Positive developments, including a de-escalation in trade tensions or improved growth figures from countries like Spain, are possible outcomes that have not yet been reflected in current market prices. To navigate this landscape effectively, it will be crucial to align expectations with economic realities, ensuring that investment strategies are grounded in accurate market assessments. But does Iberia have a competitive advantage at the moment?
One of the most anticipated moments of the Iberian REIT & Listed conference, organised by Iberian Property and EPRA, was the round table discussion entitled ‘The Spanish REIT's & Listed Real Estate Market (R)evolution’, moderated by Ignacio Martínez-Avial, CEO of BNP Paribas Real Estate Spain, which featured the representatives of the main listed companies in Spain.
David Martinez, CEO of AEDAS Homes, began by putting into evidence that with the economy growing, interest rates declining, and employment rates decreasing, the financial health of Spanish households is in a strong position. This creates a positive environment for the housing market. However, when considering the endemic undersupply of housing in Spain and the construction industry’s limited capacity to scale up production, the situation becomes even more advantageous for the market.
According to official statistics, the number of households in Spain is projected to grow by 250,000 per year, while the construction industry is only producing about 100,000 new homes annually. This supply-demand gap is likely to persist for quite some time. As an example, AEDAS is currently developing nearly 5,000 homes as part of the Plan Vive by the Comunidad de Madrid, aimed at providing affordable rental housing. Of the 1,000 homes already delivered, each has received over 50 applications, clearly demonstrating the high demand.
For his part, Carlos Krohmer, Director of Corporate Development at Colonial, observed that Southern European countries, particularly Spain, are now leading in economic performance, attracting considerable investment. He pointed out that Spain could strategically benefit from its positioning in energy sourcing, particularly renewable energy, which should be factored into long-term planning.
In the investment markets, Spain has generated substantial liquidity over the past 24 months, creating opportunities for direct investment. He noted that a significant amount of large capital remains dormant, particularly in Germany, where ageing populations with accumulated savings are under pressure to diversify beyond fixed income and consider real estate investments. Having previously over-allocated within Germany at high prices, these investors are now likely to look towards other liquid markets with attractive risk-return profiles, such as Paris, Madrid, and Barcelona.
The need to maintain Spain’s current pace of growth while ensuring it remains sustainable was stressed by Ismael Clemente, CEO of Merlin Properties, who warned that growing at 2.5% while incurring a 4% public deficit is unsustainable, as it effectively means borrowing against future generations. In contrast, Portugal’s growth while maintaining a budget surplus illustrates a healthier model. Despite this, Spain is experiencing growth, and Ismael emphasised the importance of maintaining this momentum while also enhancing legal security for investors. He argued that growth alone is insufficient to attract foreign investment.
Moving to a sectoral insights debate, the CEO of AEDAS Homes, outlined three key levers to increase housing supply and address the supply shortage: the first is to produce more land, faster; the second is to produce more housing, faster; and the third is to attract more capital. And he put on the table initiatives for each lever: “To produce more land it is necessary to approve a Land Law that protects urban development processes, modify the regulations to make urban development uses more flexible, simplify the administrative processing of licences, even implement AI agents and encourage concessions on idle public land. To produce more housing, it is necessary to facilitate the incorporation of qualified foreign labour into the construction industry in an orderly manner and to promote and support initiatives to industrialise or prefabricate construction elements. And to attract more investment, a clear and stable legal and fiscal framework for investment must be put in place”. Increasing supply may seem like a simple solution, but it is the only way to solve a current problem that will worsen in the coming years, he warned.
Carlos Krohmer emphasised the increasing complexity of real estate, noting that it is no longer just about prime locations and square meters but also about amenities, IT services, and experiences. He highlighted the importance of integrating operational knowledge into real estate, particularly in emerging sectors such as data centres, where urban regeneration and the demand for quality urban living continue to grow.
“Real estate is no longer just location; you need very specific knowledge beyond square meters. Operating knowledge is a new fundamental for all sectors, and the cities attraction qualities lies in the combinations of asset classes, with good quality services”.
Miguel Pereda, Executive Chairman of Grupo Lar, argued that the retail stock in Iberia is sufficient, allowing investors to focus on asset quality and management rather than new developments. He highlighted the resilience of the retail sector due to favourable yield spreads and positive sales metrics, which continue to attract investor confidence. The takeover bid over the Socimi Lar España is a living proof of the interest the sector is generating.
"Furthermore, the last 9 months brought a change in the debt markets. Today there is debt available at a reasonable price, so REITS investment will follow strong", Miguel Pereda added.
