Retail Landlords Reel as Big Luxury Brands Threaten to Close Stores if Rents Aren’t Slashed

Luxury retail isn’t what it used to be, from Barcelona to Hong Kong.

By Nick Corbishley, for WOLF STREET:

In Barcelona, frantic backroom haggling is taking place between some of the world’s biggest luxury retailers and the owners of some of the city’s most expensive commercial real estate. That real estate is on Passeig de Gracia, a ten-block avenue that is home to two of Antoni Gaudi’s most emblematic buildings, La Pedrera and Casa Batllo. It is currently Spain’s third most expensive shopping street, having lost the top spot to Av. Porta de l’Angel (also in Barcelona) and Av. Preciados (Madrid).

Two months ago, renting a street-level store on Paseo de Gracia would have probably set you back around €3,000 per square meter. But that was before the arrival of Covid-19, when the street was teeming with international tourists, including deep-pocketed, big-spending visitors from China, Japan, South Korea, Russia and the Middle East. Today, after more than seven weeks of draconian lockdown that is only now beginning to be relaxed, there are no tourists, the street is half empty and almost all the shops are closed.

Even when the shops are finally allowed to reopen, their biggest customers — those big-spending, deep-pocketed tourists — will be nowhere to be seen. Hence the frantic behind-the-scenes haggling.

A source who is familiar with the situation told me that some of the luxury brands have made their respective landlords a brutal ultimatum: either reduce the rent by 75% or tie it intrinsically to the sales generated by the store, which right now is essentially zero. Otherwise, they will shut the shop.

The property owners, who predominantly consist of descendants of late 19th or early 20th century Catalan industrialists — what remains of the so-called alta burguesia Catalana — may have little choice but to accept the offer, or some slightly improved version of it. Retail landlords all over Europe are already seeing their rents plunge, albeit not by as much as 75%. Some landlords have voluntarily allowed their tenants to skip rent payments if the lockdown prevents them from operating. Others are desperately chasing payments and threatening their tenants with legal action.

They include UK mall giant Intu which was already in dire enough straits before the virus crisis began, forcing most of its tenants in the UK and Spain to temporarily close their stores. As of four days ago, it had only managed to recover 40% of its rents due on April 1. Among the retailers that are refusing to even engage with Intu “to find a consensual solution” are “a number of large, well-capitalized brands who have the ability to pay but have chosen not to,” the company said in a statement.

In Hong Kong, which is famous for its luxury retail, some luxury retailers have given up trying to renegotiate their rents altogether and are now staging a gradual retreat. Even before Covid arrived, the pro-democracy movement had scared away many mainland Chinese tourists, who were the mainstay of Hong Kong’s huge luxury goods sector. Covid did the rest. By late January, with most of the city’s borders with the mainland closed, visitor arrivals had slumped 97% year over year to just a few thousand a day.

As in Barcelona, without the guaranteed influx of huge numbers of well-heeled foreign tourists, the luxury retail sector now has a significantly shrunken market. By February, the sales of luxury goods (jewelry, watches, valuable gifts, etc.) in Hong Kong had slumped by 78% compared to the same month of 2019.

Many luxury brands are reducing the number of stores they operate in the city. In January, Louis Vuitton announced plans to shutter its flagship store at Hong Kong’s Times Square. Days later, Prada brought forward its planned shutdown of a nearby store to February from June. Valentino has also slashed the number of its stores in the city, as have Swatch Group brands Omega and Longines. Two home grown companies, Chow Tai Fook Jewellery Group and cosmetics maker Sa Sa International Holdings, each plan to close down 15 to 30 stores.

Whether in Hong Kong, the UK, Barcelona or just about anywhere, owners of many types of retail properties are feeling the pinch as rents plunge or dry up completely. The fact that some of the world’s richest retail brands are closing up many of their shops in some of their formerly most lucrative markets, or at least threatening to do so if the rents they pay are not sharply reduced, shows just how significantly things have changed in the last couple of months.

In Spain and the UK, temporary moratoriums on evictions prevent landlords from pushing out tenants that don’t pay. But in this environment, these landlords wouldn’t be able to find another tenant anyway, and the property would not produce revenues for the landlord. The financial stress is now spreading from retailers via landlords to their lenders. Many of these commercial property owners will apply for mortgage holidays from their banks, many of which will be approved, for the simple reason that the last thing the banks need right now is cascading defaults on commercial property loans. By Nick Corbishley, for WOLF STREET.

