17 November 2015 – El Mundo
Spain is now the sixth largest real estate investment market in the world. At least that is according to the latest global report published by the real estate consultancy CBRE. As such, Spain is continuing its ascent through the rankings of desirable destinations for real estate investment, having risen from 16th place in 2013 to 11th place in 2014. On the basis of investment data to June 2015, Spain is now ranked ahead of other markets such as France, Canada and China.
This ascent is due, primarily, to the arrival of international capital, which accounted for 31% of all of the real estate investment in our country during the first six months of the year. Real estate investment in Spain amounted to €8,500 million during H1 2015 and the latest data for September indicates that investment amounted to €10,800 million during the first nine months of the year.
Real estate investment at the global level amounted to $407,000 million during the first half of the year, the best six months since the previous cyclical peak in 2007, when $441,000 million was invested. The USA, UK and Germany continued to be the three largest markets by far in terms of global real estate investment. The combined investment in those three countries alone amounted to $301,000 million (i.e. a market share of 74%).
Cross-border investment has also increased in weight over the last 24 months, to account for 50% of the market in EMEA (Europe, the Middle East and Africa). Capital from Spain was involved in operations in other countries amounting to $1,390 million during the 6 months to June 2015, which exceeded the volumes recorded by other countries such as Norway and Japan.
By type of asset in EMEA, the office market has gone from accounting for 53% of the real estate sector in 2007 to 38% during the year to date. This decrease has been just as pronounced in the hotel sector, which dropped from 9% to 4%. Nevertheless, hotel assets continue to be attractive for large real estate companies and investors from the Middle East, who are looking for opportunities in safe markets such as London, Paris and Berlin, as well as in countries such as Spain, the Netherlands and Italy.
Investment in alternative real estate assets (such as halls of residence and health-care assets) accounted for 24% of investment in the global non-residential real estate market, probably driven by the compression in yields across the other more traditional sectors.
Concerns about declining yields
In terms of prices, the decline in yields has generated concern about the sustainability of the current price levels, especially for the most prime assets. In the majority of the world’s main markets, the returns demanded from the prime segment are well below the average for that market and, in certain cases, have reached historical lows.
Nevertheless, there is a certain degree of homogeneity in terms of the prices in all of the major real estate investment markets. If we compare the spreads (the differential between the yields on prime offices and 10-year state bonds), we see that the range in the main markets varies between 1% and 3%. In the case of Madrid, this spread amounts to around 3%.
Looking ahead to 2016, CBRE expects that the investors who are committed to Europe will increase their exposure to risk. The growth in rental income and compression in yields will be felt in secondary space especially. In terms of Spain, CBRE expects that Spain will end 2015 with a total real estate investment volume of around €13,000 million.
Original story: El Mundo
Translation: Carmel Drake