Annual investment volumes in Spain’s commercial property market were up 12 % y-o-y at the end of 2013 at €2.5 billion, according to Savills, with overseas buyers accounting for 80%, which is a sharp increase on the 40% average recorded over the past few years.
The international real estate advisor reports that investors from the US, France, UK and Germany, who were frequently active prior to the economic downturn, had returned to the market and the country also saw some newcomers, the most notable of which being from Latin America.
Savills research shows 52% of overseas investment, just over €1 billion, originated from various European funds, followed by Latin American companies with 16% (just over €315 million) mainly driven by the purchase of the Sabadell bank branch portfolio by Fibra Uno.
Luis Espadas, Head of Capital Markets at Savills Spain, comments: “Spain is back ‘en vogue’ with the fear of investing here replaced by a fear of missing out on an opportunity to invest in what buyers now feel is a market with upside potential. With the latest GDP data showing a 0.1% quarter-on-quarter increase after nine consecutive quarters of decreases, it is thought that the Spanish economy is now at a turning point and this is reflected in the real estate market by a renewed confidence from outside the country to invest.”
Savills highlights that domestic investors in Spain are still active, although their limited investment capacity has reduced their market share. However, the firm states that the lack of financing and rising price of loans has provided national buyers with a competitive advantage for lot sizes up to €30-€40 million.
In terms of specific sectors, Savills research confirms that the retail market has returned to the top spot accounting for 45% of investor volumes in 2013 with five of the 10 largest transaction coming from this sector. In addition, the Spanish hotel market has increased its popularity with investors recording a total transaction volume of almost €300 million, which is a 33% growth on 2012.
With regard to preferred investor locations, Savills research shows that Madrid continues to be the most mature and solid market in Spain, however the difficulty of entering this market due to the dominance of the frequent investors there has made Barcelona a consistent alternative.
Looking forward, Savills expects that investor interest in Spain will continue in 2014 however, the strong demand for prime properties which are in short supply, combined with a predicted growth in rents in the short-medium term for this type of product, will place further downward pressure on yields, which current stand at 6% for prime office assets and at 6.75% for prime shopping center product.
Gema de la Fuente, Head of Research at Savills Spain, says: “The international investor perception regarding Spain has changed thanks to its improving economic expectations. We are beginning to see signs of recovery, although this may take a while to filter down to the domestic economy, which will be the main catalyst behind driving a market economy.”