According to Forcadell’s H2 2018 National Investment Market Report, professionally managed real estate investment in Spain captured an investment volume 39,3% higher than in 2017.
Investment funds funds have continued leading the RE market, especially international funds. In fact, 65% of the total invested in 2018 has foreign origin, and often has been managed through local operators.
According to Forcadell’s H2 2018 National Investment Market Report, the RE professionally managed investment market in Spain has continued growing, especially since 2014. Invesment interest, local as well as foreign, has kept its focus in the Spanish market throughout 2018 despite the scarce availability of prime product, attracting a volume of over €18.800m, 39% more respect 2017. Of the total invested, more than €7.000m correspond to corporate transactions.
In Forcadell’s assements, the favourable economic framework, the continued increase of rent prices during the last 4 years, the attractive of assets which still present high yields - in alternative assets or located in 2nd lines- together with the pace of absorption of new projects have placed Spain and especially Madrid and Barcelona in the centre of the European market regarding investment. However, these two cities have not been able, contrary to what was expected, to take advantage of Brexit capturing investment and outgoing companies, an opportunity that other European cities such as Paris have seized.
It is worth noting the perception of the future of the sector has been caught up by the alarmist vision of some economists and media which suggest there is a change in the stage of the economic cycle, a fact that has reflected in the cautious attitude and certain slowdown in decision making, especially in Family Offices and small investors profiles.
HOSPITALITY
The hotel investment market has continued its impressive upward trajectory. While in 2016 and 2017 hotelier investment reached record figures with a volume of almost €4.000m, in 2018 the sector has surpassed its mark with €4.900m invested. The 2nd half-year -notably better than the 1st- has crowned the hotelier market as the sector that has attracted most investment. This was due mainly to transactions of large investment funds like the Blackstone bid on Hispania. The Canary Islands and the Balearic Islands have led the holiday season segment, attracting half of the investment in hotel assets of the year. And although Catalonia has been the most visited destination in 2018, the refusal to grant new hotel licenses in Barcelona has brought a decrease in investment transactions in the city, an increase in prices and a spread of new projects in the neighbouring municipalities.
The consulting firm points out that the student residence halls and senior residences market, on its behalf, are in a process of expansion, specialization and professionalization. Throughout 2018, new student residences have been developed by large international players, particularly in Madrid and Barcelona, in Ciudad Universitaria and the corporate district 22@ respectively. The yields sought for these projects are 6% in the 1st Lines and 7-8% in the secondary Lines.
INDUSTRIAL-LOGISTICS
Logistic assets are still engaging most of investment interest compared to the industrial sector, leading most of new construction projects. Nevertheless, these last months have seen the beginning for industrial projects such as Acciona: developing 58 warehouses in the city of Barcelona that will go into the market in 2019. On the other hand, the logistic sector keeps going strong due to the boost of e-commerce, with an investment volume close to €1.500m (a similar figure to 2017) and a record take-up in Madrid as well as in Barcelona. Investment activity is mainly focused in tenant assets, developing new projects -most of them for speculative units-, developed land ready to build and outdated warehouses to reform.
RETAIL
According to Forcadell’s H2 2018 Investment Market Report, investment specialized in retail assets has led again, together with the hotelier sector, the real estate market, monopolizing 22% of the total investment in 2018, a volume over €4.200m.This record figure surpasses the amount obtained the past 2 years (€4.000m).The retail investment market remains extremely dynamic, driven by e-commerce, the trend towards specialization, the increase in sales in the local small businesses, the new formats that are turning up and the positive appreciation that the new projects are having, both by retailers and consumers, once they are out in the market. In 2018, 15 new shopping centers opened in Spain, and all of them are following a clear position towards the Food & Beverages segment and client experience through leisure, specialized commerce, services and physical activities.
OFFICES
Forcadell points out that the investment office market in 2018, significantly more dynamic in the 2nd half of the year than in the first, attracted 8% less investment volume respect the past year, reaching €2.250m.This decrease is due mainly to the lack of available space for sale. On the other hand, however, this lack of space together with the strong investment pressure and the favourable take-up figures that are registering another record year have encouraged developer activity. Highly specialized international investment funds are engaging in sophisticated projects, of high quality and large spaces that prioritize employee wellbeing and include in their facilities swimming pools, gyms and wider common areas. Most of these developments are also being rented before the construction process is over due to the fact that the availability rate for new construction offices is extremely low, both in Madrid as well as in Barcelona.