In the logistics sector, the market remains robust, displaying sustained growth with no immediate signs of slowing down, according to Ismael Clemente. However, this positive trajectory is tempered by several challenges. One significant shift is the deceleration of online commerce growth. Previously marked by double-digit expansion, the sector is now experiencing mid-single-digit growth rates. This slowdown could face further pressure from the introduction of tariffs, as the European Union recently announced new duties on small purchases.
Another crucial factor influencing logistics is the increasing integration of artificial intelligence into supply chain management. This technological advancement is driving greater efficiency among operators, as exemplified by the situation in Madrid, where vehicle loads were historically below 40%. AI is expected to optimize load management, reducing operational costs and potentially decreasing the demand for storage and cross-docking facilities. This enhanced efficiency will also contribute to alleviating urban congestion, as vans currently account for approximately 24% of Madrid's traffic. Nonetheless, the shift toward greater productivity may lead to localized oversupply issues, particularly in areas like Madrid and Barcelona, where some “tourist-driven” developments have expanded logistics capacity. Ismael Clemente anticipates that these imbalances will be managed through strategic pricing adjustments.
Turning to the data centre industry, the CEO presented an optimistic outlook, underpinned by a confluence of favorable conditions in Spain and Portugal. Both countries benefit from strategic submarine cable connections, surplus electricity generation, and resilient energy grids. Moreover, their relative isolation from the rest of Europe, once perceived as a disadvantage, has become a strategic asset due to the continent's dependence on Russian energy supplies. This geopolitical context has enhanced the appeal of the Iberian Peninsula as a data centre hub, setting the stage for continued growth in the sector.
A significant hurdle lies in public perception, particularly regarding environmental impact. There is growing scrutiny over the water and energy consumption associated with data centres, although Ismael argues that much of this concern is misplaced. Both Spain and Portugal produce more energy than they consume, negating the notion of excessive resource strain. Additionally, the belief that data centres generate minimal employment is misleading. In reality, “the industry creates substantial high-skilled job opportunities, although these roles often attract professionals whose educational backgrounds and independent thinking may not align with the preferences of certain policymakers”.
Another pressing challenge for the data centre industry is the need for enhanced distribution networks and grid investment. To fully leverage the opportunities presented by increasing demand, significant upgrades to the energy grid are required to minimize transmission losses. Yet, in an era where public spending is predominantly allocated to current expenditures rather than capital investments, securing the necessary funding for infrastructure development is no easy task. This issue is compounded by the political unpopularity of long-term investment decisions, despite their strategic importance for economic growth.
The rapid rise in investor interest in data centres has also sparked concerns about land speculation. Ismael notes that as demand for suitable land intensifies, prices are being driven up.
“When you have assets, you have options. We supply ourselves because in the future we foresee an extraordinary movement of speculation like the one that took place in renewables. But we don't want to be the ones providing liquidity to all the intermediaries in the world.”
In anticipation of this trend, Merlin has proactively secured land in Navalmoral de la Mata and Valdecaballeros, located in the provinces of Cáceres and Badajoz. By taking this strategic position, Merlin aims to safeguard itself from market volatility and avoid contributing to speculative price inflation.
Complementing Ismael's perspective, David Martínez, CEO of AEDAS Homes, underscores the importance of strategic land acquisition in the context of a shifting real estate landscape. In 2024, Aedas invested €400 million in land and corporate operations, including the acquisition of Inmobiliaria Espacio, a prominent developer previously owned by the Villar Mir family. David Martínez attributes this strategic move to a favorable market environment accompanied by a significant shift in the capital landscape, as high-return-seeking U.S. investors are gradually being replaced by more conservative institutional investors.
Ismael’s observations also extend to the broader implications of artificial intelligence and hardware development, particularly in relation to DeepSeek. The company has achieved remarkable success by ingeniously re-engineering existing technological components. Using NVIDIA’s second-tier GPUs, optimized for power efficiency in model training, DeepSeek has leveraged open architecture platforms like PyTorch and Meta’s YAMA. Additionally, the company incorporated an algorithm derived from OpenAI, showcasing its ability to innovate within the framework of existing technological ecosystems.
However, Ismael suggests that the real inflection point for the AI hardware industry will occur when China starts manufacturing its own GPUs, CPUs, and TPUs with competitive quality. This development would diversify the market's supply sources, reducing dependency on established players and driving down costs. In Ismael’s view, this shift will democratize access to advanced computing power, further accelerating the growth of artificial intelligence. Consequently, the demand for computing capacity, storage solutions, and interconnection infrastructure is expected to surge, benefiting the data centre industry.