European banks haven’t gotten over Financial Crisis 1 and the Euro Debt Crisis. Now there’s a new crisis. Deutsche Bank’s CEO going on TV to soothe nerves didn’t help matters. Read…  European Banks Reveal Scale & Complexity of Crisis. Shares Hammered Back to 1987 Level

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  93 comments for “Retail Landlords Reel as Big Luxury Brands Threaten to Close Stores if Rents Aren’t Slashed

  1. Reality says:

    Retail Landlords and their luxury brand tenants both need to fail, declare and go away forever. A consumer driven economy fueled by ever increasing indebtedness is a sickness that is fatal as we are all currently witnessing. Time to evolve from being sugar/salt consuming, credit card charging, Kardashian Ass Watchers.

    • VeryAmused says:

      I am not sure the world can survive without 10K handbags and shoes.

      How would one know they are better than others?

      • joe2 says:

        Increase you education and skills, knowledge of the arts and sciences, charity work? But a little harder than busting your sugar daddy for a few thou.

    • MonkeyBusiness says:

      As long as there are human beings, there will always be some degree of “Keeping up with the Joneses or the Kardashians”.

      My old boss told me that “high school is never over”.

      The problem is not consumption per se, it’s the insane gap between the pay of a CEO and a regular worker.

      • M says:

        The poor CEOs get that pay so they will jump like spaniels, kiss anywhere like Spaniels, and commit unconscionable crimes that no dog would do for the ultra rich, control groups. Pity them.

        They are like Faust but less nice. :-) Having worked with high level executives, I tried to stay alert to avoid getting involved in their crimes and later indicted. Only those of the wrong groups or without connections get prosecuted though, is what I heard.

        • M says:

          LAW ENFORCEMENT: consider investigating the ultra rich with “wiretaps!” Google what those are.

          CONGRESS: Remove all privileges for lawyers and accountants that are then revealed to be assisting tax fraud or creating foreign shell companies to hide income/assets. Enact asset forfeiture for use of such shell companies: that will remove the federal deficit.

          This story really makes me happy, since this downturn hits the rich RE owners and the other rich, both of whom engage in this tax fraud baloney. :-)

        • Xabier says:

          Don’t be so horrid about spaniels: mine -a true sporting dog – is extremely independent and is very good at telling me to take a hike!

          Pick on the Pekinese instead or some other nasty little floor mop.

      • noname says:

        “high school is never over” for people who have and use FB.

        the only time i’m around the wannabes (mental midgets) in my life is when i’m forced to be.

      • otishertz says:

        No offense, but if high school is never over for someone then it may be time for some self examination.

        • WT Frogg says:

          otishertz :

          Lets put it another way : ” Nobody ever really grows up, the toys just get more expensive.”

      • Trinacria says:

        I think one of my favorites – Fredrick Douglass – said it best:

        “The life of a nation is secure only while the nation is honest, truthful, and virtuous.”

        I’d say, there is nothing honest, truthful let alone virtuous to see here…so it seems our life as a nation may not be all that secure…how very sad as all thrown away for stuff / tchotchkies (trinkets, nick nacks etc. for those who don’t know the word).

    • dd says:


    • Dan Romig says:

      There will always be a place for quality brand retailers. Quality and luxury are usually inter-connected.

      I was thinking of this situation that Nick is reporting on from Barcelona as it relates to the Twin Cities this morning. I don’t shop at the traditional luxury shops in downtown, but the few things I shop for are higher quality – which I feel I’ve earned at this point in life. I’m not alone in this attitude.

      As I rode by my friend’s bike shop, a shop where I began my quest to be a racer 34 years ago, I was happy see a dude walk out of the shop with a top-end time-trial bike. I smiled knowing that he bought it from the owner that I raced with long ago. I also felt good knowing that my friend’s shop will be there for me in the future.