Coworking spaces which are experiencing a process of expansion and professionalization are in the spotlight of investment funds. They have already launched speculative developments for buildings with designed spaces exclusively for flexible offices.
Yields remained stable both in Barcelona as well as in Madrid, except for prime product in Barcelona, where they have compressed, equaling those of the Spanish capital (4,5%).
RESIDENTIAL
According to the consulting firm, the residential market has amassed an investment volume reaching almost €4.000m, a figure 30% higher than in 2017 that reveals the sector is still in an upward trend, although with a forecast for a change in paradigm for 2020-2021. Aligned with the surge in residential assets, yields have started to register slight decreases. Prices, and therefore investor interest are showing a geographically diverse behavior: while Madrid and Barcelona are consolidating its prices, its metropolitan areas and other capitals still show growth margin. Residential development, on the other hand, is flourishing: in just 3 years, certifications for new construction developments have doubled and reached 100.000 units. Banking entities on its behalf have intensified their disinvestment process. As a matter of fact, the main Spanish banks (Bankia, Ibercaja,LiberBank and Santander) expect to disinvest up to €12.500m in non-productive assets, mostly residential, throughout the upcoming 2 years.
LANDS
Due to the continued increase in investor appetite during the last 3 years for land of every use -and especially residential land- owners of these assets have placed asking prices at top levels, sometimes at completely unaffordable prices for investors and developers, who in turn have to face the increase in construction costs. Residential plots of land have been the most demanded in 2018 and have experienced a revaluation in the capitals of regions over and above the main Spanish cities. In other sectors, lands have very specific locations. Such is the case of offices, where traditional CBD in Madrid and Barcelona have lost their leadership, eclipsed by the new business areas and their yields (corporate district 22@, Campo de las Naciones, Av. América y las Tablas). In the logistic sector, the most demanded plots of land are located in the 1st crowns of Madrid and Barcelona, but the lack of land pushes the interest over to the 2nd Crown, a zone where most of the transactions of the sector closed in H2 2018.
MARKET PLAYERS
Investment funds are still leading the RE investment market in Spain, especially international investment funds. In fact, 65% of investment in 2018 is of foreign origin, often managed by local operators. REITs have also had an outstanding contribution in the real estate investment market, introducing up to 20 new companies in the Alternative Equity Market (MAB) in 2018, compared to the 17 that were first listed in 2017. Banking entities, on their behalf, have intensified their disinvestment process, resulting in a new market concentration led by Cerberus and Blackstone.
TRENDS
Forcadell highlights that the real estate market in Spain is currently experiencing the expansion cycle at its late stage, with stable yields and moderate price increases. In 2018, the market players of large construction companies have expanded their portfolios, conducting fusions with other companies and initiating substantial new construction projects, rounding up a record investment figure: €18.800m. However, small scale investment has not been as dynamic. The sector is in a process of going through a qualitative leap due to the digital transformation, which brings new and more complex projects, and different structures of investment.
FORECAST
Investor appetite has shown in 2018 its preference for assets providing security, flexibility, quality and alternative long-term profitability. Along this line, it is expected that student hall residences and flexible office spaces will start to be more available in the investment market. These two assets, along with professionalized coliving -which is about to reach the Spanish market- are aligned with a trend of social thought about consumerism that has extended to the real estate market which consists in optimizing resources to the maximum, paying only for the use and experience of a good, without the cost or management of owning it.
TRANSACTIONS
According to the Forcadell Market report, among the transactions of the investment market in the 2nd half-year, Blackstone stands out as leader of the Spanish real estate. The American investment fund has become the new giant of the sector, implementing the most important transactions. Regarding hotels, the bid on Hispania valued in €1.900m that was completed the first weeks of H1 2018 have turned Blackstone into the largest hotel owner in the country, with more than 46 hotel assets in its portfolio. Along the same line, it has led the most important logistic transaction of the year, through the acquisition of Neiver’s logistic park for €300m. Furthermore, in the office sector, they have conducted the most outstanding transaction of the semester with the purchase of the headquarters of the Grupo Planeta building for €210m. In the retail sector the main player has been Castellana Properties, through the fund Vukile, and the purchase of a portfolio of 4 shopping centres to Unibail-Rodamco for €490m. In the framework of disinvestments of banking entities, highlight the Cerberus acquisition of 80% of the real estate assets of BBVA and a portfolio of residential properties to the Banco Santander for €1.535m.
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