Investment In Commercial RE Exceeds Pre-Crisis Levels

1 December 2015 – El País

The real estate companies are dealing with the recovery in the sector by restructuring their portfolios in favour of commercial properties. During the first nine months of the year, according to the consultancy CBRE, investment in offices, hotels, shopping centres and industrial warehouses amounted to €10,791 million. That figure exceeds the total amount invested during the whole of 2014 and ranks above pre-crisis levels. Operations undertaken by listed real estate companies and Socimis amounted to €6,300 million, i.e. almost 60% of the total, when in 2014, they accounted for 36%.

The €10,791 million spent on commercial properties during the first three quarters of the year by the Socimis, real estate companies, investment funds and individuals overtakes the total investment recorded during 2007, the best year of the real estate bubble era. The Director of Capital Markets at CBRE, Mikel Marco-Gardoqui, says that by this point in the year, total investment will have exceeded €11,500 million. “This is going to be a record year, and we expect investors’ appetite to continue in 2016”, he says. But the sector also warns that the “aggressiveness” associated with certain purchases raises concern against “semi-bubbles” in certain assets.

Socimis accounted for 46% of total investment during this period, which has allowed them to continue increasing their portfolios. Merlin Properties, which acquired the real estate company Testa for €1,793 million, leads this group of companies dedicated to rental properties, with assets worth €5,800 million, followed by Hispania (€775 million), Axiare (€773.4 million) and Lar Real Estate (€594.9 million). The ten Socimis listed on the Alternative Investment Market (‘Mercado Alternativo Bursátil’ or MAB) own around €3,058 million assets between them.

Strategic plans

It is not just these companies, with their tax advantages, that are participating in the bids for assets. Real estate companies – both listed and unlisted – have participated in another 13% of operations. The seven largest real estate companies on the stock market hold a portfolio of commercial properties worth almost €16,000 million.

Colonial, with a portfolio worth €6,290 million, expects to invest €1,500 million between now and 2019 through the purchase of new buildings, whilst Renta Corporación will spend another €500 million on acquisitions over the next two years. (…).

The restructurings carried out and the plans announced have been applauded by the markets, which have rewarded the majority of these companies with an improvement in their share prices. During the year to date, the value of Renta Corporación has increased by 55%; Realia by 39%; Hispania by 25%; Colonial and Axia, by 18.7%; and Merlin by 17.6%.

Moreover, Socimis and real estate companies are mediating a large part of the overseas investment arriving into the sector. For example, the main shareholders of Colonial include the sovereign fund Qatar Investment Authority and the English millionaire Joseph Lewis; meanwhile, various overseas funds holds stakes in Merlin Properties, and George Soros and John Paulson are shareholders of Hispania.

According to Marco-Gardoqui at CBRE, a significant difference between the investment that arrived in 2007 and this year is that the majority of the volume associated with the bubble was achieved through debt; today the funds come from private capital, although the banks have started to open the financing tap for the sector. (…).

Original story: El Páis (by Lluís Pellicer)

Translation: Carmel Drake