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2017 / iberian.propery // 67
ISSUE: TOP IBERIAN Investors //dossier
In 2016, the commercial real estate investment volume in
Spain reached € 14,000 million (8% more than in 2015) and
€ 1,250 million in Portugal (29% up on 2015). The industry
is expected to register yet another year of strong activity in
2017, boosted by the continued improvement in the Iberian
peninsula’s economy and its positive forecasts.With little yield
compression expected for the best properties, investors are
relying on rental growth, which still has strong uplift potential.
The offices market will continue to perform extremely well,
especially in Madrid and Barcelona. Rental growth potential
is undoubtedly one of the most attractive factors, with the
current low interest rates and heightened levels of liquidity
keeping the office market extremely active. Yields have
almost bottomed out in the CBDs of the main cities, with
property prices soaring in the best locations. However, the
lack of good product continues to be a drawback for many
investors, which is the reason why those with a value-add
profile have been, and are likely to continue to be, very active.
Prime yields in the logistics market will continue to harden
in 2017, possibly dropping to 6% in some deals that are
currently under negotiation and investment activity is likely
to reach similar levels to those seen in 2016.
In the retail sector, shopping centres are the star players and
their yields continue to tighten even further, thanks to the
heightened levels of demand. Due to the current levels of
uncertainty, Core investors arewilling to be more aggressive
when it comes to acquiring truly prime properties that offer
them secure rental income. Yields for secondary properties
have also hardened, although there are fewer investors
interested in secondary product, therefore there is less com-
petition. There is also extremely high demand for high-street
retail, thanks to private and institutional investors. The entry
of the latter into the market, has meant that there is even
less product on the market and this has forced investors to
look at value-add properties and retail units located on less
prime streets, offering more appealing yields and without
significantly increasing investor risk.
Finally, housing has become a market with opportunities
worth exploring. The uncertainty of sovereign debt and stock
market volatility has pushed many investors to diversify their
portfolios into the residential segment. Yields are higher than
for other alternative assets and potential value uplift - al-
though still moderate – remains very attractive. The housing
rental market continues to be a fairly non-professional sector
and major international funds have barely carried out any
mega deals or created any large portfolios.
In conclusion, the real estate market in Spain and Portugal
is currently at a unique point in the real estate cycle and
attracting investors from across the globe. There are still
opportunities out there, but only those with an in-depth
knowledge of the market will be able to tap into them and
capitalise on them.
Adolfo
Ramírez-Escudero
CBRE España
President
«The real estate market in Spain and
Portugal is currently at a unique point
in the real estate cycle and attracting
investors from across the globe»