Spain's family-run shops face last Christmas as rent controls end

MADRID - On Madrid's main shopping street, the Gran Via, a toy store that has sold handmade dolls since it opened in 1942 just after Spain's Civil War, is preparing to close after the Christmas rush.

Dolls decked out in classical clothes overflow in the large window of the shop, which is mentioned in several guide books to the city and attracts tourists who snap pictures of the display.

"Thank you for 72 years", reads a sign in the window.

While business has held up during Spain's economic downturn, the shop, owned by the same family since it opened, can't afford a sharp rise in its rent that will come into force when decades of rent controls stop at the end of the year. It will shut its doors in January.

"I grew up here. Emotionally it's very hard," said Susana Ezharriaga, 46, who runs the shop along with her four siblings, as employees unloaded a final shipment of dolls which sell for up to 300 euros ($370) each from boxes.

They pay a monthly rent of around 10,000 euros but the shop owners are asking for 35,000 euros once the rent control ends at the end of December -- an amount she said only a big international chain can afford.

The siblings have convinced their landlord to let them stay in the shop until the Feast of Epiphany in January 6, the main yuletide celebration in Spain when gifts are opened, so they can make the most of their biggest sales period of the year.

They will then try to find a less expensive location away from the centre where they can set up a new version of their store, which was founded by their great-grandmother.

The store is not the only independent retailer facing its last Christmas season thanks to the end of rent controls.

Across Spain about 200,000 stores, bars and restaurants are affected and 65,000-70,000 could be forced to close, according to UPTA, the professional and autonomous workers' union that represents independent store owners. Most are family-run businesses.

About 200,000 jobs will be lost as each store employs around three people, it adds.

"The city will completely change, we will lose the history of neighbourhoods, of the city," said UPTA secretary Cesar Garcia.

"Spain's high streets, its main streets, will all be the same with big chains like Zara, McDonalds, Burger King. There will be nothing that makes them different. It is bad for tourism."

'Had 20 years to adapt'

Spain's rent controls were adopted in 1964 during the dictatorship of General Francisco Franco as a way to protect shopkeepers.

Under a 1994 reform by a Socialist government rental contracts drawn up before 1985 were required to adjust to the market, with landlords and store owners given 20 years to agree on new terms.

The shops facing closure now are those that have not settled on a new rent they could afford.

"They had 20 years to adapt to the situation. During these 20 years some were able to adapt, others were not. Some were not aware of the change, others forgot it was going to happen," said urban planning professor Agustin Hernandez Aja of the Polytechnic University of Madrid.

The impact of the end of rent control will be felt most strongly in the historic centre of cities where landlords are able to charge astronomical rents that most independent shops cannot afford.

Several landmark shops in city centres have already closed their doors or moved away from main streets to less visible locations.

In August the Palacio del Juguete, or "Toy Palace", which for nearly 80 years has occupied the Portal de l'Angel, a pedestrian street in Barcelona's old town moved to a smaller shop away from the centre.

The shop was taken over by Italian shoemaker Geox which has nearly 1,300 shops around the world.

'Happening everywhere'

Angel Manuel Garcia, the president of an association which represents about 160 centenarian and traditional shops in Madrid, estimates only 5-10 percent of the group's members can afford to pay the higher rents charged for places in the centre of the city.

"These are stores that give flavour to a city, that have some architectural value, that have something special," he said.

Shopkeepers and the main opposition Socialists have asked Spain's conservative government for the end of the rent controls to be put off for five more years but the request has fallen on deaf ears.

"Our country can't afford more closures and more job losses," Socialist lawmaker Patricia Blanquer said during a debate in parliament on Wednesday.

Aja, the urban planning professor, said chain stores were pushing independent retailers out of high streets in other major European cities like London and Paris.

"In a globalized world, the same thing is happening everywhere," he said.

"It affects many symbolic places of the city that are a reference, and this attracts the media, but it is not like people were shopping in these stores everyday," he added.