According to a study of the Mid-Year Market Outlook 2021, prepared by CBRE, the leading international real estate consultancy and services firm, the real estate sector in Spain gained momentum in the first half of the year after recording the third best second quarter of the last decade, with an investment volume of more than 3,500 million euros, well above the volume achieved in the previous quarter (1,650 million) and close to the levels achieved in the first half of 2019. Thus, real estate investment in the first six months of the year amounted to €5.165 billion, in line with the figure achieved in the same period last year (€5.16 billion), when a record first quarter was recorded before the arrival of the pandemic. In general terms, if the same trend continues in the second half of the year, investment in the Spanish real estate sector could reach 12,000 million euros by 2021.
The CBRE report shows that the positive evolution of the real estate sector is supported by a favourable macro context, with long-term interest rates at very low levels and moderate inflation forecasts, which continues to position the real estate sector as an attractive investment option. As for financing, it remains restricted in cases of commercial risk. “We believe that by the second half of the year, it will improve and certain speculative projects in the logistics and residential sector will find financing,” says Marco-Gardoqui.
During the first half of 2021, investment in the office sector amounted to €847 million, 16% less than in the same period of 2020. In the case of Madrid, after months with few sales processes, reactivation is being observed in the market, so CBRE expects a more active second half of 2021 in the capital. On the other hand, Barcelona attracted 80% of office investment in the first half of the year in Spain, 40% more than in the first half of 2020, which, together with several large transactions underway, suggests an excellent year ahead.
Office take-up in the first half of the year stood at around 200,000 sq m in Madrid and 123,500 sq m in Barcelona, which is respectively 21% and 53% higher than the figure recorded in the same period last year.
According to CBRE, closing investment figures are expected to be in excess of 800 million euros in the food sector, parks and shopping centres and around 150 million euros in High Street, reaching an estimated total figure of around 950 – 1,000 million euros. Prime yields in High Street remain stable at 3.5%, with very moderate growth expected in the coming years (3.6% in 2022). On the shopping centre side, prime yields remain at 5.5% and in the supermarket sector, they have contracted slightly from 4.75% to 4.5%.
The logistics sector has reached a volume of €1,395 million in the first half of the year, the second-highest figure recorded to date in the historical series, and 169% more than the figure reached in the same period in 2020. According to CBRE, this volume was boosted by the significant Montepino transaction carried out by Bankinter Investment, which was the largest logistics real estate transaction in Spain, worth close to €900 million.
For 2021 as a whole, total investment volumes are expected to reach around 2.3 billion at national level, as forecast at the beginning of the year, which would be a record year for the sector.
On the contracting side, the Spanish logistics sector reached a contracting of 1,330,000 m2 by June 2021. The Central Zone registered a contracting of 628,000 m2, of which 68% was net contracting. The total figure is the highest recorded in the last decade and represents an increase of 182% compared to the same period in 2020. Meanwhile, Catalonia achieved logistics contracting of 490,000 m2, 89% of which was net contracting, a very positive figure. The total figure represents an increase of 149% compared to the same period in 2020.
According to CBRE, there has been an increase in e-commerce-related demand compared to the previous year, with e-commerce-related transactions accounting for 51% of the total in the first half of 2021. The expansion of e-commerce will continue to drive logistics activity this year.
During the first half of 2021, Multifamily ranked as the second-largest asset class with €1,311m invested (25% of the total), of which €1,067m was concentrated in BTR (651K) and PRS (416K) transactions, highlighting the lack of existing and leased buildings. Activity continues to be concentrated in Madrid and Barcelona, although other secondary cities are also attracting strong investment interest. For the second half of the year, “we expect residential investment volumes to remain the same or even register some increases given the growing investor interest. One of the factors driving the growth of this asset is the increasing demand for rental homes, which is a growing trend,” explains Martínez Brioso.
Prime yields in Madrid and Barcelona stand at 3% and 3.5%, respectively, with a stable trend expected for the remainder of 2021, despite the fact that other European capitals are already seeing a contraction in yields. Prime rents are expected to remain stable at 23 euros/m2/month in Madrid and 24 euros/m2/month in Barcelona.
On the demand side, a slight recovery is expected by 2021, with an increase of 5%, equivalent to 500,000-525,000 homes sold (vs. the 475,000-500,000 previously estimated). On the price front, CBRE’s forecast has improved during the first half of the year as a result of the positive evolution of market sentiment. Thus, prices are expected to fall slightly by between -1% and -2% (based on data from the Ministry of Public Works and Transport) by 2021, slightly above the previously estimated decline (-1%/-3%). CBRE forecasts a readjustment in second-hand prices, while new construction will remain stable or even rise slightly for the remainder of the year.
In terms of supply, CBRE estimates that the number of new housing approvals will be between 75-85 thousand (24,000 approvals up to March), very much in line with the average of the last five years (80,000 approvals). The land market will maintain a stable dynamic in the second half of the year.
After suffering the worst year in its history, the hotel sector is starting to pick up again thanks to the distribution of vacancy and the lifting of travel restrictions. From an investment point of view, the high level of liquidity in the market combined with the cash needs of many owners, as well as the continued attractiveness of Spain for investors, augur a second half of the year with more transactional movement than has been seen in the first six months.
The year 2021 has seen luxury openings throughout Spain. Madrid has been one of the destinations chosen by the major chains for the opening of new establishments such as the Four Seasons at the end of 2020 or the Mandarin Oriental Ritz in April 2021. Madrid also has new luxury openings in the pipeline for the coming months with the reopening of the Rosewood Villa Magna, the W Madrid and The Madrid EDITION.
