The effects of the pandemic on the Valencian real estate market are gradually becoming an obstacle of the past. The sector remains strong and continuously growing, especially in some segments such as logistics. In addition, the current context has led many investors to turn to real estate as a refuge value, and the Valencian Community is positioned as a strategic place. Thus, there are more and more new national and international players that enter with force, attracted by their high returns and their more competitive prices compared to other more consolidated cities such as Madrid and Barcelona.
According to a report by the consulting firm BNP Paribas, investment in the region stood at 425 million euros in 2021, double that of the previous year marked by the pandemic and which closed with 240 million euros. These positive figures show the interest in the Valencian market. Maximums have not yet been reached, registered in 2018 with 815 million euros, although it is true that that year was marked by three large operations that concentrated 50% of the total investment that year.
But, who is behind the investment in the Valencian Community? As detailed in a press conference by Joaquín Ivars, Levante director of BN Paribas, the profile has changed. Previously, it was the Valencian large estates (local family offices) that accounted for most of the transactions in the region, but since 2019, the socimis and national and international funds are the ones that are moving capital in the real estate market of the Valencian Community. Joaquín Ivars added, “before we only worked with Valencian families, but now they come from Madrid, Barcelona and abroad with very high tickets and driven by the high profitability here.”
And it is that their priorities have also changed. The assets that have traditionally moved most of the investment have been retail and the office market, but the pandemic has strongly aroused interest in logistics and alternative assets such as residences for students or the elderly. In reality, these last two segments concentrated more than the millions transacted in the Valencian real estate market.
In addition, according to data from the consultant, logistics collected 41% of the total investment in the region, followed by alternative assets: residences for the elderly or students (25%); residential (15%); the hotelier (9%); and retail and offices (5% respectively). Regarding the housing market, the trend that has marked the past year and that will guide the following developments will be the ‘build to rent’ due to the need to increase the professional rental offer.
Joaquín Ivars explained to us, “the logistics market of Valencia and its metropolitan crown are experiencing their best moment. This fact is reflected in the levels of investment and contracting, and in the typology of the investor. In the last year we have shown how, not only is this sector attracting more and more international investors, but we are also giving entry to new players who traditionally did not have the forum in logistics assets”.
Valencian real estate logistics is experiencing a moment of splendor. In addition to having a lot to do with ecommerce, the need to have large platforms for food and sanitary storage has also had an influence, two sectors that have also encouraged investment in this segment. Although this good progress took off two years ago, it continues to be unstoppable, registering record hiring figures and maximum levels of activity.
In this way, the contracting reached 402,850 square meters in 2021, maximum historical records practically doubling the year 2020 (+93%) and reflecting an increase of 34% over the year 2019, the previous peak of the market. All this concentrated in 50 operations, 14 more than the previous year, which until now had been the most active in the number of contracts. According to BNP Paribas, one of the main attractions of Valencian real estate logistics is the higher returns it offers, which are around 5% compared to Madrid and Barcelona, which are around 3.9%.
The enthusiasm and the influx of funds is such that even some land owners have been tempted to raise prices, although these are isolated cases. On average, rents stand at 4 euros per square meter per month, although in the most prime areas such as Riba-roja they are somewhat higher, 4.5 euros per square meter per month. This is precisely why it met 47% of the demand last year.
In addition, the inauguration of logistics platforms in markets such as Riba-roja, Cheste or Sagunto has meant that, during the last twelve months, the logistics park of Valencia and its metropolitan area has increased by 145,000 square meters. The total stock exceeds 2.25 million square meters as of January 1, 2022. Even today there are ongoing projects that could be incorporated into the market and that add up to a total of 66,939 square meters, distributed in six new logistics platforms.
Offices resist teleworking
Regarding the office segment, despite the fact that teleworking in companies cast doubt on the future of this market, the pace has finally been maintained with the contracting of 42,358 square meters in 2021, 19% more than in 2020 (37,055 m²) , although far from the good data of 2019 that reached 59,223 square meters. In any case, from the consultant they emphasize that the demand is still “very active” because, despite the fact that many companies have installed teleworking as an option, there is still interest in having their own space, mainly from sectors linked to technologies, communications, logistics and health.
On the other hand, in the Valencian square the demand has been decentralized outside the center of the city of Valencia because there is almost no supply available. This has caused a shift towards Avenida Cortes Valencianas, Avenida Alfahuir or La Marina, areas that according to their forecasts will continue to absorb current demand. Regarding rents, the average is €10.6/m² per month, the highest being the Aqua building, which reaches €16/m² per month. These are figures that are much lower than those of other cities such as Madrid, whose average is €36/m² per month, or Barcelona, which is €27.5/m² per month, which also attracts investors to the Valencian market.
As they have explained, the current scenario of inflation has led many owners to renegotiate rental contracts, although in most cases there is a lot of flexibility and understanding so as not to affect the rise in the CPI on rents. According to Ivars, “maintaining prices is being accepted because it is more important not to lose customers.”
In addition, according to BNP Paribas, real estate investment will continue to be characterized by its resilience and flexibility and the Valencian Community will continue to be in the sights of national investors and foreign capital, with the logistics segment as the main protagonist in the coming years.