Ministry of Development: Real Estate Activity is Non-Existent in 40+ Spanish Municipalities

21 April 2019 – El Confidencial

There is barely any real estate activity in more than 100 Spanish municipalities with more than 10,000 inhabitants. In 42, not a single building permit to construct a new home was issued in 2018. Not one. And in another 100, fewer than five permits were issued, whilst in 200, fewer than ten permits were issued.

That is according to data from the Ministry of Development, which reveals the extent of the disparity between the booming areas of Madrid, Barcelona, the Costa del Sol and the islands, amongst others, and the complete dearth of activity in other parts of the country.

Asturias and Murcia are the autonomous regions that are suffering the most where construction activity has been all but suspended. The driving factors are multiple, but a lack of demand is key. Moreover, even where there is buyer interest, there is not enough buildable land to develop, construction costs are high, financing is hard to come by and qualified labour is scarce.

Even at the national level, although 100,000 new home permits were issued last year, that figure is still eight times lower than it was in 2006, when 865,561 new build permits were awarded. And although the experts agree that a healthy market will never see a return to the pre-crisis figures, the volume of new home construction is still well below the 150,000-200,000 benchmark that property developers consider sustainable.

By contrast, in certain parts of the Community of Madrid, lots more building permits were granted last year than during the height of the boom, for example, in Tres Cantos (657 in 2018 compared with 6 in 2006) and Rivas Vaciamadrid (1,345 compared with 831 twelve years ago). There was also a lot of activity in Boadilla del Monte, San Sebastián de los Reyes and Alcobendas. Beyond the capital, more new build permits were granted last year than in 2006 in Pamplona, Lasarte and Santiago de Compostela, amongst others.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

E&V: The Costa del Sol Enjoys a New RE Boom

12 March 2019 – Europa Press

According to a report about the real estate market for 2018-2019 compiled by Engel & Völkers (E&V), demand is growing along the Costa del Sol from domestic and international investors alike.

The improvement in the economy, better financing conditions, high rental yields and the reactivation of new construction projects all confirm that there is a boom underway on the Andalucían coast once again.

The real estate agency forecasts a moderate increase in prices and transaction volumes of around 7%-10% during 2019. Málaga is the driving force, thanks to its cultural offering and robust infrastructure, but new build projects have resumed all along the coast in recent years.

In this climate, in 2018, 60% of operations were closed by foreigners looking for second homes, with average prices of €3,000/m2 in Málaga capital and maximum prices of €8,000/m2 in the city centre.

Marbella has also re-emerged as an investment destination after years of paralysis, where overseas buyers account for 80% of all purchases. There, clients seek modern villas equipped with the latest technology, which have views of the sea or are located close to a golf course.

Original story: Europa Press  

Translation/Summary: Carmel Drake

Rockspring Buys McCann’s HQ in the 22@ District of Barcelona

25 January 2019 – Expansión

The owner of the Mercadona logistics platform in Sant Esteve Sesrovires is now investing in the office segment in Barcelona.

International investors are continuing to back the office segment in Barcelona to benefit from the boom in demand and the growth in rents that are being recorded in the sector. The latest player to invest is the British fund Rockspring – which has formed part of Patrizia Immobilien since last year – which has purchased an office building located in the 22@ district, the area that is registering the highest demand. The amount of the operation could reach €12 million, according to sources in the sector.

The property, located at number 123 Calle Ciudad de Granada, on the corner with Calle Tánger, was the former headquarters of Laboratorios Kin until that company moved to other offices on La Diagonal. The manufacturer of dental hygiene products, which used to own the property, carried out a comprehensive renovation project, which involved its change of use from industrial to offices, and it put it on the rental market. Savills Aguirre Newman was engaged for its marketing and was also responsible for searching for an investor (…).

In May last year, the property was leased in its entirety to the multi-national advertising company McCann, which left Edificio Planeta and opened its corporate headquarters in 22@, where it occupies a surface area of 3,000 m2.

The useful surface area of the offices amounts to 2,740 m2, spread over four floors measuring 650 m2 each and an attic spanning 140 m2. The rental price agreed with McCann amounts to €16.50/month (…).

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake

Tinsa: Madrid, Pamplona & Alicante Led Spain’s House Price Rises in Q3

1 October 2018 – Eje Prime

Madrid, Pamplona and Alicante. Those three cities led the ranking in house price rises in Spain during the third quarter of 2018. The Spanish capital topped the podium with price rises in the residential market of 15.6%, although six other large cities in the country also recorded double-digit increases, according to data from the IMIE report compiled by Tinsa.

