Tag: office sector

Office Inv’t in Madrid & Barcelona Rose by 70% in YTD Sept

27 November 2017 – Eje Prime

Madrid and Barcelona are continuing to take advantage of the boom in the office market. The sector, which accounts for 28% of all (tertiary) real estate investments in Spain, has its national breeding ground in the country’s two largest cities. During the nine months until September, the leasing of office space increased by 70% with respect to the same period in 2016, pushing up rental prices and also, reducing the available stock to a minimum. The forecasts indicate that the sector will close 2017 with a total of 780,000 m2 of space leased in Madrid and Barcelona alone: 460,000 m2 in the Spanish capital and 320,000 m2 in the Mediterranean city.

The leasing of office space grew by 21% in the third quarter in Madrid, where the leasing of workspace exceeded the 100,000 m2 threshold during the quarter to reach 102,000 m2. This increase is stimulating the sector, which by year-end may equal the total space leased in 2016 (450,000 m2).

In the Spanish capital, the central business district (CBD) continues to be the location of choice for companies, with an occupancy rate that accounts for 50% of the whole city. Between June and September, 73 operations were signed in Madrid, in other words, fewer than the 90 contracts that were signed during the same quarter last year, according to a report compiled by the consultancy firm Cushman & Wakefield.

In Barcelona, by contrast, the leasing of office space decreased by 56% during the third quarter (…) to 56,700 m2. On the other hand, of the 291 operations closed between June and September in the city, only 6% exceeded 2,000 m2; instead, contracts for spaces measuring less than 500 m2 predominated (61%), resulting in an average leased surface area of 900 m2. Similarly, in the Catalan capital, where the cumulative absorption has increased by 12% in 2017 compared to 2016, technological companies are the most active, accounting for 39% of the office space rented in the Mediterranean city, ahead of the industrial sector (11%).

The 22@ district, an area of constant growth, is home to 46% of the offices of companies headquartered in Barcelona. The rest are located in the centre (36%) and on the outskirts, where 18% of companies are situated.

Two of the largest operations carried out in Spain in the last quarter in this tertiary sector featured WeWork, one of the main players in the coworking segment. The US company leased 6,500 m2 of surface area in the Luxa building in the 22@ district of Barcelona and another 5,500 m2 of space at number 43 on Madrid’s Paseo de la Castellana.

90% occupancy rates

One of the challenges for the office sector in 2018 is going to be increasing its stock. Currently, the availability of space in Madrid and Barcelona is at minimum levels. In the Spanish capital, the supply of workspace has decreased to 12% of the total land constructed for that purpose, whilst in Barcelona, the figure is even lower, at 8%.

To this end, the plan for next year is to incorporate 139,000 m2 of new stock in the Catalan city and 80,000 m2 of space in Madrid. This lack of space has driven up rents, which are currently priced at €32/m2/month in the prime areas of the Spanish capital and €22.75/m2/month in Barcelona.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

CBRE: Madrid Is EMEA’s 3rd Most Attractive City For RE Investors

30 March 2017 – Mis Oficinas

Madrid is the third most attractive city in Europe, the Middle East and Africa (the EMEA region) for real estate investment. At least that is according to the “Global Investors Intentions 2017” report compiled by CBRE, the leading real estate consultancy and services company in the world, based on a survey of 2,000 international investors.

According to the study, London leads the ranking of the most attractive cities for real estate investment, after it was chosen by 17% of investors. It was followed by Berlin (15.8%) and Madrid (8.4%). Amsterdam and Paris complete the top five (…). For the first time in 2017, cities such as Hamburg and Milan did not appear in the top ten, due to growing concerns from investors about (high) asset prices in some of Europe’s most established markets, following years of increases.

“Madrid is a very attractive city for international investors for a variety of reasons. Prices here are still below those of other markets, and in recent years, some very interesting renovation and development projects have been launched. Similarly, rental income is forecast to rise. These factors caused investment in the Spanish capital to exceed €4,000 million in 2016”, said Paloma Relinque, National Director of Capital Markets at CBRE Spain.

Meanwhile, Spain is ranked sixth in the list of the most attractive countries to invest in, whereby maintaining its top-10 position, against competition from all of the countries in Europe, the Middle East and Africa. In this sense, Germany is the market of choice for 22% of those surveyed as an investment market in 2017. It is followed by the United Kingdom (20%), Eastern Europe (10%), Scandinavia (10%) and The Netherlands (9%).

In terms of the sectors that these investors plan to invest in, the office market was mentioned the most, by 34.7% of investors. It was followed by the industrial-logistics sector, chosen by 25.9% of respondents. Nevertheless, one of the most interesting conclusions was the growing appetite for alternative assets, in which 7 out of every 10 real estate investors are now investing. Specifically, real estate debt is the segment that is sparking the most interest amongst investors (31%), followed by leisure and entertainment (27%) – which is the segment that grew by the most in comparison to the previous year – and student halls of residence (25%).

