Real estate investment in Barcelona will top €1.6 billion this year, significantly higher than the €1.2 billion level reached last year, claims the Spanish real estate consultancy Aguirre Newman, who also note that Barcelona property prices are at “historic lows.”

This optimistic forecast is based on the fact that more than €1 billion has been invested in the first nine months of the year, before the end-of-year rush to close deals.

International investors like foreign funds and family offices were responsible for 58% of the investment in the first nine months of this year, reveal Aguirre Newman. That’s more or less in line with the share of investment driven by foreign capital in the same period last year, and goes to show how important foreign investors now are to the Barcelona property market.

The Aguirre Newman report doesn’t mention it, but this reliance on foreign capital has its risks. Foreign capital is flighty, and if something happens to dent investor confidence, it can evaporate overnight.

The lion’s share of investment went to office space. In the year to September, the level of investment in offices was over €580 million, a big increase on the €272 million invested in office space last year.

However, the way in which Barcelona property is being reconverted to more productive uses like hotels is noteworthy, say Aguirre Newman, citing the reconversion of the Estel building (formerly the Telefonica office, pictured below), the Agbar tower, and Paseo de Gracia 111.

This suggests a trend, with investors moving away from their traditional interest in office space towards hotel and retail space, say Aguirre Newman. This year more than €260 million has been invested in hotel projects, they report.

The biggest factor holding back the property market in the Catalan Capital is the lack of prime property available to large investors, argue Aguirre Newman. “The scarcity of quality product in prime areas is holding back investor activity in the city,” explains the report.

A big shame for investors, given that Barcelona property prices in all segments are at “historic lows” after falling by 50% since the peak, say Aguirre Newman, who point out investors can now buy property in prime areas of Barcelona for between 1,700 €/m2 and 3,000 €/m2, significantly below many other European cities.