WIXLIB

RETAIL RESEARCHPUERTADEL SOLTHE IDEAL LOCATION FOR SECONDGENERATION FLAGSHIPS IN SPAINAUTUMN 2017FLAGSHIPS WHY SPAIN AND WHY MADRID? PUERTA DEL SOL TRENDS

2

22,000 SQM OF RETAIL SPACE37 RETAIL UNITSA VIBRANT MELTING POTTHAT WELCOMES OVER 100MILLION VISITORS PER YEARINTERSECTION OF THECITY'S BUSIEST HIGHSTREETS, MADRID’SEQUIVALENT TO PICADILLYCIRCUS OR TIMES SQUARESTRIKING PERIOD FAÇADESIN A LANDMARK SQUARESURROUNDED BY ICONICHISTORICAL BUILDINGS3

2ND GENERATION FLAGSHIPS:A MULTI-SENSORY EXPERIENCEA SECONDGENERATIONFLAGSHIP IS THEPERFECT SETTINGFOR CREATINGMULTI-SENSORYAND OMNICHANNELEXPERIENCES Across the globe, top retail brands are nowturning landmark properties into secondgeneration flagship stores. These newflagships are not just a shell in which to sella product, they provide an exclusive settingin which retailers can innovate, present theirmost creative design concepts andcontinually reinvent themselves to providetheir customers with truly uniqueexperiences. A prized location in a prime retail area of amajor city is no longer the be-all and endall for success in terms of a brand’s visibilityand prestige, retailers must now also focuson the customers’ sensory experienceswhen they visit their stores.street world, has embarked on its expansionstrategy by opening a flagship store onPaseo de Gracia, where its customers canfully immerse themselves in the brand'sphilosophy and enjoy their “Happy Culture”right in the heart of the city centre. Sephorahas developed and introduced its newconcept in its stores in Madrid andBarcelona, integrating visual and digitalcontent into the sale of its products. Thesunglass designer Hawkers has also justjoined the click-to-brick crowd, opening astore on Calle Carretas in Madrid thatfeatures both a videogame area and allowscustomers to pay with bitcoins.Burberry on Regent Street is a primeexample; creating an interactive shoppingexperience that has reinvented the brandand boosted its online sales. Pepe Jeans isanother example of a brand that hasintroduced technology into its Londonflagship, now offering its customers bothinteractive fitting rooms and an area wherethey can design tailor-made clothing.Topshop has created a beauty area in its8,400 sqm store on Oxford Street, nowoffering customers the opportunity to treatthemselves to a make-over or even a hairappointment. In Spain, H&M has opened a flexitarianrestaurant in its Paseo de Gracia flagshipstore in Barcelona, whilst KIABI, which upuntil now had not ventured into the high Creating in-store multi-sensory experienceshas become a must for retailers, who arenow designing new formats that allowvaluable synergies to be created betweenthe on and offline businesses. E-commerce has significant room to growin Spain, with only 30% of online storesdelivering to the whole of the country.However, despite the rising number ofonline sales, with 27% of Spanish peoplenow buying online, brick-and-mortar storesremain the country's preferred choice. Having a flagship store that producesthat all important and lasting wow-effecthas become a must, repositioning andstrengthening a brand's image, therebyallowing the store to have a muchhigher effort rate than any other highstreet format.SPANISH QUARTERLY E-COMMERCE 134IIIIII2014IVIIIIII2015IVIIIIIIIV2016Source: CNMC

FLAGSHIP INNOVATIONGASTRO SPACES. H&MFlagship store BarcelonaTAILOR-MADE CLOTHING. PEPE JEANSFlagship store LondonTAILOR-MADE CLOTHING. PEPE JEANSFlagship store LondonPERSONAL SHOPPING EXPERIENCES. TOPSHOP-TOPMANFlagship store London5

WHY SPAIN? Spain’s economic recovery has been remarkable, and recognisedby the IMF as the example to follow. It is currently the fourthfastest-growing economy in the Eurozone, outpacing the UK,Germany and France. Thanks to the improving economic backdrop, consumerconfidence reached all-time highs in July, generating positiveexpectations for consumption, which have then been furtherboosted by contained price growth and low interest rates. The country’s infrastructure, combined with the physical and legalassurance that it offers, has become a major draw for internationalinvestors. Spain received a record 75.3 million tourists in 2016. The industryhas continued to thrive in H1 2017, with the number of touristsvisiting Spain exceeding H1 2016’s figure by 11.5%.HOUSEHOLD FINAL CONSUMPTION EXPENDITURE MILLIONS ( )CONSUMER CONFIDENCE ,000135.00020I III I III I III I III I III I III I III I III I III I III I III I III020112007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Source: INE. Ieconomics20122013201420152016(Aug)2017 (Jul)Source: CISGDP (SPAIN AND REGION OF MADRID) and -1,0%-4.0%-4,0%Source: INE, BBVA Research and adridSpainEspañaCPIIPCCPI. ForecastIPC.forecast

WHY MADRID? Madrid currently boasts all the key attributes to establish itself asa global hub. The city’s economic growth is outstripping the national average,with GDP forecast to climb 3.6% in 2017 and 3% in 2018. International tourism is playing an increasingly important role inMadrid. With the city receiving close to 5.3 million internationalvisitors, Madrid was ranked fourth out of all European cities inthe Global Destination Cities Index, which tracks averageinternational tourist spend. Madrid also holds the number two spot in Europe, only behindLondon in the Globe Shopper index’s Best Shopping Destinationranking. The results of this study are based on a five-categoryanalysis: store quality, affordability, culture & climate, hotels &transport and convenience (opening hours, use of languages,security and savings). Madrid is highly competitive in terms of retail unit rental levelscompared with other European cities, with the average annualrent standing at 3,600 per sqm versus 6,400 per sqm in Parisand even up to 14,500 per sqm in London.TOP TEN EUROPEAN CITIES BY INTERNATIONAL TOURIST SPENDGlobal Destination Cities rce: MasterCard7

