Spanish property investment market ahead of the European cycle (ES)

Spain shares many of the qualities that are currently attracting investors to the UK commercial real estate market, according to new research released by CB Richard Ellis. The UK real estate market has attracted much attention from potential investors recently due to a growing perception that the repricing of UK real estate has now been sufficient to make it an attractive investment target.

Many of the same factors apply to the Spanish market and as a result, it is attracting an increasing share of the European property investment market.

Although in absolute terms the Spanish commercial real estate investment market has shrunk over the past 18 months, with investment activity totalling €1.85 billion in H1 2009, the decline has been much less severe than that seen elsewhere in Europe. As a result, Spain's share of the total European market has more than doubled, from around 3% of the total in 2005/06, to 7.5% in H1 2009. This growth in market share indicates that investors – particularly opportunity funds – are already spotting value in the Spanish market.

It is also significant that Spain saw some of Europe's largest property deals in H1 2009, including two of the nine transactions of more than €200 million. This included the acquisition by Orion Capital of the Plenilunio shopping centre in Madrid for €235 million, one of a number of properties that CB Richard Ellis has been marketing on behalf of Banco Santander's real estate fund, Banif.

An important driver of this investor interest in Spain is the relative speed with which the market has repriced, as well as the availability of good quality investment product at those prices. Since the peak of the market in mid-2007, prime yields in Spain have increased by between 200 and 225 basis points. This compares to a European average rise of 136 bps for the same period (according to the CB Richard Ellis All-Property EU27 Prime Yield Index).

Adolfo Ramirez-Escudero, Executive Managing Director CB Richard Ellis Spain, said: "There has been a lot of interest in the properties that we have been marketing on behalf of Banif. There were seven serious bidders for the Plenilunio shopping centre – sold last quarter for €235 million – which indicates that it is not just one or two funds looking at Spain; there is already serious competition for the best assets

"In addition to Q2 investment activity in Spain, we saw a significant increase in activity in July. CBRE Spain completed four notable deals for Spanish clients totalling more than €300 million in July. Two of these were in Spain, with another two elsewhere in Europe sold to international buyers."

Source: CBRE

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