On the other hand, the report described investors’ main concerns for 2017. The most frequently mentioned concern was the risk that interest rates rise more quickly than expected, a fear cited by a quarter of the investors surveyed. It is noteworthy that, despite the numerous elections on the horizon in Europe and their possible implications for the sector, investors place greater importance on the economic climate than on geopolitical matters. The third concern is the fact that prices are forecast to increase and the risk of a possible bubble. (…).

Original story: Mis Oficinas

Translation: Carmel Drake

CBRE: House Prices Will Grow By 3%-6% In 2017

16 January 2017 – El Mundo

One out of every two directors in the real estate sector in Spain believe that house prices at the national aggregate level will rise by between 3% and 6% in 2017, compared with only 21% that thought the same in 2016. That is one of the main conclusions of the Real Estate Trends Barometer compiled annually by CBRE, the largest international real estate consultancy and services firm. For the preparation of the Barometer, CBRE has surveyed the 100 main experts in the sector in our country.

This indicator is particularly important because it is the first time since the outbreak of the crisis that experts in the sector forecast an overall increase in prices in the Spanish residential market. That, together with other data, is evidence of the recovery in the housing market. In fact, 56% of the experts surveyed believe that the absorption of housing will gradually increase and half of them think that prime yields will grow in the residential sector.

Similarly, after property developers experienced a revival in 2016, 36% of those surveyed consider that most opportunities will be found in renovations within the residential segment in 2017, followed by new build homes, which means that the number of cranes should continue to follow the rising path that has already begun.

The awakening of property developers and real estate companies

Almost 60% of the experts consulted forecast that private investors and family offices will be more active in 2017 than last year, followed by core plus funds (according to 44%) and institutional investors (30%). Moreover, 58% of the directors in the sector think that opportunistic investors will decrease their activity in the market in 2017, an important change compared to recent years.

Nevertheless, the most striking conclusion is the perception that the people surveyed have of the role that property developers and real estate companies will play this year. In fact, 32.2% of those surveyed think that property developers will play a key role, compared with 6.6% who thought the same last year. Similarly, 44.4% (compared with 26.3% last year) think that their role will increase although in a less marked way.

Meanwhile, in terms of other players, the Socimis are expected to continue to play a key role according to one out of three experts. International investors will also be significant players in 2017, according to 31.5% and finally, domestic investors will remain stable with respect to last year or may even slightly increase their presence according to the vast majority.

Adolfo Ramírez-Escudero, President of CBRE Spain, added that “these forecasts seem to show a continuous line with respect to 2016, a year in which, according to our data, more than 40% of the €13,850 million invested in the real estate sector in our country came from overseas and when Socimis accounted for around 40% of the total capital invested”.

Offices will continue to attract most attention in the market

Like in the previous two years, the office sector will continue to be the most attractive in 2017. Whilst last year, 32% of those surveyed focused their real estate activity in Spain on that segment, this year 35% expect to do so, followed by 19% who are committed to the residential sector. Moreover, interest in the industrial-logistics sector has increased, up from 12% last year to 16% this year. (…).

Original story: El Mundo

Translation: Carmel Drake

CBRE: RE Inv’t In 2017 Will Exceed €13,600M

16 January 2017 – Cinco Días

Merlin’s purchase of Torre Agbar in Barcelona and the agreement signed between the Baraka group and the chain Riu to open a hotel in Edificio España in Madrid, both announced last Thursday, are major real estate operations that are not only defining the start to 2017, they are also marking the sector’s entry into a new cycle. That is one of the conclusions of the Real Estate Trend Barometer compiled by CBRE and published on Friday, which calculates that non-residential real estate investment in 2017 will exceed the figure recorded in 2016 (€13,600 million).

The reasons given by the consultancy firm for this optimism include the economic recovery and the political stability following the formation of the Government. Nevertheless, it alerts that there are also risks for the sector from the volatility on the international stage and specifically due to Brexit. “There is no reason to think that 2017 will be worse than 2016”, said Adolfo Ramirez-Escudero, President at CBRE, who forecasts a “very active” investment market this year. That situation results from improvements in rental income for all assets: offices, retail, residential and logistics.

In this sense, the office market offers the greatest possibilities. Although in 2016, the amount of new space leased decreased (with only three operations exceeding 10,000 m2, compared with nine in 2015), CBRE considers that it was the political uncertainty that caused that downturn. Now that that uncertainty has been resolved, the operations that were not signed last year will be completed instead in 2017.

The logistics segment occupies second place in terms of the opportunities it offers investors, given the strength of ecommerce and the needs of companies in the sector such as Amazon. Next comes the hotel sector, where the specialist consultancy firm Irea forecasts investment of €2,000 million over the next year. In this context, the residential market also stands out and CBRE expects to see a recovery there for the first time since the crisis. In fact, it predicts that demand for new homes will increase by 180,000 units between 2010 and 2025. (…).

