In its latest ‘Think’ report Henderson’s c. £12.7 billion Property business turns its attention to Spain, noting that Eurozone exit fears regarding the country have all but dissipated with attention once again focused on the economic and real estate fundamentals.
The recovery in investment pricing typically precedes the turning point in rents, and past evidence reminds us that the window of opportunity to invest at the bottom of the cycle is narrow. For investors familiar with Spain and who are realistic about pricing, there should be good buying opportunities for early movers. But where should investment be directed?
The paper considers opportunities within the various sectors, highlighting good quality shopping centers and retail parks as potential long term investments.
Andy Schofield, Director of Research, Property, said: “Assessing current pricing involves a certain degree of guesswork because transaction volumes are very thin.
"In the office sector, cross-border investors trawling Madrid’s prime Castellana and expecting a bargain often leave with their tails between their legs. Cross-border investors should find more opportunities in retail, particularly good quality shopping centers and parks. Such investments should be viewed as long term holds, however, with rental growth a distant prospect.
"In terms of the occupier outlook, a gradual recovery in employment from 2015, combined with low inflation, should kick start growth in real household income and pave the way for a meaningful recovery in consumer demand towards the latter years of the decade. In the meantime, retailer demand will focus on good quality centers with a proven trading record.
"Despite all the pitfalls, by researching the market thoroughly, careful stock selection can deliver attractive risk-adjusted returns, relative to other core European countries. It’s time to take a closer look."