European Luxury Retail

Navigating Supply Constraints on Europe’s Luxury Streets

Across Europe’s leading luxury destinations, vacancy remains at or near historic lows, with several prime streets reporting zero availability. This supply-demand imbalance is intensifying competition for space and reshaping location strategy.

Brands and investors are responding by expanding into adjacent units, upper and lower floors, and redevelopment pipelines, as well as adopting “nearby street” strategies that offer a halo effect from prime pitches while providing greater flexibility and scale. These dynamics continue to underpin rental growth and reinforce the defensive qualities of well-located luxury assets.

Luxury Retail in Spain:

In Spain, the main luxury streets continue to show strong dynamism and growing demand. In 2024, eight new luxury store openings were recorded on the country’s prime shopping streets. In Madrid, six of these stores are concentrated between Serrano and Ortega y Gasset streets, while in Barcelona, Passeig de Gràcia hosts the remaining two. The availability of retail spaces in these prime areas is extremely limited, with a virtually non-existent vacancy rate. This scarcity has contributed to keeping prime rents at high levels, reaching €260/m² per month in Madrid and €270/m² per month in Barcelona. Forecasts for 2025 indicate an expected increase of 5% to 10% in maximum rental prices, approaching 2019 levels, when they peaked at €285/m² per month.

As retailers adapt to an environment with increasingly demanding consumers, physical stores remain a key touchpoint for customer interaction. These spaces allow consumers to discover and purchase luxury products while enjoying in-person experiences that strengthen their connection with the brand. The need for retailers to secure the best spaces in strategic locations continues to drive high demand in these premium retail areas. Luxury brands have continued investing in key locations across Europe, with a particular focus on London, Paris, and Milan. These investments are highly strategic and selective, aimed at maintaining long-term positioning and carrying out significant transformations in physical retail spaces.

More and more brands are seeking to expand the size of their stores to showcase a broader product range and offer exclusive experiences to their clients. Given the lack of available space, retailers are adopting innovative strategies, such as expanding into neighboring units or relocating to larger spaces, all with the goal of establishing their stores as brand landmarks.