      The key to my friend’s success and longevity is that he owns the two-story building. A main floor shop, a basement for stocking parts and such and two nice apartments upstairs – which generate income. He owns it from decades of hard and honest work. So yeah, there is a place for a luxury bike shop in St Paul, and my bike, purchased there, cost $12,000 when new ten years ago.

      A lot of luxury goods, furniture for example, will be handed down to the next generation or two. Quality and luxury are usually inter-connected. Some consumers want and can afford high quality.

      • noname says:

        considering that a honda civic started at $15k 10 years ago, i’m not so sure it was simply “decades of hard and honest work” that allowed him to own his building. just sayin’

        • Portia says:

          Mass production versus a specialty product is not a good basis for price comparison. As someone who uses a bike for main transportation, I have agonized over the prices of e-bikes. Comparing them from bottom up, there are differences in materials and technology that make for large price disparities as you get into competitive sports. I finally found a happy medium for myself.

      • Jos Oskam says:

        “…Quality and luxury are usually inter-connected…”

        Sorry, but I disagree.

        Quality is an autonomous property of something that can be seen and experienced. It usually has an intimate relationship with cost, since it is not normally possible to produce quality items on the cheap.

        Luxury is a more or less quantifiable experience that depends heavily on the eye of the beholder and is relatively independent of cost. Often, people appreciate as luxury the kind of “fluff” that is produced at low cost but comes at steep prices.

        It would be a good thing if the COVID crisis made the fluff disappear, and re-kindle an interest in high-quality goods.

        One is allowed to dream, I suppose…

        • otishertz says:

          Defining quality is almost as difficult as defining irony.

          Go ahead, try to define either.

        • VintageVNvet says:

          Not so sure about the ”quality” of luxury goods these days, but there used to be some connections with some products such as RR vehicles, etc.
          As to quality of tools, both ‘hand’ tools for use without electricity or other sources of power, and ‘power’ tools, the difference is readily defined by usage metrics.
          Just one example of the power type would be the quality electric drill that costs 3 or more times the low quality one and lasts 10 or more times with the same usage.
          As for the hand type, that would be similarly illustrated by the top quality chisel or hand saw that would last a lifetime, need sharpening only after hitting a nail, etc., and cut smoother and faster than the low quality tool.
          Is that sufficient illustration of the point, that IMO, can be generalized over many types of items, perhaps services too.
          Irony OTOH is simply having your clothes look neatly pressed instead of slovenly crumpled, etc…

        • LeClerc says:

          Paging Bob Persig…

        • Dan Romig says:

          Bob lived across the street and three houses to the north of me. he was a quit, but friendly guy. When I’d driven by him on my new Kawasaki in 2002 and waved to greet him, he asked me to stop so he could check out my bike.

          “Do you ride? I asked. “Not any more, but I used to. I wrote ‘Zen and the Art of Motorcycle Maintenance’.” he informed me.

          It’s been a dozen or so years since Bob moved from my neighborhood, but thanks for reminding me of my nice neighbor.

        • Dan Romig says:

          Just a follow up to gets things accurate: Bob did not own the home across the street. It belonged to his good friend who is in the book, John Sutherland.

          I’m not sure what the reason was behind Bob being away from his second wife for a bit, but he was living there for a couple of years.

          I asked a neighbor for additional info as it probably seems a bit too coincidental that LeClerc writes ‘Paging Bob Persig…’ and I say he lived across the street. But, it is true.

          He did like my bike by the way as it was/is relatively simple and easy to work on.

          “Sometimes it’s a little better to travel than arrive.”

          “If the machine produces tranquility, it’s right.”

          Words of wisdom Bob; now I’m going to ride one of my machines to find tranquility.

    • Stuart says:

      Excellent comment. Throw in a massive conversion of the Military Industrial Complex from Corporate Welfare to actual human needs and you may have something there.

      • Javert Chip says:


        Gee, a lot of people probably think defense from bad guys, allowing you & your family the freedom & liberty to live a long & happy life was a “human need”. Case in counterpoint: reference 2014 Russian annexation of Crimea.

        In fact, most Americans consider it to be “…self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness…”.

        Further, to achieve this, they agreed “…to institute…Government…to effect their Safety and Happiness…”.

        Extremely naive people are terrific at virtue-signaling, and don’t get the connection between “defense” and “freedom & liberty”; neither do the uninitiated understand freedom is neither free or guaranteed.

