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Investor Appetite Grows for Tourist Flats in Cities


The number of investors looking for buildings in Barcelona and Madrid to convert into tourist flats as an alternative to hotels is increasing, according to reports in the Spanish press.

The perennial appeal of Spanish cities like Barcelona creates strong demand for tourist accommodation that has lead to a boom in both hotels and rental operations that is now bumping up against housing supply issues and resistance from locals.

Barcelona’s property market, in particular, has a fixed stock of housing with no capacity to increase supply in the face of growing demand pressures as hotels and other types of tourist accommodation take over a growing share of the city’s housing stock, reducing the choice of housing left for local residents.

Local frustrations with housing costs, and friction between tourists renting flats and local residents, are factors behind the recent decision by Barcelona city hall to imposed a moratorium on new tourist rental licences, whilst announcing plans to limit tourist rental to dedicated buildings in future. Madrid is also drafting regulations to control tourist rentals. This is sure to increase the value of buildings that can be completely given over to tourist rentals.

Buildings in Madrid and Barcelona can be bought for anything between €1 million and €30 million or more, and typically offer a significant discount to retail prices. Purchase prices in terms of €/m2 range from 2,000 to 2,500 to 3,500 to 4,000 €/m2 according to a recent article in El Mundo, a Spanish daily, added to which investors typically have to budget for refurbishment costs of between 1,000 to 1,500 €/m2

Local and international family offices and funds from the UK, France. Switzerland, Germany, and Israel, with budgets of €3 million to €15 million, are the main investors, say El Mundo, with investor demand up 20 to 25% this year according to RTV, a consultancy, and closing times compressing as market pressures build.

Tourist apartments offer short-stay travellers more flexibility and lower cost per night stays for larger groups. For operators, they are less complex to manage than hotels, with lower operating leverage thanks to fewer fixed costs like restaurants.

Flats in buildings converted to tourist rentals can then be sold on as managed rental investments to retail investors looking for a no-hassle second home with a guaranteed rental yield and good upside. This gives investors a variety of yield-boosting exit strategies.

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