Real estate investment may increase up to 25% in 2021

Real estate investment may increase up to 25% in 2021

There is a favourable context to impulse the real estate investment in Spain

It is expected for real estate investment activity to go back to pre-pandemic levels this year. On the one hand, it is expected to be more optimism due to the progressive return to normalcy in the coming months and, on the other hand, it is expected for the economy to recover as vaccination advances.

It is based on these arguments that CBRE estimates investment in the sector will be around 10.500-12.000 million euro which would represent a 25% increase compared to 2020 (when 9.477 million euro were invested) and an approximation to 2019 levels. But this number might be even higher if corporate operations are carried out, considered CBRE during the presentation of its Market Outlook 2021.

On CBRE’s projections for 2021, CBRE España’s president, Adolfo Ramírez-Escudero, explained that «this year, the volume of capital seeking investment opportunities will remain remarkable, and in tandem with the economy’s recovery and as the vaccination plan moves forward, there will be greater activity within the sector, predictably during the second half of the year».

Favourable context for recovery

Furthermore, Ramírez-Escudero highlighted the favourable context in terms of economic policy and low-interest rates for the recovery: «The situation we are in with very low-interest rates, negative inflation, bond revenues at minimum values in some countries and a super-expansive monetary policy to face the Covid-19 crisis favoured international investment in Spain’s real estate sector. Thus, real estate’s attractive spreads advantage over long-term interest rates will continue boosting the interest in real estate assets».

For CBRE, the Spanish economy will recover gradually in 2021, although it will go through a strong upturn during the second half of the year when there will be more people vaccinated. It is expected for GDP to grow around 4.4% in 2021. «A quicker recovery from tourism and an effective use of the European funds will be key factors to achieve a more solid recovery of the economy», added Ramírez-Escudero.

What is expected for 2021?

Amongst other subjects within the Spanish real estate market’s agenda for 2021, are the market’s polarization in terms of quality, location and use of the asset and more selective and restricted financing.

Amongst the segments which will stand out is build-to-rent, which should continue being the protagonist due to the «lack of quality dwellings for rent in Spain and the increase in demand in the last few years», commented Miriam Goicoechea, associate director of Research at CBRE España.

Logistics too, especially proximity logistics, should reach its peak, while we will witness the segment’s automation and the increasing relevance of sustainable criteria.

The alternative segment «keeps experiencing relevant growth in investment volume as a consequence of the demographic evolution, society’s new needs and the attractive revenues the segment offers when compared to traditional products», assumed the director of Research at CBRE España, concluding that this a «defensive segment which will keep growing in 2021 boosted by the enormous deficit in terms of offer when compared to demand».

In terms of the office segment, not much change is expected in terms of the investors’ preferences. Despite the pandemic, which generated decreases of 53%, representing up to 2 billion euro, investors maintain their interest, although more selective. Lola Martínez Brioso explained that «the more prime assets, due to location, quality of the asset and revenue security, remain the most sought after, despite the lack of offer. In this type of assets, revenues have remained stable. At the same time, the value-add product has lost traction, in part due to difficulty in obtaining financing. The gap between buyer and seller’s price expectations makes it difficult in many cases, for operations to move forward».

The recovery of the hotel segment is also expected since it is already beginning, but it will take place at different speeds and it will start in the rural and nature segment and the beach segment, revealed CBRE. The recovery will take place later for the beach segment and, lastly, the professional travel segment (business meetings, congresses, conventions…) which, due to the pandemic, was greatly reduced. According to Martínez-Brioso, «for the coming months, a considerably higher trading activity is expected, which will accelerate in particular during the second semester». On price adjustment, Martínez-Brioso remarked that «it seems inevitable given the circumstances, but the confidence investors have in Spain will allow the segment to contain, up to a point, discounts in operations, especially in those considered more prime or strategic».

Retail registered, in 2020, the highest investment of the last three years due to the sale of large shopping centres and supermarket portfolios. For 2021, CBRE predicts the investment market should remain active. According to Martínez-Brioso «we have visibility over a pipeline worth 2.5 billion euro, which indicates we might see quite a lot of activity this year».

You can read the full news in Spanish HERE.

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