Thierry Bougeard, CEO of BNP Paribas Real Estate, says that "in 2018 we must be optimistic about the projections for growth in the real estate sector, which will be boosted by the lack of investment alternatives and enormous liquidity. In addition, the new players that have appeared in the market in recent years (SOCIMI, international funds, family office, etc.) will contribute to the development and professionalization of the real estate sector in Spain.
These are the nine trends that mark the real estate consultant:
1. The logistics market will lead the way
The logistics market will continue to register the largest growth in the real estate sector in 2018, mainly due to the boost of electronic commerce, with annual growth of 25% and a market share of 41%. The lack of available quality offer has caused many developers to decide to buy industrial plots to develop new projects that include innovation in logistics parameters and in the sustainability of materials. LED lighting is revolutionizing this sector and will allow companies to significant save in consumption.
2. Good retail profitability will be kept
The investment in the retail segment will remain this year in numbers similar to those of the previous year (over €4,000 million), supported by positive forecasts of GDP growth, job creation, increase of consumption and investor appetite before the good profits that these assets will continue offering.
3. Towards concentration in the residential sector
In 2018 we will continue to attend mergers between promoters, sale of companies to funds and more entrances in stock exchange. In addition, the number of the local developer reappear with the purchase of plots throughout the national territory. The shortage of land will increase its price and, consequently, also the new construction. By territories, some provincial capitals will be placed in the spotlight of investors, thus joining other consolidated areas such as Madrid, Barcelona, the Balearic Islands and the Costa de Sol.
4. More demand for quality offices
The investment in the office sector in Spain will continue to show its strength throughout this year, where it will reach a total investment volume similar to that of 2017, around €2,500 million. Investors will maintain their commitment to this sector due to the growing demand for quality office space, which is favoring the gradual increase of rents, particularly in the CBD. Regarding the type of investors, the profile "value-add and Core +" will have a greater role and will increase the number of investors who can consider buying land to develop new office projects. Investors with a more conservative profile (insurers, core funds, mutuals, etc.) will have more difficulties in fulfilling their ambitious investment plans, due to the lack of prime opportunities.
5. New ways of working
The upward cycle will continue in the office segment, both in absorption levels and in the growth of rents. Despite the positive macroeconomic data for the office sector, the demand for office space will not reach the levels of 2007 due to the new ways of working, with a significant reduction in the ratio of m2 per job, and due to the market based on contractual renegotiations. While this trend is running out due to the growth of rents in different areas of our market.
6. Rotation in international funds and SOCIMI
On the sales side, the market will keep its dynamism with international funds and SOCIMI, which will enter a period of asset rotation after keeping them in their portfolios for the minimum period necessary to get the tax advantages of these vehicles. The new players will contribute with new resources and knowledge to maximize the value of the development and management activities.
7. Renewed interest in medium-sized retail parks
There is a clear trend towards the acquisition of commercial land, by investors with a promoter profile, for the development of medium-sized parks, after years of interruption due to the crisis in this sector. In addition, shopping centers will remain the type of asset most demanded by investors, although other products such as portfolios of hypermarkets, supermarkets or bank branches and medium-sized areas will see increased interest by a certain type of investor. The profits will remain at 2017 levels (6 - 6.5% in medium-sized parks, 5 - 5.5% for prime shopping centers or 3% for prime locations "High Street").
8. Selling opportunity for family hotel groups
The hotel segment will remain popular in a scenario of strong appetite for investors in Spain, the second largest tourist destination in the world (82 million visitors in 2017). The strong buying pressure of investors, given the liquidity of the capital markets, will motivate the owners of hotel assets, mainly small and medium family hotel groups, to sell their assets and the large funds will begin to dispose of non- strategic assets and others by profitability strategies.
9. Reappear from the alternative market
In 2018 there will be a trend towards the professionalization of some sectors within the alternative investment market, such as car parks, gas stations, clinics, nursing homes, hospitals, universities, schools and student residences. The opportunity to professionalize some of these sectors is very attractive. Clear example are the student residences, until now mostly directed by religious orders.