Large Companies Also Focus On The Rental Housing Market

26 September 2016 – El Mundo

The rental market is becoming one of the symbols of the new real estate cycle. It has gone from being an almost residual market to becoming one of the stars of the residential sector. Gone are the prejudices that used to weigh down on this regime – it seems like the best is yet to come: all indications are that the sector has a promising future ahead thanks to its potential for professionalization.

Currently, the rental market accounts for around 25% of the residential stock. The latest official data comes from 2014, when, according to Eurostat, 21.2% of Spaniards lived in rental accommodation. According to the experts, that percentage that has been increasing ever since and it is much higher in the major cities. Spain has not had this many tenants since the 1960s.

Despite the significant increase in rental accommodation, Spain is a long way below countries such as Germany (where 47.5% of homes are rented), Austria (42.8%), Denmark (36.7%), the UK (35.2%) and France (34.9%). On average, 29.9% of homes in Europe are rented. This European reality indicates that the rental market in Spain still has potential for growth.

Experts agree that one of the maxims of the new real estate cycle will be a more balanced relationship between ownership and rental. They agree that to reach this goal, the sector, which is currently mainly in the hands of individual landlords, will have to be professionalized. This professionalization has been underway for years and is now starting to consolidate itself on a large scale.

Testa Residencial

A recent example is the maturity of the professional leasing market is Testa Residencial, the new subsidiary of Merlin Properties, created following the merger of the residential portfolios previously owned by the Socimi and Metrovacesa. This joint venture, which is still in its gestation period and which is expected to adopt the Socimi structure, was born with 4,706 homes, all operated under leases. Merlin’s major commitment to residential leasing is even more important if we take into account the fact that it has become the largest real estate group in Spain and the eighth largest in Europe.

In addition, Testa Residencial’s extensive supply will grow even more thanks to upcoming injections of properties (in exchange for shares) from Banco Santander, BBVA and Banco Popular, three shareholders inherited from Metrovacesa. (…). As such, the firm will end up managing a portfolio of 10,000 units, allowing it to complete with the main real estate companies in this market.

Testa Residential is launching itself into a sector in which two large companies have competed until now: Azora and Larcovi. The first, founded in 2003, has more than 12,000 rental homes under management in different funds and companies (for example, Azora and Hispania) and is the largest private entity in this market. (…).

Concha Osácar, the founding partner at Azora, takes it as read that the rental market will continue to grow for several reasons: the increase in geographical mobility for employment purposes, the limited access to credit to make (house) purchases, the elimination of tax incentives to acquire a home, the change in mentality (“especially amongst young people”) and growing demand from families looking for better homes.

Alongside Azora, Larcovi represents the tip of the iceberg of the professionalization of the sector. It manages more than 9,000 units (…).

“To satisfy the growing demand, the supply will have to be increased. We estimate that Spain will need between 1 million and 1.2 million additional rental homes to bring it into line with its European counterparts”, says Osácar. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Madrid Leads Spain’s Property Development Drive

23 October 2015 – Expansión

The Barcelona Meeting Point, which has been held this week and the Autumn edition of SIMA, which starts in Madrid today, are both proving to be of particular interest to the Spanish real estate sector. And it is no wonder, given that those two regions are leading the way in terms of property development at the moment. But the reactivation of the real estate sector is not proving to be homogeneous: it is slow, uneven and focused on certain large urban areas. Investment funds and real estate companies have acquired offices and commercial assets amounting to €10,800 million so far in 2015, already exceeding the total figure invested in 2014 (€10,200 million). And investors’ interest, which began in the tertiary sector, is now extending to the residential sector, at the hands of a winning formula: the partnership of large investment funds and local property developers.

Interest in ‘ready-to-build plots’ (‘suelo finalista’) has been increasing in Madrid since the end of 2013, however, given the shortage of land in the capital, attention is now starting to focus on other development land (‘suelos con gestión de desarrollo previo’), according to findings from CBRE in its latest report Market View Residencial. The lack of property developments to meet future demand is already a concern for the sector, and that perception has only increased since the change in the municipal government, given that the brakes seem to have been put on several projects: Chamartín, Mahou-Calderon and Canalejas.

According to Servihabitat’s latest report about the residential sector, house sales will have increased by 25.6% by the end of this year, to total more than 400,000 operations. The entity expects the rising trend to continue in 2016, with more than 460,000 house sales, up by 14.5%. As a result, it expects house prices to rise by 2.6% this year and by 6% in 2016. All of the experts agree that the lack of land will end up impacting house prices.

In the centre of the capital, large one-off operations continue to abound, such as the ones closed last year by Domo Gestora, which acquired a plot of land on Raimundo Fernández Villaverde for €111 million; and Ibosa, which was awarded the former Metro depot in Cuatro Caminos. Another highly anticipated operation is the sale of a plot of land on Calle Padre Damián, 52, owned by the Ministry for Foreign Affairs, measuring 15,000 m2, where 200 homes are going to be built. The auction date has not been set yet, but Domo, Larcovi (with Ruiz-Larrea Architects), Comunidades Santa Gema, and the strong partnership between Los Jardines and El Olivar, have created four cooperatives interested in this plot worth around €100 million.

