If between July and September, the volume of investment moderated with respect to the extraordinary figures registered during the first half of the year, to an amount of €2,712 million, in the first nine months of the year the investment attracted by the Spanish real estate sector increased up to 58% compared with the previous year to €10,295 million.
The positive evolution of the figures until September suggests that 2017 will close with investment levels higher than €13,000 million, in line with the historical volumes of 2015 and 2016. Reaching this figure in the current year will be particularly important if we take into account that will not be repeated the macro operations performed by Merlin in the two previous years (Testa purchase in 2015 and merger with Metrovacesa in 2016).
“These data are very positive and confirm investors’ appetite for the Spanish real estate sector”, said Adolfo Ramírez-Escudero, President of CBRE Spain. "The demand from investors continues at high levels and the pipeline of operations suggests that the activity will maintain its strength at the end of the year," he added.
Domestic and international investors are continuing to see Spain as a market with a great potential and are showing interest in the full range of asset types.
Rise of the hotel sector and retail strength
By sectors, it is highlighted the growth of investment attracted by the hotel sector in the first nine months of 2017, in comparison with the same period of the previous year. Until September received €2,400 million in investments, a figure that represents 23% of total investment compared to 14% of the previous year. The rise is due to the large amount of operations registered throughout the country.
On the one hand, the retail sector continues its strength and has attracted €2,700 million so far this year (26% of the total), highlighting both investment in shopping centers and in high street. Meanwhile, the office sector has reduced its investments regarding to the same period of 2016 to 15% of the total investment and giving importance to the logistics sector, with investments up to September for €1,500 million (14% of the total). On the other hand, investment in the residential sector represents 6% of the total, while the alternative assets registered a significant increase over last year with a total of €1,500 million in investments so far this year.
Foreign investment accounts for 67% of the total
Last year, Spanish socimis accounted for 43% of real estate investment, however, this year its role has been moderate and only intervened in 10% of the volume traded.
The direct investment from abroad represents 67% of the total. As a result of the purchase of Empark car park company by Australian Macquarie Group, the foreign investment so far this year is led by the geographical area of the Middle East and Asia Pacific, representing 31% of the total foreign investment. This is followed by the United States and France with 18% and 17% respectively.
In this respect, foreign investment has increased by 73% over the same period last year, reaching €6,747 million.
The strength of demand has kept the downward pressure on profitability, in line with what happened in the first half of the year. In the current scenario, the core investor is willing to be very aggressive when the asset is really prime and to offer income security. Thus, so far this year, prime yields have been compressed in all segments, from offices, where they stand around 3.75%, to places in high street, around 3.25%. In general, levels are historically low.