CBRE: Renovations & New Builds Will Drive Inv’t In 2016

The real estate sector is entering 2016 with optimism and is glimpsing a panorama of new opportunities, thanks to a boost from the property development and residential redevelopment segments, which are being reborn for the first time since the start of the crisis. That is according to the findings of CBRE’s Real Estate Barometer, prepared on the basis of the opinion of almost 100 directors (in the sector).

The study shows that the real estate sector will take off once again in 2016, driven by the recovery in rents in Madrid and Barcelona, the construction of new developments and the return of land as a sought-after asset. (…).

In terms of residential real estate development, 49% of the directors surveyed think that the segment for refurbishments is the one with the most opportunities. Nevertheless, the most interesting finding is that, for the first time since 2007, 40% of the directors surveyed point to new housing as a segment with significant potential, double the figure that thought the same a year ago.

Specifically, almost half of the directors surveyed believe that the number of new homes will amount to between 100,000 and 175,000 in 2016, compared with 40% in the previous survey, whilst an additional 20% expect that range to amount to between 175,000 and 250,000, compared with 15% a year ago. (…).

Prices have bottomed out

In terms of prices in the residential market, 83% of the directors surveyed think that prices have now bottomed out, compared with 46% last year. Of the remaining 17%, 38% forecast that prices will fall by less than 5% in 2016, whilst a similar percentage expect prices to drop by between 5% and 10%. Nevertheless, the responses certainly point to the two-speed evolution of the market, with localised, rather than generalised, increases in prices, primarily in Madrid, Barcelona and the Costa del Sol.

In the same way, the directors surveyed expect rental prices to rise. Specifically, 95% believe that rental prices will increase in centrally located offices, compared with 76% a year before. In the same way, 65% expect rental prices in the industrial and logistics segment to increase this year, compared with 31% a year ago. (…).

“2015 was undoubtedly a record year for real estate investment in Spain, with total investment amounting to almost €13,000 million. If we analyse the players behind these purchases, we see that the Socimis invested 42% of the total, but other domestic buyers, financial institutions and real estate companies that had been recapitalised also grew in importance”, says Lola Martínez-Brioso, Head of Research at CBRE.

Regarding the Socimis, 55% of the directors surveyed think that the growth of these companies on the stock market is sustainable, compared with 45% who think the opposite.

The study also reveals that institutional funds will lead the investment market in 2016. Specifically, 33% expect institutional investors to be the most active this year, followed by collective vehicles (30%) and real estate investors (28%). By contrast, only 4% think that vulture funds will be the most active players.

Offices

Meanwhile, offices will continue to be objects of desire. Thus, 42% of the directors surveyed will prioritise this segment, followed by 22% who plan to focus on the residential segment. Something similar is happening with the investment plans of those surveyed looking beyond Spain, since 35% say that offices will be their main objective abroad.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Original Story:

Translation/Summary: Carmel Drake

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