4 July 2017 – El Confidencial
Investor appetite for the Spanish real estate sector is continuing to rise and our country is getting ready to close yet another historical year in terms of investment volumes. For the time being, the first half of the year has seen record investment figures, with an investment volume of €6,100 million during the six months to June, up by 38% compared to the same period last year, according to data from CBRE.
There are five mega-operations behind this result, which have determined the strong start to the year: the purchase of the Madrid Xanadú shopping centre by Intu Properties, which paid €530 million for the property; the acquisition of the Buffalo portfolio, worth €300 million, by Blackstone; the sale of Edificio España to Riu for €272 million; the sale by GreenOak of the Acero logistics portfolio to GIC for €243.3 million; and the purchase of the Nueva Condomina shopping centre by Klépierre for €233 million.
And all indications are that between now and Christmas, there will be another similar run of operations, an expectation that allows experts to predict that investment will exceed the €10,000 million threshold for the third year in a row.
Some of the operations called to collaborate in the record-breaking figures are on course, such as Hispania’s sale of its office portfolio, for which the Socimi has received half a dozen offers for around €500 million; the sale of Parque Corredor by Sareb; and several portfolios that the banks are bringing onto the market; whilst others are well underway, such as the purchase of nine retail parks and properties that the South African fund Vukile Property has just agreed – it will acquire a portfolio of retail properties from the joint venture between Redevco and Ares for €193 million.
More appetite, lower returns
The main driver of investment during the first half of the year was the retail segment, which accounted for one-third of total investment (€1,900 million), boosted by the recovery in consumption. The other side of the coin corresponded to the residential segment, which saw a decrease of 20% with respect to the first half of last year, whereas the hotel sector continued to benefit from the boom in tourism and accounted for 29% of the total (€1,750 million).
Nevertheless, all of this buyer appetite means that returns are now at minimum levels…and they are still falling. The logistics and hotel sectors are the only markets capable of offering attractive yields, with average returns of 5.85% and 5.75%, respectively, although those numbers fall well below the figures achieved just two years ago (7% and 8%).
Yields on shopping centres have decreased to 4.25%; office returns have fallen to 4%, whilst the profitability of high-street premises barely reaches 3.5%. Despite this narrowing, international funds, which have been backing our country for a while and other new funds, which are just arriving, have Spain at the centre of their targets and are starring in these record figures.
In this way, whilst last year, the Socimis were the undisputable investment leaders, accounting for 43% of the total, this year, they represent just 14%; meanwhile, investment funds account for 34% of the total, with the US, British and French funds leading the ranking of overseas investors.
Original story: El Confidencial (by Ruth Ugalde)
Translation: Carmel Drake