        Easy to virtue-signal; actually delivering virtue requires sterner stuff. For the record, Mexico did a pretty good job of it at Little Peuebla on May 5, 1862.

        • sunny129 says:

          In fact, most Americans consider it to be “…self-evident, that all men are created equal……’

          The time this was written, MEN means only ‘White Men’, Not women or nor any KIND of colored men or women. It is a reflection of thinking who, had absolute power and thought they were virtuous and noble in their thoughts!

          Hypocrisy embedded and gets repeated, all over the world!
          just saying!

          btw: Ex Secretary of State Ms. Condoleezza Rice, pointed this IRONY during a congressional hearing!

        • Javert Chip says:


          You appear to be arguing America is not perfect. This is only somewhat interesting because I’ve never claimed is is.

          But since you’ve brought up the point, name another contemporary, reasonably large, highly diverse nation that you consider to be more tolerant than the US (note: Norway, Finland, Sweden are tiny, have 97% white populations, and simply don’t count).

    • M says:

      :-) Amen.

    • Tony says:

      Meanwhile, the African illegals, who pay zero rent, who sell fake designer bags and geegaws, cleverly displayed on the sidewalk on parachute like cloths that can be quickly picked up and slung over the shoulder should the cops be seen, they have no customers, and they too are desperate. Capitalism in action!

  2. 2banana says:

    So ultra rich Chinese tourists are not shopping luxury goods in luxury retail stores in Barcelona or Hong Kong anymore.

    So where are they? Shopping in China?

    Not so rich anymore? Just stopped spending?

    • stan6565 says:

      With c19 reduced number of flights from China to Barcelona, they are still on their way, driving, towards their destination.

    • Gerrard White says:

      yes they will be shopping in china and in those other asian countries where the virus was successfully contained and the social economic structure of society is both stronger and more responsive than in old europe or newish US
      this time the quarantine will be europe & us in quarantine

      • Javert Chip says:

        Gerrard White

        So, your position is because China can put 1,000,000 muslims in a concentration camp & uses them as slave labor, and there appears to be no internal Chinese resistance, you consider that to be evidence of “…[Chinese] social economic structure of society is both stronger and more responsive than in old europe or newish US…”?

        Gosh, sounds like a tightly controlled totalitarian state to me.

        • Gerrard White says:

          er no that is not my position, but since you argue – what is prison pop of the US?, what is death toll per year from US ‘interventions’

          as you see these attempts to sling mud get in the way of thinking

          the thinking is – what is the business model in retail and tourism that depends to almost 100% on externalities which can go to zero overnight – answer a foolish one

          plus it depends on illegals, in miserable conditions moves locals out of town, ghosts the cities, kills the economy for the profit of banks and real estate speculation

          what’s worse than an efficient totalitarian society? answer- an in efficient one

    • HD says:

      I feel for countries like Spain and Greece. They face a double whammy now compared to other EU member states. Tourism is dead for 2020 IMO. And these countries need tourists. Desperately so. Just goes to show you: try to keep your national economy as diversified as humanly possible.

      • char says:

        And it is not even the fault of Greece. They can’t accept tourists from Britain, Sweden or the Netherlands because their government are incompetent at battling C19

  3. nick kelly says:

    I guess I’ll open: what if any public assistance should luxury brands and their landlords get?
    Sorry, but I’ll say zero.

    Of course there is a role for high quality but if anyone thinks a five thousand dollar handbag is higher quality than a two or three hundred dollar bag, they are simply starstruck. You aren’t paying for the leather or the stitching, you are paying so people can see you have a bag, or watch, etc., they can’t afford. You are paying for the privilege of overpaying, aka, conspicuous consumption.

    In a world of infinite resources ( like 3 months ago), sure, let people revisit their childhood and try to recapture the moment where the Red Ryder BB gun or special doll is under the tree. But now…?

    • Petunia says:

      Some of this consumption is not conspicuous consumption, it’s malinvestment. These women don’t see the correlation between 10 handbags equaling one very nice paid up car. I see it all the time, it’s sad.

      • IanCad says:

        “Malinvestment” I shall remember and use it at every opportunity. Most immediately, to anyone contemplating going to a bricks and mortar university or plunking money down on a house.

