The Resurgence of Bilbao’s Real Estate Sector

15 December 2017 – Expansión

Bilbao has undergone a major facelift in recent years and has just received its due recognition in this regard with its award as the European City of 2018 by the British Academy of Urbanism. With a leisure offer led by the prestigious Guggenheim Museum, an exquisite gastronomy, the likely arrival of the AVE (train service) and an increasingly attractive urban destination for travellers, Bilbao is a city that enjoys a stable economy and that is continuing to attract real estate investors.

The arrival of Primark and the new flagship Zara store are revitalising retail, a sector that is also boosting the logistics market in the face of growing demand for urban space to handle online sales. Four new hotels are also going to open soon and the construction of new residential developments is now underway. Moreover, the city will soon require new offices.

With more than 900,000 inhabitants, the metropolitan area of Bilbao has traditionally been a small but safe and stable market for the real estate sector. Limited by the scarce supply of land, the developments undertaken to modernise the Biscayan capital have converted this industrial city into a major centre for leisure and enjoyment. Its transformation has been highly valued not only by its residents but also by local, domestic and increasingly, international, property developers, who see the Nervión River as a safe bet for their money.

Bilbao is a special market from the point of view of real estate, because thanks to the constant presence and commitment of local investors, and the high salaries of its residents, with an income per capita that is 30% higher than the average for the rest of Spain, the city is less affected by the cycles that impact the real estate sector elsewhere.

In the office segment, the city developed 80% of its supply in the 1960s and did not see any new output until 2011. In that segment, the construction of Torre Iberdrola represented the turning point. According to Juanjo López del Corral, Regional Director at CBRE Bilbao, “the tower resulted in the incorporation of 50,000 m2 of new office space, equivalent to the surface area of 25 buildings in the city”. Until today, the space in the tower has been sufficient to absorb the demand for office space in the city. Currently, 42,000 m2 of the building is leased and the remaining space is expected to be let during the first quarter of next year, at a rent of around €20/m2/month.

Torre Iberdrola charges the highest office rents in the city. On average, in the prime business district, the rent per square metre amounts to €13.50/m2/month, according to the CBRE consultancy. Across the city, average rents range between €8/m2/month and €14/m2/month (…).

Retail

It is not only the office sector that is working to adapt to the new needs of companies, the Retail and Residential segments are also adjusting to the new demands. In the specific case of Retail, the greatest challenge for operators is to find available space on the Biscayan capital’s main shopping streets, such as Gran Vía. They are home to first-rate players from Spain and overseas and “offer very similar yields to those generated on Gran Vía, Madrid”. “The most powerful brands in the mass market now occupy former bank buildings as their new flagship stores. Examples include the upcoming Zara store, measuring 4,000 m2, which will open its doors at number 23, in a building that was previously occupied by BBK; also, the future Primark shop, at Gran Vía 1, which will open on the lower floors of the historical Torre BBVA, and which will become Primark’s fourth largest store, spanning 10,000 m2”, said the director at CBRE (…).

The sources at CBRE also highlight the strong arrival of restaurant chains, which until now had remained shy given the city’s rich cuisine, but which now represent significant demand for the retail segment (…).

Residential

Meanwhile, the residential market is also in full expansion. There are new build developments offering services that used to be unthinkable in Bilbao, such as gyms and swimming pools, with a higher level of quality, taller buildings, technology… “But like in the other segments, the lack of space makes its hard to find large developments with added services, which is why the majority of the new projects are focusing on the renovation of old buildings, both residential and industrial”, say sources at the consultancy firm (…).

Currently, the average sales price in the centre of Bilbao amounts to €6,400/m2, excluding parking spaces and storerooms; although prices can reach as high as €8,000/m2. In secondary areas of Abando, prices stand at around €4,000/m2 (…).

Original story: Expansión (by Lucía Junco)

Translation: Carmel Drake

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