Tag: IESE Business School

Merlin: The Strong RE Inv’t Figures Will Not Be Repeated In 2016

26 February 2016 – Invertia

In the context of the 2nd Meeting of the Real Estate Sector, organised by the IESE business school, Ismael Clemente (pictured above), the President and CEO of Merlin Properties, explained that the investments made in recent years have been due to the improvement in the economic situation, following years of recession.

In any case, Clemente has said that “we are seeing good things in the market”, but we need to “good governance of the country” to confirm the trend.

“It seems like there is little hope for 2016. We would like our political leaders to have a sanity attack and start reaching agreements”, he said.

With regard to this political instability, he has said that some companies “cannot wait” for the situation to be resolved.

When asked about the future of the sector, Clemente forecast a “slight decrease” in demand for offices and explained that companies depend on the fact that “a proportion of their employees are ‘floating’”, which leads to situations of “overbooking”.

“There are companies with 1,400 employees looking for spaces for 1,000 employees”, he said.

Regarding the refinancing of Testa, Clemente criticised the change in the value of the risk premium, and explained that “the widening of 50% of the risk premium is not good business for anyone”.

In terms of new technologies and the changes that they may generate in the real estate market, Clemente explained that Merlin wants to increase its portfolio of logistics facilities in Spain’s main hubs with a view to supporting the growth of online businesses.

Meanwhile, he also pointed out the (wider) need to adapt to new technologies: “Either we start to adapt ourselves now, in the form of training, or we will end up with the destruction of lots of jobs and, therefore, with fewer consumers”.

Original story: Invertia

Translation: Carmel Drake

Investors On The Hunt For Prime RE Assets

20 April 2015 – Expansión

Opportunities / The Spanish real estate sector has aroused interest from all types of purchasers, from those that are more opportunistic in nature to those that are seeking lower risk. Offices, shops and shopping centres are the most sought-after assets, but hotels and logistics centres offer the best returns.

The volume of investment has increased from just over €3,000 million to more than €8,500 million in only 12 months. That has been the evolution recorded by the non-residential real estate segment, which reflects the highest level of interest from all kinds of investors in Spain. Thus, the Spanish market has become the second most attractive country for investment in Europe, according to the consultancy CBRE.

But, what are these investors looking for in Spain? Based on the nature of the deals closed last year, offices and commercial assets (both shopping centres and high street stores) are the most sought after. “The transactions that spark the most interest have a value of between €40 million and €50 million, rely on financing for 50-60% (of the price) and generate an initial return of between 5% and 7%. Investors are looking for buildings with: occupancy rates of more than 70%; solvent tenants; and (lease) contracts lasting for around 6 years”, explain sources at JLL, based on data collected in a survey prepared together with the Iese Business School from more than 100 investors.

Excess demand for buildings, and for offices and shopping centres in particular, has led to “very competitive processes for star assets, i.e. those that are best placed in terms of location or that have high rentals, as well as good buildings that require management to improve their profitability”, explain sources at Catella. “Socimis and US funds are very active, along with institutional funds. All of them are creating strong investor pressure”, they add.

The fierce competition has meant that offices and commercial assets no longer offer such high returns, and so many investors have started to invest in other kinds of assets, such as logistics and industrial centres and hotels. Thus, whilst deals involving offices in prime locations offer a return of 5.5%, well-located industrial assets generate a return of 8.25% and logistics centres in secondary areas produce returns of up to 9.5%, explain sources at Deloitte Real Estate.

In the hotel segment, the experts predict that the volume of investment in 2015 will exceed that recorded last year (€1,081 million) thanks to deals involving distressed assets and the activity of debt portfolios, given the shortage of attractive assets.