      • char says:

        Is a very nice car also not a malinvestment? In 20 years the 10 handbags are worth more nd they don’t need insurance, upkeep or taxes.

        • Petunia says:

          A very nice car will always have some residual value, even if it’s only the scrap metal. Maybe one out of 10 handbags will have any significant residual value in 20 years.

          I have one handbag that has maintained its value over 20 years, a Dior. For many of the intervening years, it too had no significant value, until the fashion house resurrected the design. Now it’s worth more than I paid for it.

        • Synergy says:

          Do a google search on “handbag insurance” and you may be surprised. Maybe no taxes but good quality leather can use conditioning every now and then to keep it looking good.

        • char says:

          The insurance,taxes and upkeep of a 19 year old formerly very nice car is more than the value of a 20 year old car.

          ps. This is obviously an exaggeration. It is more like 5 years of costs is the value of a 20 year old car

      • Portia says:

        When you have both, and maybe two or three very nice paid-up cars, it’s hard to see that you don’t need a bigger house in a better neighborhood, and a private jet. I think of that woman Jill Todd, who just wrote a book about how unlimited money messes with yoiur brain.

      • Adam says:

        a hand bag as an “investment”, Petunia?

    • VintageVNvet says:

      As Zig Ziglar (sp?) used to say, ”You’re not selling the steak, you’re selling the sizzle.”
      IMO, that sums up pretty well the delta between any well functioning item and one that functions just as well but no better but costs much more because of the name of the store.
      Clearly, there are some notable exceptions, but in general, IMHO, ” folks that spend money they don’t have to buy stuff they don’t need to impress people they don’t know or like ” deserve the empty life and regret they apparently usually get if we are to believe most of the great fiction of the last several centuries.

    • MiTurn says:

      True, but Ferraris are made by working-class people. And so are stupid-expensive handbags. Just a thought.

  4. Suzie Alcatrez says:

    The customers will be back.

    The rich will emerge with even more money than before the coronavirus.

    • Petunia says:

      I heard Hermes opened a new store in China and sold $3M on opening day. Even their Japanese stores are turning a profit.

      • MC01 says:

        $2.7 million is an unconfirmed figure for the re-opening of the Hermès flagship store in Guangzhou on April 13: apparently several shoppers posted their bills on Weibo to show they had spent the equivalent of tens of thousand dollars at the store on that day and the figure was extrapolated from there and from locals counting the number of customers coming and going from the store. Guangdong (of which Guangzhou is the capital) is the richest province of China so it’s possible there’s some kernel of truth, but make of this what you want since it could be a sophisticated PR operation.
        Again make of this what you want but next Monday Disneyland Shanghai will re-open, albeit at limited capacity to prevent crowding. During the May Day vacation pretty much all tourist attractions had re-opened across the country, albeit at 30-50% capacity, again to prevent crowding.
        The Chinese government is performing acrobatics to convince people it’s safe to go out and spend even on big ticket items like those ghastly handbags and Buick’s.

        In the meantime here those retailers who should (should) re-open in less than two weeks don’t even know what rules they will have to follow and we are all nervously looking over our shoulder to see when the government will lock us up again. Because it’s just a matter of when, not if.

        Jeu, set et match.

        • Gerrard White says:

          Thanks, you are spot on – in any case the tourist economies of Barcelona and so on were accidents waiting to happen

          It’s not the lockdown so much any more, for all that was badly managed, it’s the après lockdown which will make it quite clear to everyone how incapable and inefficient and culpable to various european ‘authorities’ are

          at which point expect some blood in the streets

  5. Petunia says:

    The luxury retail environment had gotten so crazy before the crisis, I’m glad to see changes coming. So many brands artificially restrict the supply of goods, they really don’t need the stores. At some stores you need an appointment to queue up outside, to see merchandise they don’t have in stock. If you want an item you have to pay to go on a waiting list. Simply ridiculous marketing.

    Now more merchandise is available online. Many customers prefer to shop at home because these luxury brands don’t provide a luxury retail experience, so why have the stores.

    • 2banana says:

      Wait a sec…

      Or we talking handbags or Teslas from a few years ago?

