CBRE: RE Inv’t In 2017 Will Exceed €13,600M

16 January 2017 – Cinco Días

Merlin’s purchase of Torre Agbar in Barcelona and the agreement signed between the Baraka group and the chain Riu to open a hotel in Edificio España in Madrid, both announced last Thursday, are major real estate operations that are not only defining the start to 2017, they are also marking the sector’s entry into a new cycle. That is one of the conclusions of the Real Estate Trend Barometer compiled by CBRE and published on Friday, which calculates that non-residential real estate investment in 2017 will exceed the figure recorded in 2016 (€13,600 million).

The reasons given by the consultancy firm for this optimism include the economic recovery and the political stability following the formation of the Government. Nevertheless, it alerts that there are also risks for the sector from the volatility on the international stage and specifically due to Brexit. “There is no reason to think that 2017 will be worse than 2016”, said Adolfo Ramirez-Escudero, President at CBRE, who forecasts a “very active” investment market this year. That situation results from improvements in rental income for all assets: offices, retail, residential and logistics.

In this sense, the office market offers the greatest possibilities. Although in 2016, the amount of new space leased decreased (with only three operations exceeding 10,000 m2, compared with nine in 2015), CBRE considers that it was the political uncertainty that caused that downturn. Now that that uncertainty has been resolved, the operations that were not signed last year will be completed instead in 2017.

The logistics segment occupies second place in terms of the opportunities it offers investors, given the strength of ecommerce and the needs of companies in the sector such as Amazon. Next comes the hotel sector, where the specialist consultancy firm Irea forecasts investment of €2,000 million over the next year. In this context, the residential market also stands out and CBRE expects to see a recovery there for the first time since the crisis. In fact, it predicts that demand for new homes will increase by 180,000 units between 2010 and 2025. (…).

This improvement in residential housing will force real estate developers to play an important role. (…). That will be the case, for example, of the new real estate companies created from scratch by international funds, including Dospuntos (owned by Värde Partners) and Neinor Homes (owned by the fund Lone Star).

In terms of investor profile, family offices and private investors will gain weight compared to last year, Socimis will continue to play an important role for another year. Value added funds (which invest in renovations) and institutional entities (such as insurance companies) will also be key players. Nevertheless, opportunistic investors – those who look for bargains – who were very active in the depressed market of 2014 and 2015, will now exit the arena. According to Ramírez-Escudero, that shows that the market is now more mature. (…).

Original story: Cinco Días (by Álvaro Bayón)

Translation: Carmel Drake