Renovation

Another possibility being considered by investors looking to enter the Spanish market and make a good return is the recovery of out-of-date properties or those without good lease contracts, through their renovation. “On the one hand, Socimis are looking to purchase offices, logistics assets and shopping centres that guarantee a return of between 6% and 7.5%. On the other hand, we have the real estate funds owned by private equity firms, which are looking for riskers assets that offer higher returns, such as properties that require renovation or land that needs developing. The expected returns in those cases can exceed 15%”, explain sources at Deloitte RE.

“Investors are becoming increasingly sophisticated and demanding. As has happened in other European countries, the most efficient buildings are going to be the key and, in the case of the financial district in Madrid, they have the lowest availability rates in Europe for that type of asset, which opens an important niche, both for investment as well as for the renovation of existing properties”, say source at Knight Frank.

Original story: Expansión (by R. Ruiz and Y. Blanco)

Translation: Carmel Drake

Housing: Rental Prices Are On The Rise In 7 Autonomous Regions

29 January 2015 – Expansión

Trend/ The rental market is showing signs of improvement, after seven consecutive years of decline. Rental prices are increasing again in seven autonomous regions and are now stable in three.

The trend in rental prices is starting to change. After seven years of uninterrupted decreases, there were signs of stabilisation in the market in 2014. Overall, prices decreased by 1.9%, but that represented the smallest decreased since the golden years of the bubble, in 2007. Moreover, rental prices in 10 autonomous regions are no longer falling (they are increasing in seven and stable in three).

Those are the main conclusions of a report, prepared by Fotocasa.es in collaboration with the IESE Business School, about Rental Housing In 2014. “In the space of a few months, we have gone from seeing decreasing rental prices across almost the whole country, to seeing year-on-year increases in seven autonomous communities; furthermore, the scope for further downward movement is now limited in certain other areas”, says the study.

The Balearic Islands led the return to rental increases, with an annual rise of 6.7%. It was followed by Cataluña (6.5%), Pais Vasco (6.1%), the Canary Islands (1.8%), Madrid (0.6%), Extremadura (0.5%) and Valencia (0.2%).

Moreover, for the first time in seven years, none of the autonomous regions recorded rental price decreases of more than -5%. In fact, the sharpest decline was in Castilla-La Mancha (-3.4%), followed by Asturias (-3.2%), Navarra (-2.9%), Murcia (-2.3%) and La Rioja (-2.1%).

“The year-on-year variation in 2014 (-1.9%) is more than three points lower than the decline recorded at the end of 2013 (-5.2%) and it brings us back to pre-crisis levels”, said Fotocasa.

Rental prices in Spain reached their historical peak in May 2007, at €10.12 per sqm per month. Since then, they have declined by 33.1% overall, with Aragon (-42.5%) and Cantabria (-37%) being hit particularly hard.

The report identifies 86 municipalities that recorded rental price increases last year. The most notable increase was in San Sebastián, the city with the most expensive housing in Spain (12.7%), followed by Sant Pere de Ribes (11.7%) and Calvia (11.5%).

In Spain’s two largest real estate markets, the changing trend is catching on more quickly. In 2014, the rental price per sqm increased in 10 of the 21 districts in Madrid and in 9 of the 10 districts in Barcelona.

Madrid and Barcelona

The most notable increase in the capital was in the Retiro district (5.5%), followed by the Centro (5.3%), Chamberí and Salamanca (4.1% in both). And the most marked decreases were in Vicálvaro (-7%), Puente de Vallecas (-5.7%) and Villaverde (-5%).

Meanwhile, in Barcelona, the largest increase in rental prices was recorded in the district of Les Corts (12.9%), followed by Eixample (9.8%), Ciutat Vella (9.4%), San Martí (8.8%) and Sarria-Sant Gervasi (8.5%). The only district to experience a decrease was Sant Andreu (-1.2%).

The most expensive area to rent a home in Barcelona is Ciutat Vella, with a average price per sqm per month of €13.60, followed by Sarria-Sant Gervasi (€13.04). Meanwhile, the most expensive district in Madrid is Salamanca, with an average price of €13.04 per sqm per month, followed by Chamberí (€12.96).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake