout the day on Paseo de Gracia. However, on Calle Serrano, it is much easier to define the hours when morelower average spend purchases are made and when fewer, but higher average spend purchases are made.

GRAPH27SPEND BY HOUR. JEWELLERY AND WATCHES% OF THE DAILY TOTAL

GRAPH26SPEND BY HOUR. FASHION% OF THE DAILY TOTAL

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Serrano Pº de Gracia

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


GRAPH25SPEND BY PRODUCT TYPE% OF THE TOTAL FOR EACH STREET

0% 20% 40% 60% 80% 100%

Others

Shoes

Jewellery/Watches

Fashion


Source: Knight Frank from data provided by Geoblink



HAPPINESS IS MADE OF LITTLE THINGS: A LITTLE YACHT, A LITTLE MANSION, A LITTLE FORTUNE.

Groucho Marx

““

LUXURY IS A NECESSITY THAT BEGINS WHERE NECESSITY ENDS.

Coco Chanel

“ “

THE LAW OF LUXURY DOES NOT ADD, IT TAKES AWAY.

Giorgio Armani

“ “ FASHION IS AN INSTANT LANGUAGE.

Miuccia Prada

“ “

RESEARCH

Elaine BeachillDirector of Retail Capital [email protected]+34 600 919 016

Brynn EvansSenior Flagships Capital [email protected]+34 600 919 129

Rosa UriolHead of [email protected]+34 600 919 114

Luxury Investment IndexJewellery Special Q2 2017

E-commerce, all just a click away, 2018

Knight Frank Market Reports are available atwww.knightfrank.es/investigacion-de-mercados and www.knightfrank.com/research

Puerta del Sol Snapshot Autumn 2017

Tamara SánchezSenior Flagships [email protected]+34 600 919 073

Pablo Párraga Head of Retail [email protected]+34 600 919 078

Vanesa Marcos Research [email protected]+34 600 919 130

Important notice© Knight Frank España, S.A.U. 2018This report is published for general information only and isnot to be relied upon in any way. Although high standardshave been used in the preparation of the information,analysis, views and projections presented in this report, noresponsibility or liability whatsoever can be accepted byKnight Frank España, S.A.U. for any loss or damageresultant from any use of, reliance or reference to thecontents of this document.As a general report, this material does not necessarilyrepresent the view of Knight Frank España, S.A.U. in relationto a particular property or project. Reproduction of thisreport in whole or part is not permitted without prior writtenapproval of Knight Frank España, S.A.U. to the form andcontent within which it appears. Knight Frank España is alimited liability partnership registered in the MercantileRegister of Madrid with Tax ID No. (CIF) A-79122552. Ourregistered office is located at Suero de Quiñones 34, 28002Madrid.

http://www.knightfrank.es/investigacion-de-mercados

http://www.knightfrank.com/research

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