Along with the Spanish capital, Pamplona and  Alicante saw their house prices soar between June and September, with increases of 14.2% and 13.2%, respectively. Moreover, Palma (de Mallorca) continued to be one of the most expensive markets, after recording a price rise of 12.8% during the period. Meanwhile, in Málaga, house prices rose by 12.5%, Valencia recorded an increase of 12% and Murcia saw a rise of 11.1%.

The report reflects the boom in the provincial capitals, which were key drivers behind the 4.9% increase in new and second-hand house prices in Spain during the third quarter, to €1,317/m2.

With this new increase, house prices in Spain have been rising since the third quarter of 2016. Nevertheless, sources at Tinsa recall that “although the normalisation of the residential market is a general trend, there are still significant differences by region.

By autonomous region, Madrid is the region where house prices rose by the most in the last 12 months, with a rise of 13% in Q3. It was followed by La Rioja, with an increase of 11.8%; the Balearic Islands, with a rise of 9.9%; and Navarra, with growth of 8.7%.

Original story: Eje Prime

Translation: Carmel Drake

Tritax Purchases Mango’s Logistics Centre from VGP for €150M

26 September 2018 – Expansión

Less than two years is the time that Mango’s logistics platform has been in the hands of the Belgian group VGP. In December 2016, the Brussels-based firm paid €150 million for the logistics complex that Mango had built in Lliçà d’Amunt (Barcelona) and which has a surface area of 250,000 m2 together with some adjoining land on which an additional 100,000 m2 may be built.

According to sources speaking to Expansión, VGP has just sold the asset to the British group Tritax Big Box, a firm listed on the London Stock Exchange.

The buyer of the complex, which Mango inaugurated in the middle of 2016, is a real estate investor specialising in the logistics market. Some of its largest properties include logistics platforms leased to large companies such as Amazon, Unilever, Kuehne+Nagel, L’Oréal, Hachette, Whirlpool, Kellogg’s, Tesco and DHL.

At the end of 2017, Tritax’s portfolio was worth GBP 2.61 billion (€2.92 billion at current exchange rates), 38.1% more than the previous year. Tritax has been advised by the law firm Ashurst in what has been its first operation in the Spanish market. VGP has been advised by the real estate consultancy firm JLL.

Last summer, Tritax raised €300 million through a public offer for sale on the London Stock Exchange. The objective of its managers is to use that money, together with external financing, to acquire logistics properties in Continental Europe.

“Barcelona is the second largest city in Spain and its logistics market is one of the strongest in Europe, with high demand and a limited supply of buildings and land, especially for logistics assets of this kind”, said Nick Preston, manager of Tritax Eurobox, in a statement.

The lease contract for the logistics centre, which has a surface area of 186,138 m2, has a 30-year term, until 2046, although Mango has the option to cancel it in 2036, 2039 and 2042. According to Tritax, the annual rent that Mango pays will allow it to obtain an annual yield of 5%.

Isak Andic decided to build this logistics platform in response to the increase in sales that the fashion chain was experiencing, although that growth has slowed in recent years.

Last year, Mango recorded losses of €33 million, down by 46% compared to 2016, the year in which the company recorded negative results for the first time in its history, with losses of €61 million. In 2017, sales decreased by 2.9%, the same drop as the previous year, and amounted to €2.194 billion.

Divestment

The sale of the logistics centre was the first divestment that Andic made after investing a large proportion of his profits in the real estate sector in previous years. But it was not the last, given that a year later, in December 2017, he sold the chain’s headquarters, located in Palau-solità i Plegamans (Barcelona) to the British group Invesco for €100 million.

Original story: Expansión (by M. Anglés, S. Saiz & R. Casado)

Translation: Carmel Drake

Podemos & the Tax Authorities Negotiate a Stricter Fiscal Framework for Socimis

11 September 2018 – Expansión

Podemos and the Government are studying measures to put a stop to the “rental bubble in Spain’s largest cities”, which Pablo Iglesias argues is being caused by the tax advantages being afforded to the Socimis.

The Tax Authorities and Podemos are negotiating a stricter fiscal framework for Socimis. That is according to sources at the negotiations, and to an announcement made by the leader of Podemos, Pablo Iglesias (pictured above, right), after his meeting with the President of the Government, Pedro Sánchez (pictured above, left), on Thursday.

