The international real estate firm Savills says Spain will continue to enjoy the attention of institutional investors though political risks loom on the horizon.
For the time being, the political risks are theoretical, and Spain is still a European darling of international funds and other large investors. But politics in Spain could “darken” the horizon, with a general election this year and the hard-left riding high in the opinion polls.
On the other hand, with the highest GDP growth (2014 and forecast 2015) of the big-four economies in the Eurozone, credit restrictions relaxing, and prime rents on an upward trend, there are also good reasons to be positive about Spanish property, argues Luis Espadas, Director of Capital Markets in Savills Spain
Savills forecasts are based partly on the results obtained last year when investment in the Spanish property sector exceeded €7 billion against the approximately €2.5 billion invested in 2013.
Office and Retail Dominate
Thus far in Spain’s real estate investment recovery office and retail space has been the focus say Savills, with office space the object of 39% of investment, and retail space 33%, mostly in prime areas.
The dwindling supply of prime office and retail space has led to greater interest in secondary areas, and in properties with the potential for value-added strategies, as well as other sectors such as logistics and hotels that both ended the year with “striking” increases. “Due to this type of transaction, set to continue in 2015, 45% of investment assets last year were outside Madrid and Barcelona, with 41 per cent in the capital and 14 per cent in the Catalonian city,” says Espadas.
Spanish investors are back on top with 44 per cent of the total, but considering that 72 per cent of Spanish investment comes from REITs (Socimis in Spanish), which are considered Spanish companies even when their shareholders are foreign, this figure cannot be taken at face value.
Among international investors, the most active were North American funds accounting for 40.2 per cent, closely followed by the Europeans with 37.3 per cent. Investors from Latin America are still active, and particularly focused on the office sector. It’s also worth mentioning Asian/Pacific investors whose discreet 10.5 per cent of the total includes one of the most significant transactions of the year – the Wanda Group purchase of the España building in Madrid for €265 million.