BNP: RE Investment To Exceed €10,000M In 2015

30 September 2015 – Cinco Días

Real estate investment in Spain is reaching historical highs in 2015, exceeding even the levels recorded during the boom in the sector, which ended in 2007 and gave rise to the subsequent crisis. Those are the conclusions of a report about the market presented yesterday by BNP Paribas Real Estate, the real estate division of the French bank. It says that the total figure for the purchase of assets such as offices, shopping centres, hotels, residential properties (excluding those sold privately to individuals) and logistics assets will come close to €10,000 million this year, and will even reach €12,500 million if corporate operations, such as the purchase of Testa by the Socimi Merlin Properties, are included.

And it is precisely this “hyperactivity” by the Socimis, the new players in the market, who first appeared in 2014, that is proving key to this huge increase (in investment) from the minimum levels recorded in 2012, when total investment amounted to just €1,785 million. Investment this year is expected to exceed even the level recorded in 2007, the year before the crisis when €9,200 million was invested. “The Socimis are spending a lot. I do not think that they will be able to invest as much in 2016”, said Jesús Pérez, President of BNP Paribas.

The Socimis, which emerged in 2014 – including Merlin Properties, Axiare, Hispania and Lar España – have raised capital quickly, earning the trust of many large international investors, and they have used this capital to acquire assets. “The Socimis are a key driver behind this peak in investment as they have (successfully) channelled capital from overseas”, confirmed Ramiro Rodríguez, Head of Research at BNP Paribas Real Estate.

This year, the entity expects that these listed company will invest around €4,200 million between them (they spent €1,900 million in 2014). Large funds have backed the resurgence of the Spanish real estate market by investing in these companies, which are managed by specialist managers in the sector who have teams with lots of experience.

According to BNP’s calculations, during the year to August, total investment in our country amounted to €7,560 million. However, the entity expects that only €8,000 million will be invested in total in 2016, partly because the Socimis will be forced to rein in their spending.

The other major reason as to why funds and investors are interested in this sector is because there are still opportunities to be found. “Prices have decreased by 40% since 2008”, says Pérez, who highlights that the residential and land markets are also on the rise, partly driven by property developers “who are rising up from the ashes”.

The reactivation of the sector stems from economic recovery and employment, and so investors expect that the improvement will increase occupancy rates in offices, footfall in shopping centres and drive up logistical activity…and that that will, in turn, lead to increased income and higher rents for tenants. In fact, BNP Paribas thinks that the volume of office rental transactions will increase by 100,000 m2 in Madrid and by a further 84,000 m2 in Barcelona.

Nevertheless, the office availability rate is decreasing slowly, partly due to the long duration of the companies’ existing contracts, which prevent them from moving, according to these experts. However, the shortage of space is being seen above all in prime areas, i.e. in the best business areas of these two cities. This deficit – and the pressure from potential buyers – explains why prices have risen in these areas this year by 17% in Madrid and 15% in Barcelona.

Pérez is certain that the independence process has not deterred investors from investing in the market in the Catalan capital. “Investments have only been delayed in two or three specific cases”, he said.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake