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 3.5 billion euros, well above the volume reached in the previous quarter (1.65 billion euros) 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 euros, in line with the figure achieved in the same period last year (5.160 billion), when a record first quarter was recorded before the arrival of the pandemic.
This data refers to the Mid-Year Market Outlook 2021, a study prepared by CBRE. The report represents a revision of the forecasts announced at the beginning of the year. Overall, 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 in 2021, as anticipated at the beginning of the year.
«Investors, with a large volume of capital available and encouraged by an economic recovery that, although at different speeds, is already occurring globally, are ready to increase their exposure to the real estate sector. The volume achieved in the first half of the year, with an exceptional second quarter, together with the deals currently in the pipeline, allows us to maintain the forecasts made in January, which place real estate investment in 2021 as a whole at between 10.000-12.000 million», says Mikel Marco-Gardoqui, managing director, head of capital markets at CBRE.
The report reveals 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 in the second half of the year it will improve and certain speculative projects in the logistics and residential sector will find financing», said Marco-Gardoqui.
Reactivation of the office market
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, we are seeing a reactivation in the market, which is why CBRE forecasts a more active second half of 2021 in the capital.
Moreover, 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, means that an excellent year is forecast.
Office take-up in the first half of the year stood at around 200.000 sqm in Madrid and 123.500 sqm in Barcelona, 21% and 53% higher than the same period last year, respectively.
Rising footfall boosts retail sector
The easing of restrictions in recent months has contributed to the gradual recovery in both footfall and sales. According to CBRE, closing investment figures of over 800 million euros are expected in the food sector, parks and shopping centres and around 150 million euros on the High Street. This would bring the total estimated figure to between 950 and 1.000 million euros.
Prime yields in High Street remain stable at 3.5% and are expected to see very moderate growth in the coming years (3.6% in 2022). On the shopping centres side, prime yields remain at 5,5% and in the supermarket sector they are slightly down from 4,75% to 4,5%.
E-commerce boosts the logistics sector
The logistics sector has reached a volume of 1.395 billion euros 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 ever carried out in Spain, worth close to 900 million euros.
By 2021 as a whole, total investment volumes are expected to reach around 2.300 billion nationally, as forecast at the beginning of the year, which would be a record year for the sector.
Improved residential demand and price forecasts for 2021
During the first half of 2021, Multifamily was the second largest asset class with EUR 1,311 million invested (25% of the total), of which EUR 1,067 million 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 Lola Martínez Brioso, director of research at CBRE.
Hotel market rebound and optimism for summer 2021
After suffering the worst year in its history, the hotel sector is starting to pick up again thanks to the distribution of vaccinations 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.
«Although the beginning of the year was expected to be very active at a transactional level due to the cash tensions accumulated by many hotel groups after more than a year without activity, the reality has been a price mismatch between seller and buyer, as well as a shortage of distressed product, so desired by many investors with high capital costs, which have delayed the activation of the market until probably the second half of the year», says Martínez Brioso.