In terms of other future projects, within the M-30 radius, all eyes are focused on Operación Chamartín (17,500 homes), Operación Campamento (10,700 homes) and the smallest project of all Operación Calderón (2,000 homes). For Samuel Población, National Director of Residential Property and Land at CBRE, all three are very interesting projects and, in his opinion, Chamartín is the most necessary. “It will be the vertebral axis between the Castellana and the developments in the North, it has the blessing of the owners and it will take almost 20 years to complete. It doesn’t make any sense, either commercially or development wise, to delay it any longer”. However, the new mayoress of Madrid considers that this urban planning project cannot be resolved “in two months” and has said that no decision will be taken until after the general elections. This uncertainty, which will exist until the final version of the General Plan for Madrid is reviewed and the new Town Hall’s plans are presented in more detail, is not good for the sector, at a time when real estate investment has shot up by 51%, says Samuel Población, who also points out that, the project now known as Distrito Castellana Norte is planned in several phases, which means that its launch is not incompatible with subsequent adjustments.

Scarcity on the horizon

The lack of supply has been felt most notably in the PAUs (‘Proyectos de Arquitectura y Urbanismo’ or Architecture and Urban Planning Projects)  in the north of Madrid: Sanchinarro, Las Tablas, Montecarmelo and Arroyofresno; and is starting to become apparent in Valdebebas. Currently, around 5,000 homes (unsubsidised and subsidised) have been delivered or are about to be in that development alone, out of a total projected number of 13,500. The Junta de Compensación is selling new plots for the construction of social housing, with plans for 1,000 subsidised homes to be built; after that, the supply of protected land in Valdebebas will have run dry.

In the south of the city, the Ensanche de Vallecas area is also showing signs of the shortage: in 2007, there were almost 3,000 homes for sale there, and now there are just 150.

In the southeast, other important developments are planned, such as Valdecarros (48,000 homes), Los Ahijones (15,400 homes) and el Cañaveral (15,000 homes), however there is not yet sufficient demand in those areas to match the vast supply.

Madrid’s residential market is a very polarised and so, despite the fact that there appears to be stock, there are pockets where scarcity is just around the corner.

Luis Corral, the CEO of Foro Consultores, reminds us that  improvisation does not work in the housing sector: “To develop homes, land needs to be created and that takes time, which means developers need to have developable land in their portfolios”.

Original story: Expansión Special ‘Casas’ Supplement (Loreta Ruiz-Ocaña)

Translation: Carmel Drake

Former Larcovi Employees Create New RE Company

22 October 2015 – Expansión

A new real estate management company has been born. It is called Víveme, a company created as the result of a carve-out from the real estate group Larcovi. “We have been hatching the idea for almost a year; and we have been working towards its launch now, at a time when the results in the sector are improving”, explains Mariam Martín Ferreiro, the President of Víveme.

The new company will be responsible for rendering a range of services to third parties, including land searches, project development, financing searches and the marketing of homes. “We work with cooperatives; financial institutions that own land; and projects that have been foreclosed due to bankruptcy”, says Martín Ferreiro. “Víveme will not take on any developer risk, but sometimes we will provide financial support to investors”, she said.

Behind this new company are several former employees of Larcovi. “There is no large business group behind us, instead, as employees we are also shareholders. We have created Víveme because we believe in the recovery of the market and in our own experience”.

Although it was only launched recently, the real estate company has already got almost one thousand homes under management. “As we start out, we already have several projects underway for the development of 900 homes, mostly in Madrid, of which 500 are already under construction”, says the President.

Forecasts

Thanks to this volume of activity, the company hopes to close the first year with a profit. “With the current portfolio, and another two projects that we plan to start before the end of the year, we hope to end the year with turnover of €1.5 million”. The aim is to manage between four and five new projects per year, whereby delivering 2,000 homes between now and 2020. “We have now obtained financing for a development close to the Castellana and in October we will deliver 57 family homes in Rivas”.

Víveme will compete directly with the banks’ real estate arms, which is not something that concerns its directors too much. “We know that the financial institutions are there, but increasingly they are focusing on their core businesses and we believe that we can compete with them, by offering high quality products and by listening to our clients, personalising each home, not just the finishes, but also letting customers participate in the design phase”.

Víveme is one of numerous companies that will participate in the Autumn edition of the SIMA real estate trade fair in Madrid, which is being held between 23 and 25 October. Other participants include: Iberdrola Inmobiliaria, Vía Célere, Hercesa and TM Grupo Inmobiliario, as well as Servihabitat, owned by La Caixa, and Anida, owned by BBVA

Original story: Expansión (by R.R.)

Translation: Carmel Drake