    • otishertz says:

      A lot of trophy stores are out there. These are usualy stores propped up by multinationals who don’t care about the sales vs rent PSF. It’s a loss leader and advertising to them but their rent rates echo in their localities and salivate all the landlords.

      There are a lot of reasons for the death of retail. Greed of property owners and concomitant rent escalation is a huge and unmentioned part of it. When an apple store opens on a street all the piddly property owners next door expect the same rent but apple is so huge they spent 300 million dollars every trading day in the third quarter buying their own shares. $300 Million a day. They don’t care about the rent.

      It’s unrealistic to expect Jo and Nancy shopkeeper to pay that rent, so they shut down. Ultimately, things get very bland and the local color disappears. Then you get all the usual supranational boring name brands everywhere, in every town, and all the regional differences disappear.

  6. timbers says:

    What perfect timing! Jerome recently said he’s going to buy junk bonds early May, and as he has not been arrested (yet) well…he’ll make it so. That means the road to salvation for these retail renters is merely a matter of employing 50% American workers and issue limitless junk bonds to their most whimsical desires and Jerome will buy them. Because lifestyles of the rich and famous are exactly as deserving of bailouts as are essential state and local government services…. according to some folks here.

  7. FinePrintGuy says:

    When your family has been collecting rent for 5 generations on a building, you probably arnt sweating a few missed payments or a reset at 75% of the high water mark rent. They are probably collecting tons of cash from diverse sources. Just a blip on the monthly summary coming from their investment managers…

    • 2banana says:

      Can they reset their property taxes at 75%?

      How about the wages of the people who work for them?

      Insurance? Upkeep? Upgrades to the latest municipal codes? Complying with environmental laws?

      You sure are pretty good at taking stuff from folks you deem unworthy.

      How about the sacrifices going through the Civil War? Not selling out to big corporations and tearing down the historical building to put up a big box?

      How about we just let the market sort it out.

      • FinePrintGuy says:

        Property taxes … on property bought 5 generations ago? Going to venture that its low…

        Environmental laws? Municipal codes? Are they changing so frequently?

        Civil War…that one from the 1930s? Its 2020 now…

        What big box retailer would be permitted to tear down the main drag in Barcelona…ever?

        • char says:

          Property taxes are not all California. My guess it will be more a percentage point in Barcelona of current value. Not the price when it was bought. Which would be something like Euro 500 with all the inflation and income growth Spain has seen

    • KGC says:

      I’m sorry, but that’s a fantasy. Most of those properties are mortgaged, so the owners can enjoy living on that appraised value, which is used to pay for up keep, and keeping up with appearances (very important to “alta burguesia Catalana” and those who wish to appear such.) That’s a big part of the problem. They are mortgaged at rates that are ridiculous; they know it, the banks know it, and the gov’t knows it. But none of them can say anything about this because that would require them to admit they have been supporting this lie. And the lie (and maintaining it) is more important to them than the great unwashed. They will go to war, kill, and steal to keep the facade in place.

      This is why you have hundreds of thousands of empty properties that can’t be sold or used, because no one in the chain can, or will, admit to their true value. To do so would cause the system to crash.

      That’s why a pile of stones in a field that’s not seen tending in 50 years is still a “country villa” in Italy. $200,000 dollar apartments sit empty in villages where the average family survives on less than $1000/month in Spain. It’s not that they can’t find buyers; they can. but not at the prices they have to get to bail themselves, and the banks, out of the hole they dug themselves.

      Watch; it’s going to happen here in the USA (again). People will go underwater on their mortgages, and yet they won’t sell, because they borrowed against that “equity”, and they’ll either go bankrupt, get the gov’t to bail them out, or somehow manage to survive until the next time the market comes back.

      • Clay says:

        These folks need to get with the times / program and convert their towns and villages to money laundering, I mean, wealth management hubs. The gusher of hot money flowing in will indefinitely prop up their property values ‘cos all that innocent, moral, right-thing-to-do money needs a warm, loving home. Problem solved. /sarc

      • Xabier says:

        Very true regarding Spanish real estate and why they cling to these unreal valuations.

        I wanted to move to a valley in the Pyrenees where my family lived in the 17th century, and the properties -very good, solid, family ones built in the best years – are sitting empty for years at absurd prices.

