Real estate investment in Spain should drop 30% in 2020

Real estate investment in Spain should drop 30% in 2020

This y-o-y drop confirmed CBRE’s predictions for Europe which indicated a 25% y-o-y drop in real estate investment. For Mikel Marco-Gardoqui, advisory manager and in charge of Capital Markets at CBRE España, the investment predicted by CBRE for the end of 2020 «can be considered positive given the extreme and unreasonable conditions under which trading activity took place this year». The break on businesses imposed by the pandemic caused a 30-35% y-o-y drop in terms of operations, advanced the consultant.

The numbers predicted for 2020 will only be reached due to the «extraordinary first quarter» which attracted 4 billion euro for the sector, almost double the first quarter of 2019. As soon as the pandemic settled in, the numbers dropped, between April and June, to around 1.3 billion euro – a number not seen since 2013 – and between July and September to around 1.5 billion euro. The activity registered during the last three months shows an increase when compared to the two previous months and will likely surpass 2 billion euro, advanced the consultant. «As the months go by, activity has slowly increased during a year in which uncertainty and caution were the protagonists», remarked Mikel Marco-Gardoqui.

Under this scenario, international investors reinforced their presence in Spain even more, representing now 76% of all investment – 11% more than the previous year. For Mikel Marco-Gardoqui, this reveals that «the market’s great liquidity remains palpable». And he added that «that liquidity, along with lack of investment opportunities with interesting returns, continues driving the competitiveness among investors towards the more prime and less risky product, which will be the one that not only has good quality and location, but also ensures stable returns».

Office and logistic Investment fell

Despite being considered resilient to the pandemic, the logistics and offices segments received less capital in 2020 than in 2019. Retail and multifamily, on the other hand, saw their numbers grow during this period.

Despite registering a 52% y-o-y drop, the office segment remains one of the main choices for investors, representing 2 billion euro, or 21% of all real estate investment. «Despite Covid-19, investors focused on this segment maintain their interest for more premium products, whereas the value-add product lost traction partly due to the difficulty in finding financing for this type of assets. Besides, the gap between buyer and seller’s prices is one more added difficulty», pointed out the man responsible for Capital Markets at CBRE España.

Logistics also had a 27% drop. Nevertheless, it is one of the leading segments of the year with a total of 1.250 million euro invested. This drop might be directly related to the lack offer, pointed out CBRE.

It was without surprise that the hotel segment, the most impacted by the crisis, also had a big drop in terms of investment. Up until now, CBRE registered 560 million euro invested in the hotel segment, around 75% less than what was registered in 2019. Nevertheless, the consultant noted that there are still ongoing operations to be concluded until the end of the year.

Despite all the setbacks, retail had a positive evolution with a 48% y-o-y increase in terms of investment and the year is expected to end with an investment volume of approximately 2.3 billion euro.

«This is due, mainly, to the conclusion of large operations connected to Intu’s divestment process. On the other hand, it should not be surprising, since high-street activity has dropped dramatically, but interest for supermarket portfolios skyrocketed», detailed Marco-Gardoqui.

Multifamily investment also consolidated its growing trend in 2020 receiving 2.4 billion euro, almost 300 million euro more than last year. «The highlight in this segment goes to the increase in Build to Rent projects, with a 48% y-o-y increase in terms of investment. Faced with the lack of finished and rented product, investors became interested in terrains for developing BTR», pointed out Martínez Brioso.

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