Family-run businesses close at alarming rate in Spain's capital

Madrid has experienced enormous changes over the past decade.

Until recently, it preserved that town-feel despite having more than 3 million inhabitants, a quintessentially castizo (authentically Spanish) city which distinguished it from other world capitals for having a far more familiar and down-to-earth vibe.

This was in large part due to the predominance of traditional shops and businesses passed down from one generation to another. The local bar with the the 1970s decor, the haberdashery (mercería)where the same abuelas always shop, the shoe repair store which has been around since the 19th century.

It's what Spaniards might call el Madrid de siempre or el Madrid de toda la vida (the Madrid of always or same as ever).

Unfortunately, gentrification has taken a hold of Madrid, and now international franchises dominate most streets. Taco Bell, Starbucks, bubble tea joints, Apple stores, Zara- it's a trend seen across most Spanish cities.

In the capital, however, the data shows that this displacement is on another level. In just one year, 7,084 local businesses have disappeared from the streets of Madrid.

In many parts of the city, neighbourhoods are losing their identity and increasingly becoming filled with shops and establishments like souvenir stores, gourmet food shop, exclusive cafés, money exchange offices and luggage storage catered to tourists.

As a result, the traditional barrios that make Madrid so special are losing their character.

According to figures from Spain’s national stats body, INE, in 2020 there were 50,853 so-called 'neighbourhood shops' in the Madrid region, but by 2024 the figure had fallen to 43,769, a drop of almost 14 percent.

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The biggest collapse was recorded in 2023, when nearly 6,000 businesses closed in just twelve months, almost 12 percent of the total. For many smaller, locally-owned businesses, the Covid-19 pandemic was the final blow and often they were forced to close down after decades in business.

COCEM, Madrid's specialised retailers confederation, sees a clear diagnosis. Its president, Armando Rodríguez, told the Spanish press that many retailers have made an effort to adapt and catch up, but that the current regulatory framework is unworkable for smaller owners and favours big business.

“The same is required of a neighbourhood bakery as of a large supermarket,” he complains. Bureaucratic obstacles, he says, are forcing many businesses to hire external services to avoid penalties. “This is leading to closures, early retirements and a lack of generational renewal,” he adds.

Often the offspring of small shop owners in Madrid and other cities around Spain choose not to take on the family business, instead choosing to cash in on a quick sale.

This has an impact on daily life and allows trade to be dominated by big companies. For example, COCEM figures show that in the last five years 24 percent of butchers have closed in the region. The electrical goods sector lost 14 percent of its establishments in two years and jewellery shops 20 percent, and the media sector a dramatic 62 percent.

Daniel Waldburger, owner of La Casa del Abuelo, one of the century-old businesses that is holding out in the capital, for now, at least, spoke to Spanish outlet El Español and blamed oversupply for driving traditional shops out of town.

“There’s too much supply and some have to leave due to lack of opportunity,” he says. But it is not just a question of competition. Administrative procedures, he agrees, have become so complex that the traditional business model is no longer viable. “Before, you could sort it out with a gestoría. Now you need to hire more staff just to comply with the regulations, and they can no longer afford that,” he says.

This combination of problems means that many multi-generational businesses that were previously handed down in the family are now being given up.

“We have a real problem with generational change,” Waldburger says. “We know that the fifth generation will not be able to continue with this. We will have to evolve or we will be bought out.”