There are several segments of the real estate market where those opportunities should appear, as revealed by the experts gathered for the "Iberian Investment Briefing – Why Iberia" online edition which took place this Tuesday morning.
One of those segments will be the hotel segment. Cristina García-Peri, Head of Business Development & Strategy at Azora, assumed that in this segment – which was one of the most affected by the crisis – «tremendous opportunities» will appear because several «distressed assets» of this type will be placed on the market. «We believe people will keep travelling and staying in hotels» and, as such, this is an attractive segment, especially leisure hotels. On this matter, Pedro Coelho, Chairman at Square Asset Management, warned that things will be different for business hotels. In his opinion, these assets «will suffer greatly with the crisis, because there will not be business meetings in the coming times».
But this wave of opportunity should not begin immediately. According to data revealed by Richard Betts, director at Real Asset Media and the initiative’s mediator, most participants – around 85% - agree that distressed opportunities should only appear on the Iberian real estate market within at least 1 year. 3% of respondents, however, consider that that will not happen at all and 2% believe that the market will remain the same.
The current trend is to invest in logistics, assumed the experts. For José Manuel Llovet, General Manager of Retail, Offices & Logistics at Grupo Lar, the pandemic crisis confirmed the investment in logistics, whose growth has been remarkable during the last two years. Now, he believes that «logistics’ fundamentals are very strong because there is demand due to the growth of e-commerce». But this change in the scenario should bring consequences for the segment, such as rent increases and challenges which include greater investment in technology and in particular on AI. On this point, Simon Wallace, Global Co-Head of Alternatives Research and Strategy at DWS, considered that logistics should be right on top, since «the quality of its revenue is well-positioned».
Another segment that has the potential to grow in Iberia is the housing rental market. Cristina García-Peri believes there will be «a greater appetite from investors for this segment». In particular, the affordable housing market «which will attract a lot of foreign investment», since «Spain offers a stable legal framework». DWS’ representative also considered that housing will be a segment which will attract «institutional capital» which should be stronger within the big Iberian cities.
Alternative assets, which maintain an unbalance between offer and demand, should also stand out within the Iberian market. For Cristina García-Peri, «nursing homes» are «a great investment opportunity», since there «is lack of offer in the segment to meet the needs of a very aged population». Much of this investment should be carried out through public-private partnerships, she added. On the other hand, we need to «be selective in terms of asset locations» when planning to invest on students’ residences, alerted Cristina García-Peri, who further explained that «despite the continuing high demand, much investment was already carried out» within this segment.
Offices keep «strong demand»
The office segment, which was already considered a «strong segment», remains resilient to the crisis. The representative from Grupo Lar confirms it, stating that we now «see strong demand, full occupancy and a very positive activity».
On the segment’s future, Simon Wallace goes further, projecting that in terms of future full returns, the office segment should surpass the European average between 2020 and 2024. According to his perspective, there will be a trend for relocation within the segment and as such a growth in demand «for new spaces and new locations in Madrid, Barcelona and Lisbon, which offer better accessibility».
For now, it is certain that the segment will face challenges soon, such as the coordination between office and remote work, which according to the director of Iberian Property António Gil Machado, should be flexible.
Future of Retail remains uncertain
The «high uncertainty» continues to affect retail, one of the segments most affected by the crisis. The director of Grupo Lar really believes that this crisis will «greatly affect the fundamentals of the market temporarily», due, in part, to the rental payment delays. This factor is particularly important in terms of assessing assets, a «critical point» right now, which demands more cooperation between consultants, appraisers and market players, he believes.
Despite there not being «a lot of investment during the coming months», José Manuel Llovet believes that retail deals will return in 2021. Actually, a recovery of the segment is already expected for the end of the year, generated by an increase in affluence to shopping centres.
Governments’ measures are on the right track
In order to mitigate the severe effects the crisis had on business, Governments have played an important role since they have drawn several support measures, recalled María Jesús Fernández García, Executive Director, ICEX - Invest in Spain.
«The tax policies must be on the front line, so as to prevent worse consequences caused by this crisis. But the European Central Bank also has an important role to play in terms of providing financing under good conditions», she stated. What’s important now is to support companies, minimise the impact on jobs and protect the more vulnerable businesses and families.
María Jesús Fernández García considers that these measures are «on the right track» and that this can be the moment to bet on the transition to a green economy. On this matter, Spain already has several incentives both for new construction and to rehabilitate existing buildings. What is certain is that «Spain is open to new business for the future», she assumed