WHY OPEN A FLAGSHIP INPUERTA DEL SOL? Puerta del Sol is situated right in the veryheart of Madrid, forming the city’s mainsocial hub and is the retail area parexcellence along with Calle Preciados.The ever-increasing number ofinternational companies and retailers,including the arrival of top brands suchas Apple, coupled with therefurbishment of some the city’slandmark properties and theregeneration of surrounding areas, isfurther establishing Puerta del Sol as ago-to national and international retaildestination.The fact that Puerta del Sol is apedestrianised area drives business;increasing sales and pushing up rents.Other streets such as Preciados,Fuencarral and Arenal boast virtually novacancy.In Spain, works to semi-pedestrianiseGran Vía are expected to get underwaytowards the end of 2018, and will formone single retail hub that will join17th Century2003819002017 together the current pedestrianisedareas of Fuencarral, Preciados andPuerta del Sol.TIMELINEConverting Preciados, Fuencarral andArenal into pedestrianised areas pavedthe way for some of the city’s mostprestigious lettings, such as the openingof Pull & Bear’s largest store at Preciados9, the debut of Decathlon in the iconicCalle Fuencarral Market and CalvinKlein’s decision to strengthen itspositioning in Spain with its new store atArenal 3. In London, semipedestrianising Oxford Street alsobolstered sales and the road is expectedto be fully pedestrianised by 2020.15th CenturyGiven its location outside thecity’s walls, the square was abusy meeting place formerchants looking to avoidpaying taxes.1766Casa de Correos constructed.1857The square takes on its currentsemi-circular form afterundergoing a majorregeneration project.1919The first Metro line is opened,running between Puerta delSol and Cuatro Caminos.1950sThe area is refurbished toimprove vehicle access giventhe rising traffic levels.1960sLandscaped areas andfountains are added. Works topedestrianise Calle Preciadosand Calle El Carmen begin.1986A large pedestrianised area iscreated, the Metro station isrefurbished and the RegionalGovernment relocates to theReal Casa de Correos.2004-2009The underground metro andregional train interchange isconstructed.2009Several monuments arerelocated, such as “The Bearand the Strawberry Tree” andthe renovation of Kilometre 0plaque, in order to improvepedestrian access.2014Apple moves into Puerta delSol 1 and the illuminated TíoPepe signage is moved toPuerta del Sol 11.2017Proposal from the City Councilto redesign the square andreposition elements that limitvisibility.Madrid’s City Council and RegionalGovernment are working on plans toredesign the Sol area to make it moreaccessible by modifying the layout,repositioning the street furniture andclearing the centre of the square to allowfor higher footfall. This project furtherdemonstrates the city’s push to establishthis area as a major retail hub.1950sFuture - The COAM (Madrid OfficialAssociation of Architects) “PiensaSol” tendering process

Puerta del Sol is the main retailarea par excellence. With six ofthe city’s main high streetsleading onto it (Preciados,Mayor, Arenal, Carmen,Montera and Carretas) andother major retail high streets,such as Gran Vía andFuencarral lying just a stone’sthrow away, the area can nowincreasingly be compared toLondon’s Piccadilly Circus andNew York’s Times Square,although it still offers far lowerrents than these celebratedsquares.FOOTFALLIts high retail footfall makes itthe most visited area in Spain,registering over 100 millionvisitors per year, whilst morethan 30 million passengerstravel through the Puerta delSol transport hub each year.30,000 - 40,000people per day20,000 - 30,000people per day10,000 - 20,000people per day9

WHY OPEN A FLAGSHIP IN PUERTA DEL SOL?KEY PLANNEW RETAILERSDEMAND FORECASTWith the economic recovery infull swing and high street storesseeing sales surge, retailers Primark, H&M and Adidas, who have allturned these properties into flagship stores.The heightened investment in refurbishingproperties has opened the door to newfront-line retailers that attract moredemanding buyers. In recent years, some of the city centre’s mosticonic buildings have been refurbished and letto big-name brands such as Apple, Sfera,The number of smaller retail units, thatfeatured heavily on the square up until afew decades ago, is now falling as the areaestablishes itself as a showcase for theindustry's top retailers.already in the market are tryingtheir locations by looking forareas with higher footfall.BBVAKFCSouvenirsRetailers are placing particularCALLE MAYORto consolidate and improveCALLE DEL CORREOLa Mallorquina8The Body ShopUnder development9emphasis on the efficiency andEl Corte Ingléslayout of their stores, valuingon the market such as Sephoraand The Body Shop, areimproving their stores and their743%positioning in the city centre.Apple’s arrival to Puerta del Sol1, occupying 6,000 sqm andboasting a sales area of overCALLE DE CARRETASTopshopDu Pareil au Meme1,000 sqm, triggered the start5of a new consolidation phasefor the area.6PLAZA PUERTA DEL SOLBrands which are establishedReal Casa de Correosboth quality and location.10MaryPaz411%CALLE DEL CARMEN11%10%1223%2%(percentages based on retailspace)133CALLE DE ESPOZ Y MINA10VodafoneRodilla1421CARRERA DE SAN JERÓNIMORiaSouvenirsSephora11AppleVision FarmaciaPans & CoOrangeCasa de Diego