Spanish Shopkeepers Get a Rent Shock

Angel García, whose family has sold hand-tailored shirts since 1857, will be shutting his shop on Madrid’s Gran Via in the new year because his landlord is raising the rent almost tenfold. At the stroke of midnight on Dec. 31, a rent-control rule introduced under dictator General Francisco Franco comes to an end, leading to financial turmoil for thousands of small-store owners. “This business has been in my family for four generations,” García, 89, says while standing in front of his shop window, where “closing down sale” posters are displayed instead of shirts. “It’s a sign of the times.”

The move, which will force businesses that can’t afford to pay market-rate rents to close or move to cheaper premises, will free up prime property that’s been inaccessible to other retailers for decades. The change comes as Spain’s economy is poised to post its fastest growth since 2007. “This is a market economy, and you cannot have a tenant renting space in a prime area paying peanuts with the tenant next to them paying market rates,” says Angeles Pérez, director of high-end retail properties for broker Jones Lang LaSalle in Madrid. “It’s like we all want to own a Prada handbag, but some of us pay €100 and others have to pay €1,000.”