22 November 2016 – Finanzas.com
CBRE Global Investors is the real estate management arm of the CBRE group. It is dedicated to developing and designing investment strategies to reflect the risk profiles that its clients (normally institutional players) define through different vehicles, using funds or listed companies. José Antonio Martín-Borregón (pictured above) is the firm’s Managing Director in Spain.
What would a “core” investor invest in at the moment?
In the main markets, in other words, in Germany, (“core” investors are investing) in more liquid assets, as well as in those assets that generate stable revenues, in other words, the office market. This means low returns. But insurance companies and pension funds invest in property to receive a higher return than they are currently earning on bonds and shares, which means that for them a 3% or 3.5% return is very attractive. Then if they want to complement their portfolios, they can approach other markets, such as Spain, Portugal and Greece, where international investors tend to look for what they cannot find in their own countries: higher returns and attractive prices.
Are offices being replaced by more profitable assets in Spain?
Is now a bad time for the office segment? No. In fact, one of the recommendations that all of the brokers are currently making regarding investment in Spain is to invest in offices in the major cities. The market is discounting significant growth in income over the next five years: at their peak rental prices stood at almost €45-€50/m2/month, and now they are less than €30/m2/month. But it is true that some investors who are not willing to wait for those rents to grow and so they are choosing to invest in logistics warehouses, for example, which may generate returns of 6.5%, or even 10% if the investment is leveraged a little. There are a lot more investors out there now – they are more sophisticated and they are developing complementary investment strategies.
Is housing an interesting market or should we rule it out?
Lots of things are going to happen in the housing market: prices are going to increase a lot, by 25% over the next five years; what’s more, housing is becoming a kind of institutional asset – there is a sense of opportunity because prices have fallen by so much and because it is still seen as quite a safe investment; and, finally, the rental housing market is going to develop significantly. Buying a home does not make economic sense (for many people anymore): from an economic point of view, it is much better to rent, it is more flexible and carries fewer risks. Moreover, rental prices are increasing at the moment, because demand exists but the supply of high-quality rental assets is very limited. As such, although the yield on housing is less than 3%, there is a very significant appreciation component to consider.
Are Socimis competing unfairly with other kinds of firms because of the preferential tax treatment they receive?
Taxation is not a primarily element of returns, there are other more important factors, such as debt, because interest rates are so low. The Socimis have a special tax regime, but they also have some special duties (they must be listed, there are restrictions over their investments, they have to pay dividends…). On the other hand, the Socimis are very similar to Sicavs and the large real estate companies are using these instruments to optimise their tax structures and so almost all of the Socimis are being listed on the MAB and they are not fulfilling the purpose for which they were designed.
Original story: Finanzas.com (by Cristina Vallejo)
Translation: Carmel Drake