31 January 2019 – Eje Prime
The real estate sector has closed another year with a strong performance in the Spanish market. As we approach the end of the real estate cycle in the country, the tertiary sector is continuing to maintain high levels of investment, with growing rents and sustainable yields.
In the retail sector, the investment volume amounted to around €3.7 billion in 2018, according to data from Knight Frank. The main driver of that investment was the high street, where spending soared by 84% to €1.3 billion.
Despite that, the bulk of retail investment in Spain continued to be directed towards shopping centres, which accounted for 54% of the total last year with major operations such as the sale of the Summit portfolio, owned by Sonae Sierra in conjunction with CBRE GI, and of which 87% is now controlled by JT Real Estate.
Moreover, the consultancy firm highlights that interest has increased from investors in shopping centres and isolated retail warehouses in good locations “which allow them to manage last mile delivery points”, said the consultancy firm.
Returns have remained stable across the three segments with yields of 5.25% for retail parks, 4.25% for shopping centres and 3% for high street assets.
Despite the strong performance of the retail sector in 2018, the jewel in the Spanish real estate crown is still the logistics segment. In 2018, investment in logistics assets amounted to €1.255 billion, close to the record set in 2017 of €1.28 billion.
In the last quarter, several large operations were closed, such as Blackstone’s purchase of a portfolio of 55 assets from Neinver for €300 million.
Interest in the segment continues to generate expectations regarding the compression of yields, and so Knight Frank forecasts returns of around 5% this year.
Finally, the office sector has also maintained a robust rate of activity, after the maximums recorded in 2017 thanks to operations undertaken by the Administration. Specifically, Knight Frank estimates that 2018 closed with a gross absorption of 493,000 m2.
Following the trend set in 2017, 52% of the surface area leased was located outside of the M-30, although during the final quarter, it was the secondary centre that accounted for the bulk of the space rented, around 35%.
Prime office rents remained stable at around €30.5/m2/month, and reached maximums of €38.5/m2/month in the most sought-after areas of the business district.
Original story: Eje Prime
Translation: Carmel Drake