Iglesias spoke of an “understanding” on this point and of advances in the negotiations. Although the fiscal framework of these real estate investment companies has always been under Podemos’s spotlight, it did not mention it in the document that it sent to the Tax Authorities in August detailing its requests, in exchange for its support of the Budgets. But, that was not a question of “limited demands”, according to sources at Podemos, who are now negotiating measures with the Executive to put a stop to the “rental bubble in Spain’s largest cities”. And, in Podemos’s opinion, the beneficial legislation afforded to Socimis explains this bubble, and it needs to be addressed urgently. Iglesias will spend tomorrow questioning Sánchez in the control session of the Government in Congress regarding the “measures that the Executive plans to adopt to put an end to the rental housing bubble”.

“We need to discourage the promotion of these types of companies, which foster the bubble model, undermine the public coffers and represent an affront to competition. We think that the special framework for Socimis, whose main feature consists of a Corporation Tax rate of 0%, needs to be reversed”, said Podemos recently in a document (…).

In this latest document, Podemos therefor, therefore, to put an end to this zero tax rate for Socimis, compared with the nominal tax rate of 25% (…). The negotiations with the Tax Authorities are based on the premise that Podemos wants to bring the tax rates for Socimis in line with those applicable to other companies. However, it does not rule out that the measures agreed will be aimed at having more control over their tax framework.

Zapatero’s Government created Socimis in 2009 in an attempt to revitalise the real estate market, inspired by the REITs (Real Estate Investment Trust) from the Anglo-Saxon world. They enjoy a very beneficial tax framework. Their Corporation Tax rate is 0%, provided they fulfil certain requirements: the minimum share capital must amount to at least €5 million (…); the funds must be invested in properties; a minimum of 80% of the profits obtained from rental must be distributed as dividends; and at least 80% of the value of the assets in urban buildings must be leased for at least three years.

Unlike the Sicavs, there is no requirement for Socimis to have a minimum number of shareholders, but their shares must be admitted for trading on a regulated market (…).

Following the economic recovery and the boom in the real estate market since 2013, the Socimis are enjoying a golden period (….).

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Land Oligopoly: 10 Cities Account for 55% of the Developments Underway in Spain

31 May 2018 – Eje Prime

The data is conclusive: ten cities account for 55% of the residential developments underway in Spain. They constitute a municipal land oligopoly, which is now showing signs of tension on the demand side given the lack of buildable land available for development and the delays by the public administrations when it comes to approving building permits. “The concentration of the population in the major cities is a phenomenon that is going to increase over the next few years”, predicts Sergio Gálvez, Director of Strategy and Investment at the property developer Aedas Homes in the context of the Madrid Real Estate Fair (SIMA) conference on land and its strategic market.

The executive of the listed Spanish company also explained that the delays in the granting of licences in certain cities are lasting for up to ten months. Gálvez regrets that “any delay suffered in the production chain clearly results in a higher sales price for the end client”.

The Director of Aedas, who believes that “the public administrations still have a long way to go in terms of the agility of the licence-granting process”, was accompanied at the roundtable by Ignacio Ocejo, Partner at Kronos Homes. The director of the Spanish property developer turned the spotlight onto financing: “the situation in the financial world has changed drastically with the new cycle; in the past, the supply could have been four times larger”.

Nevertheless, Ocejo was favourable of the fact that land financing is now “much more controlled” because capital can still be obtained under reasonable conditions. “I do not think that it is a problem, the banks themselves are being proactive when it comes to financing; the problem is more that there are fewer entities”, said the Director of Kronos.

Meanwhile, the Commercial Director of the appraisal firm Tinsa, Pedro Soria, seemed more concerned than his roundtable colleagues about land and its overheating (…) “In some places, we are already seeing price caps on land”, says Soria, “the only option left if we want to achieve the desired returns is to raise house prices”. In the event that land prices continue to rise, the Tinsa executive sees a “risk”, nevertheless, the market could be more profitable on the land investment side than when it comes to house building itself.

Spain is seeing an improvement in its new home permits once again, but the figures are still well below the more than 800,000 permits granted in the most active years of the boom in the 2000s. In this regard, Ocejo explains that “in a scenario of stability and compared with the previous cycle”, an increase in new builds at a rate of between 25% and 30% would be “positive”. “A healthy market for me would see the construction of between 130,000 and 160,000 new homes each year in Spain”, added the Partner of Kronos Homes.

Original story: Eje Prime (by J. Izquierdo)

Translation: Carmel Drake

Deloitte: Spain’s Logistics Sector is Hot Property Thanks to the ‘Amazon Effect’

18 May 2018 – Expansión

Investment funds want to take advantage of the collateral effects that the boom in e-commerce is going to have in the real estate market by taking positions in a segment with great potential, namely: the storage of goods and products. The logistics segment has become the “golden girl” of the real estate sector and one of the favourites of investors boosted by strong yields and the expectations of business growth. In this context, Asian investors have placed their focus on the European logistics market.

According to the Logistics Property Handbook compiled by Deloitte, last year, investment in logistics assets in Europe recorded a milestone with €42.5 billion of assets transacted, thanks to mega-operations such as the purchase by China Investment Corporation (CIC) from Blackstone of the Pan-European platform Logicor for €12.2 billion, and the acquisition of the European platform Gazeley by Global Logistic Properties (GLP), headquartered in Singapore, for €2.4 billion.

Mega-operations

In Spain alone, investment in logistics assets amounted to €1.63 billion, which represented a 75% increase compared to the previous year, and a historical record, due to significant transactions involving logistics portfolios. CIC’s purchase of Logicor implied a transaction volume of €652 million in Spain. Meanwhile, P3 Logistic Park – owned by the Singapore sovereign fund, GIC – purchased 11 assets from Green Oak in Spain for €243 million. Those operations boosted investment to historic levels.

Moreover, last year, Mango sold its logistics centre in Palau-Solità I Plegamans (Barcelona) to the fund manager Invesco for €100 million. That transaction was the largest involving a single asset in Spain and the fourth-largest in Europe.

According to the forecasts in the report, operations in the pipeline, which may be closed this year, already amount to €980 million.

“The large institutional funds that aspire to lead the logistics sector in Europe and around the world are bidding hard to accumulate the largest logistics surface area possible during this economic cycle. The location and size of their international logistics platforms are the two key variables for exercising greater negotiation power and whereby obtain the highest rents from operators”, explains Javier García-Matro, Partner in Financial Advisory at Deloitte.

Despite the record investment figure recorded last year, the volume of assets transacted in Spain represents just 4% of the total European market. “This fact is proof of the growth potential of these types of assets in our country. In 2017 alone, 865,000 m2 of logistics space was handed over in Madrid, Cataluña and Valencia. The strong demand of the current cycle is causing logistics promoters to develop more than 2 million m2 of land in these markets, in both turnkey and speculative projects”, says García-Mateo.

One of the major players in the sector is the Socimi Merlin, which has placed logistics asset at the centre of its growth strategy. Merlin’s expansion plan involves the development of land and turnkey construction, a roadmap that has allowed it to become one of the leaders in the sector in just four years.

The main players

Merlin has 2 million m2 of logistics land, both in portfolio and under management, and its plans involve increasing that volume to 3 million m2 before the end of the economic cycle. Specifically, it plans to spend around €250 million on logistics development over the next four years.

Another important player is Logicor, the Pan-European platform, which has been controlled by the Chinese group GIC since last year and which owns 1.2 million m2. Meanwhile, the alliance formed by the real estate manager CBRE GI and its local partner Montepino is going to develop a portfolio of prime assets in the main geographic areas of Spain with a planned investment of around €300 million.

They are joined by the European giants Prologic and the platform P3 Logistic Parks, which own 900,000 m2 and 400,000 m2, respectively, as well as the European investment group VGP, which owns almost 400,000 m2 of logistics space in Spain.

In terms of the types of assets, the Amazon effect has revolutionised the industrial sector and forced logistics operators to reinvent themselves to adapt to the new needs of clients (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

PwC Forecasts Record RE Inv’t in Spain This Year

17 May 2018 – Expansión

The real estate market in Spain is striding towards a new investment record. That is according to the partner responsible for this area at the consultancy firm PwC, Rafael Bou, speaking yesterday at the presentation of a report about trends in the real estate market in Europe – he highlighted that the best international scenario favours the arrival of new projects.

Bou affirmed that there is “widespread optimism” amongst the main players in the sector. “Even 2017, with Brexit and Trump, was a year of record investment, and so 2018 ought to be even better, given that we do not have any of that”, he said. In this sense, he also indicated that there is greater political stability in Europe following the elections in France and Germany,

Another factor that will favour the achievement of this investment record is that the European Central Bank (ECB) is going to maintain interest rates low. Bou confirmed that the uncertainty hanging over the sector is not knowing when the current expansive cycle will end; he put a date on the horizon. “Next year, the uncertainty in this regard may increase with the appointment of a new Chairman of the ECB”.

Madrid, the fifth most attractive city

PwC’s survey, compiled in collaboration with the Urban Land Institute, places Madrid as the fifth-ranked European city for conducting real estate business. If we look at the small print, the Spanish capital is ranked in sixth place in terms of the development of projects and in fifth place for the capture of investment.