    • michael earussi says:

      Sounds good until you think about what property and other taxes they might have.

    • BuySome says:

      Better go back and read that Fine Print, Guy! They were seeking a reduction of 75%…that leaves only 25% of that high water mark…more like a late summer puddle to drink from, not a well of wealth.

      • FinePrintGuy says:

        Yes, 75% cut.
        My point that you’re missing is that these buildings in town have been held for multiple generations. Through thick and thin. This isnt the first time rents have been reduced. The family that holds for 5 generations has TENACITY. If two world wars, a civil war, pandemics prior, and all the other calamities in the last 120 years havnt dislodged them, then why would they give it up now? Its Europe, old money, they don’t do much debt, there isn’t much pressure. They own plenty of assets generating income. There is little pressure to sell.

        • Candyman says:

          So much speculation. As for property tax, it doesn’t make any difference when it was bought or how much you paid for a building. In boston, for example, it is appraised by the govt yearly for commercial property. The rates are set by the govt. We pay, I know I rent and see the actual bill. I don’t begrudge anyone for making money, isn’t that what we all want? I do agree we need to have fair and balanced laws, and morals. It isn’t only the top that lack moral fiber.

    • MM says:

      It’s not a reset at 75% of the high-water mark. It’s at 25%.

  8. WES says:

    It is a game of chicken to see who is more insane, the landlord’s or the retailers!

  9. Wu says:

    Nothing Goes to Heck in a Straight Line, except when central bank suddenly flood the market with huge liquidity

  10. Michael Gorback says:

    The Special Servicers are going to have an insanely huge harvest now that the easy refi days are gone.

  11. Prof. Emeritus says:

    The thing is that most of these luxury stores do not serve the old-school snob consumer who smokes only the finest Cuban cigar and drinks only the finest French red wine, but overwhelmingly collectors. Once the value of things such as luxury watches or designer-sneakers is shaken and people discover that not everything goes to infinity in a straight line those shops and brands are facing a great fall.
    Don’t get me wrong, I’m not trying to be a social-critic here, it’s just that I’ve valued a few things in my life – and while one can see the engineering achievement in some old military equipment, the historic worth of Greek pottery or the beauty of art nouveau items, luxury watches always seemed like a tulip-seed market to me.

    • Tim says:

      Anecdotally, I’ve heard that they are also an item that has less appeal the younger the customer.

      Fitbits signal more virtue.

      How many under 35yrs old do you see wearing old fashioned watches these days.

      If not wearing tech, they’re more likely to just look at their smartphone.

      • char says:

        Watches are the only jewelry man can wear so expecting the death of watches is imho overblown. Watches are not on your arm to tell the time but as a signal of wealth

        • Prof. Emeritus says:

          Have seen bigger fashion taboos fall than that. Actually wristwatches became a jewellery only around the ’70s, pocketwatches somewhere in the ’30s. Until then most models were used purely in a utilitarian way.

        • char says:

          Men wore other jewelry at that time. Now even pimps don’t wear a gold chain.

  12. Gerrard White says:

    This is a very welcome article

    Perhaps the author could extend these observations to a discussion of the (probable) effects of a more general de touristification of the Barcelona economy, typical of many towns and cities all across europe and beyond

    It is known that there was anti tourism movement building

    – rich Asian buying of luxury goods far from home as a result of internal policy decisions as to consumption was never a viable long term business plan

    – over reliance on general tourism is revealed to be over dependent on externalities which can go to zero over night, another short sighted business plan

    -an outline of the deficiencies of the tourist economy model as adopted even in capital cities

    • Raymond Rogers says:

      We’ll see what the anti-tourist crowd has to say about the lack of jobs and increased burden of taxation due to falling tax revenue. Something tells me that falling home prices (and hence falling valuations) will not offset the former mentioned problems.

      • Xabier says:

        Quite true, there are some rather dim people out there longing for a property bust.

        Guess what, in a Depression with permanent mass unemployment you will lack the money to pay for anything at all, however cheap.

        ‘Better to pay through the nose than have no nose at all’ as the old Spanish proverb has it.

        • Frederick says:

          Not really If you squirrel away enough gold you will be just fine when everything is going to heck in a straight line Assuming you can protect it from the zombies

      • char says:

        Barcelona main business is not tourism, but tourism is killing all the the other businesses. See what happened to Venice. And tourism is not even a good paying business.

      • Gerrard White says:

        I do not think you know this business in that town or indeed continent because the blight is everywhere

        – The ‘jobs’ are really poor quality jobs, and like in most european tourist towns are done by shipped in illegals paid miserably

        Real estate Prices are inflated, artificially, as other posters on this site have explained, the apartments are rented to the party people, or empty most of the year of their foreign owner, or merely a real estate scam – locals have to move far out, the city dies

        The real economy and the local economy is parasited

        One day the bug comes along and the planes fly in empty and the scam market and pseudo ‘industry’ collapses and you’ve got like one of those towns you have out West a ghost town

        • char says:

          Eastern Europeans are not illegals. But what you are saying is completely right.

    • Javert Chip says:

      Gerrard White

      This is ridiculously simple: it’s pretty obvious all those soon-to-be-unemployed in the Barcelona tourism industry will simply return to their day jobs as astrophysicists and brain surgeons..

      • Gerrard White says:

        to do irony you have to be able to think and think about the situation, and irony is informative

        you are not-

        the tourism industry is dead, the lux Prada retail ditto

        the real estate scams almost certainly

        so what’s your point ? save them with sarcasm?

  13. otishertz says:

    As a former retail store owner for ten tears in a tourist locale I have to say… this is wonderful. Rents have been BAloNeY money for street level retail and the property owners have always been predatory.

    I friggin hate tourists and hate traveling to tourist destinations. They are all the same. The only difference is the price of souvenirs. Otherwise, same old same old.

    And to all the Air BnBoomer rentals out there, suck an egg, you have distorted the rental market where the people who serve the tourists need to live.

    • Frederick says:

      I agree Touristy locations usually suck pretty bad Everyone has got an angle to try to pry as much cash from your wallet as possible Thats why I like places like Warsaw and Bratislava Real people and you don’t have to watch you back constantly

      • Portia says:

        I live in a touristy state, and the irony to me is that some of these businesses actually despise the poorer locals. I have seen some of these go the way of the Dodo since 2007. One carpenter I hired for a small job said he only took it because he was living with my cousin, so he couldn’t really say he was too important to work for me. His mantra was “The world needs rich people” and he usually only worked for the people with second homes there.

  14. otishertz says:

    We already see the blandification of the ubiquitous supranational name brands in every tourist location. Once Jo and Nancy shopkeeper are thoroughly dead what will we have but apple stores, microsoft stores, facebook playpens, and corporate unicorn bounce houses?

    Street level retail may eventually be only distribution outlets and showrooms for technocratic companies that are bigger than most countries. Sprinkle some delivery and pickup outlets in there.

    Restaurants will always remain at street level, however, there is a huge trend of takeout only restaurants (ghost kitchens) that portends a shift there too.

    This implies a lot of dead retail space. Look around, our cities are built around street level retail and it is all going to die except for a few exceptions. How will our city streets look after 20 more years into the online takeover of retail?

    It’s homogenization to the point of death by boredom. I don’t like how it will change our culture and make it more insular but if I can get everything including groceries delivered for little to nothing and get my favorite restaurant to bring me dinner for less than a tip in the restaurant, I’ll probably stay close to home.

  15. Jdog says:

    I think you will see this downward pressure on prices everywhere going forward. This is is a deflationary environment…

  16. sierra7 says:


    When I was a youngster the SF Examiner had great comic section; at the top of the section Hearst had a leader…..”What Fools These Mortals Be!”
    Never ever forgot that theme……..

  17. Yerfej says:

    What if people realize that life is about the experiences you enjoy, and the people you do it with? Not the crap you accumulate. A change in the wealthy’s perception could be devastating to a lot of luxury brands.

    • Lisa_Hooker says:

      Life is about the things man can do and accomplish with the crap (tools) he accumulates, not the people and places you can’t remember in senility and Alzheimer’s. Better tools are always a pleasure to work with.

  18. sunny129 says:

    AM I feel to sorry for this slice of ultra luxury segment of the Economy. mostly limited to top 10% of any society?

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