This improvement in residential housing will force real estate developers to play an important role. (…). That will be the case, for example, of the new real estate companies created from scratch by international funds, including Dospuntos (owned by Värde Partners) and Neinor Homes (owned by the fund Lone Star).

In terms of investor profile, family offices and private investors will gain weight compared to last year, Socimis will continue to play an important role for another year. Value added funds (which invest in renovations) and institutional entities (such as insurance companies) will also be key players. Nevertheless, opportunistic investors – those who look for bargains – who were very active in the depressed market of 2014 and 2015, will now exit the arena. According to Ramírez-Escudero, that shows that the market is now more mature. (…).

Original story: Cinco Días (by Álvaro Bayón)

Translation: Carmel Drake

Which Players Will Shape The RE Sector In 2017?

5 December 2016 – Expansión

The end of 2016 will mark not only a new record in terms of real estate investment in Spain, but also the start of a new phase in the sector, after three years of recovery.

“In mid-2013, funds like Blackstone started to close operations, at a time when the market was completely paralysed. That prompted a magnet effect, which, together with the creation of Socimis and the reorganisation of the banking sector, launched the recovery of the sector”, said Adolfo Ramírez-Escudero, President of CBRE.

Thus, after closing last year with an investment volume of €12,884 million, the expectation is that the figure will reach €13,900 million by year end 2016. “We may reach record investment figures by year end, as new property owners, with a more institutional profile, enter the market, such as German investment funds, insurance companies, etc.”, he said.

The investment figure may be maintained next year if corporate operations continue, say sources at the consultancy firm. “We are living in a different Spain, with GDP growth of 3.2% this year and forecast GDP growth of 2.5% next year. That has a direct correlation with employment and, therefore, with real estate”, said Ramírez-Escudero.

For this new phase, one of the most important players will be the large Socimis, which have continued to close operations this year, but in a more measured way as they have been more focused on managing their properties; as well as German funds, such as Invesco Real Estate and the real estate division of Deutsche Bank.

Nevertheless, these more risk-averse investors will share the stage with another kind of player in the Spanish real estate sector in 2017. “We are pretty convinced that there is going to be a new property developer cycle, given that the real estate companies have now been established, with new capital. Next year, the property developers will be building new products”, said the Head of CBRE.

Residential segment

These new players will include Neinor Homes. The real estate company, created by the fund LoneStar with the former subsidiary of Kutxabank, has become a key player in the property development sector, with projects underway across Spain. In 2017, the company led by Juan Velayos will debut on the stock market, whereby restoring the profile of property developers, such as Martinsa Fadesa and Reyal Urbis, which fell from grace following the burst of the bubble.

Another player in the residential sector will be Avantespacia. The new real estate company, in which Inveravante (Manuel Jove’s company) owns a 70% stake and Anida (BBVA’s real estate arm) owns a 30% stake, will promote almost one thousand homes during its first phase of development. Its first project in Málaga, with 135 properties, is already being sold, whilst in Madrid, the new company is preparing a development in the Francisco Silvela area.

But development will not only be happening in the residential segment, major projects are also planned for the office and shopping centre segments. In the former, Merlin Properties is expected to play an important role. Spain’s largest Socimi is currently working on the development of an office building in the Isla Chamartín area, in the north east of Madrid.

In addition, it has just completed the purchase of the Adequa business park, a complex that comprises four office buildings and a shopping area, with space for the construction of a 24-storey skyscraper, with a total surface area of 29,000 m2.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

CBRE: RE Inv’t Amounted To €6,191M In YTD Sept 2016

3 October 2016 – Expansión

After two years of record breaking figures, the Spanish real estate sector is heading into the final stretch of the year with more modest forecasts. According to a report prepared by the real estate consultancy CBRE, investors spent €6,191 million buying real estate assets during the first nine months of 2016. That figure represents a 21% decrease compared to last year and is 11% lower than the level recorded during the same period in 2014.

Nevertheless, the amount has been very well received in the sector, given that the last two years have been regarded as “exceptional”. “The trend is still very strong, investors are still putting their faith in the Spanish real estate sector, given the lack of other types of alternative investment options and because real estate in the rest of Europe is very expensive”, said Lola Martínez, Director of Research at CBRE.

This optimism is reflected in the forecasts for the year end close, which are expected to amount to between €8,500 million and €9,000 million. “If we exclude the value of Metrovacesa’s assets to be included in the upcoming merger with Merlin, the year will close in line with the forecasts, thanks to several large-scale operations that are expected to be signed during the last quarter”, said sources at the consultancy firm.

Operations in the pipeline

In this sense, they highlighted Amancio Ortega’s purchase of Torre Cepsa on Friday for €490 million; the sale of the Adequa business park in Las Tablas (Madrid), which the Socimi Merlin will acquire in December for €380 million; and the sale of Edificio España, which the Murcian group Baraka, led by Trinitario Casanova, is due to sign on 15 October, for around €272 million.

Alongside them, experts expect El Corte Inglés to close the sale of its logistics portfolio for between €250 million and €300 million and for Gas Natural to sell several corporate buildings and remain as the tenant (in an operation known as sale & leaseback) for another €200 million.

These five operations alone amount to more than €1,500 million. “If we add up only the transactions that have already been announced, then we reach the forecast figure; and other deals may come up – there is always activity during the final quarter of the year”, said Martínez.

By type of property, commercial assets have taken over the number 1 spot from offices, which traditionally accounted for most of the investment in Spain. “The sales of Adequa and Torre Cepsa mean that the office market is going to make a come back. Nevertheless, we have just had two years of madness, with the Socimis proving themselves to be particularly active in 2015; now, there are fewer products, and prices are not as attractive for the experts”.

In the case of shopping centres, forecast indicate a slightly lower volume than recorded in 2015, despite the signing of major operations such as the purchase of Diagonal Mar in Barcelona, for around €500 million by Deutsche Bank and the acquisition by the Socimi Lar of Gran Vía de Vigo for €141 million.

In the case of the logistics business, “until the first half of the year, it was the best performing segment compared with 2015, but, it lost strength to the commercial segment during the third quarter. Nevertheless, operations such as the sale by El Corte Inglés will help it recover”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

RE In 2016: Office Bubble & Housing Propped Up By Banks

14 December 2015 – El Confidencial

With forecasts that: economic growth will range between 2.5% and 3% (compared with the Euro zone average of 1.5%); interest rates will continue at their historical lows for the foreseeable future; alternative assets will generate minimal yields; and there will be a strong correction in prices following the burst of the bubble, the Spanish real estate market has all of the ingredients to make it the star investment next year and the socimi boom is there to prove it. But the experts warn that the market is being split in two, with some parts already returning to their pre-bubble levels, and others no longer declining in an artificial way, but which may continue to decrease before increasing again.

The area of the market where the bubble signs are the greatest is the office segment, which the Anglo-saxons called “commercial real estate”. In this market, there are already segments that are situated at bubble levels in Spain”, says Ramón Zurutuza, Investment Director at the fund Gruss Capital. “Prices of €9,000/m2 and €10,000/m2 on the Castellana are almost the norm. Where will it end? There are already “mini-bubbles” in certain segments of the market”, he adds. The recent sale of Torre Espacio by Grupo Villar Mir at these prices is the paradigm of this trend.

Nevertheless, beyond these specific examples of excess, the office market is the segment that domestic and international investors like the most given that, specifically, these operations show that there is significant demand, willing to pay high prices for the best assets and that they may offer significant returns to investors. That is what the managing agent of Santander thinks; it maintains that “in the office market, we see potential for a recovery in rental prices”, according to its Director of European Variable Income, José Antonio Montero.

Santander: the residential sector is being propped up by the banks

Nevertheless, this firm is very reluctant to recommend investments in other segments, especially in the residential sector. And it is there that it makes a striking warning: “There is no end-demand in the residential sector, and the demand that does exist is the result of the (favourable) financing conditions being offered by financial entities, in other words, the ease with which loans are being granted”. This means that it is the banks themselves that are sustaining this market by granting cheap mortgages, but there is no real end-demand yet.

There is no unanimous consensus about this market, but the majority of the experts agree that it is too soon to be investing in it, given that there is no sign of an imminent recovery in prices. In fact, some of the specialist firms maintain that the market has not finished its adjustment and needs to undergo a new period of price decreases, given that end buyers are still asking for discounts from sellers.

In this way, the financing facilities being granted by the entities to purchase their own properties are supplementing that additional discount, which is what lies behind Santander’s warning. Something that, on the other hand, was also a sign of the real estate bubble.

Socimis are in favour, but investments should be made with caution

In any case, the market consensus recommends investment in the sector, with the Socimis as the preferred vehicle, rather than listing on the stock exchange. In fact, it is highly likely that the Ibex Committee will decide to include the largest Socimi, Merlin, in its selective index for the Spanish market this week. However, not all of these companies are the same and investors should be taking into account the assets and business model of each Socimi when it comes to choosing one.

Thus, Zurutuza advises that investors choose Socimis that own assets such as hotels and offices with added value, those that are of higher quality and lower risk. He also recommends paying attention to corporate governance – the separation of the chairman and CEO, a strong board that controls operations, etc. – and taking care with those companies that are raising capital to invest in assets that are no longer cheap.

Original story: El Confidencial (by Eduardo Segovia)

Translation: Carmel Drake