The research confirms that significant growth is expected in the capital’s office rentals. “Compared to other European capitals to the north, the growth in rental prices has been restricted by the setback that the Spanish economy suffered following the global financial crisis”, he said. PwC highlights the evolution of the retail and hotel sectors, and the repositioning of offices. Madrid has risen four places in the ranking with respect to last year.

Barcelona, which has risen by five places, is now ranked in eleventh place overall. The Catalan city was ranked in thirteenth place in terms of investment and in ninth place for the development of real estate projects.

The report indicates that Barcelona is one of the cities that could most benefit as a result of Brexit, although it warns of the dangers of secessionism. The analysis highlights that the retail, office and residential sectors are currently at a critical point. So too is logistics. “Boosted by demand from e-commerce companies, investors and property developers are buying logistics warehouses and developing new spaces in Barcelona in a speculative way, for the first time since the global economic crisis”, according to the report. “Some people are now talking about a price bubble in the logistics sector in light of the boom that it is experiencing”, added Bou.

The 800 surveys that have been used to compile the study were conducted prior to 1 October 2017, and so they do not reflect the impact on the real estate sector of the political crisis resulting from the Cataluña-independence process. “Having overcome the initial shock, investment has been recovering gradually”, explained Bou. Most overseas investors have returned. “Some people have decided not to invest, but others saw an opportunity in terms of prices and competition and came back quickly”, he said.

Would Barcelona and Madrid have occupied similar positions in the ranking if the surveys had been carried out after 1-O (1 October 2017)? Bou highlighted that Madrid is always ranked higher than the Catalan capital because it is a larger city.

Original story: Expansión (by Gabriel Trindade)

Translation: Carmel Drake

Spain’s First Logistics Megahub will Open in Antequera (Málaga) in 2019

19 April 2018 – Cinco Días

The first logistics megahub in Spain is starting to become a reality almost a decade after it was initially proposed. The entity known as Megahub Andalucía – a public-private initiative – has engaged the consultancy firm CBRE to search for the first major operators ahead of the imminent authorisation of the project that the Junta de Andalucía is expected to grant in June. At stake is €350 million of investment in an industrial hub for the south of Spain and north of Africa, which should be ready by 2019.

Megahub Andalucía is located in the municipality of Antequera (Málaga), in what the European Union calls a multi-modal hub, given that the European Atlantic and Mediterranean railway and road goods corridors meet at this point, the ports of Algeciras, Málaga and Sevilla are all close by, as is the AVE station in Antequera and the airport of Málaga (the fourth largest for cargo transport in Spain).

“Megahub Andalucía is located in the centre of Andalucía with respect to the large populations, both in terms of consumption and production”, says Ramón Vázquez, head of the project at CBRE. The word hub is used because several European transport networks converge on this point and the pre-fix mega has been added, in turn, because the warehouses that are going to be constructed on the plots will extend up to 200,000 m2.

The Junta de Andalucía holds a 40% stake in the company, through Red Logística de Andalucía, and the remaining 60% is held by a private company Puerto Seco de Antequera, which comprises, in turn, several companies, most notably Acotral, a local operator that has been an integrated supplier of Mercadona since 2003.

The Junta is expected to approve the special plan in June, which will allow work to start of the urbanisation of the area, after many years of delays. “The project was launched 10 years ago but has been delayed on several occasions due to urban development problems and due to the crisis. It was conceived as a logistics area and is now being reborn as a logistics megahub”, says the expert at CBRE.

The urbanisation work may begin in June and will have an estimated cost of €70 million, which will be funded by the Junta and the company Puerto Seco de Antequera. Later, around €280 million of funding will be received from investors and operators to build the macro logistics warehouses and production centres. In theory, the megahub should be operational by the end of 2019 or beginning of 2020.

The logistics hub in Antequera spans 3.3 million m2, of which 1.03 million m2 is going to correspond to logistics warehouses. There will also be an industrial park, destined to production activities, measuring 919,000 m2, plus a service centre (comprising a hotel, restaurant, training centre, businesses…) spanning 317,000 m2 and finally a railway terminal, which will connect with the goods station in Bobadilla (owned by Adif).

The project coincides with the huge boom that the logistics market is sparking in Spain, due to the reactivation of the economy, the pull from e-commerce and the needs of the major operators such as Amazon. Last year, more than 1.5 million m2 of logistics space was leased, according to data from CBRE, up by almost 20% (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake