PwC Forecasts Record RE Inv’t in Spain This Year

17 May 2018 – Expansión

The real estate market in Spain is striding towards a new investment record. That is according to the partner responsible for this area at the consultancy firm PwC, Rafael Bou, speaking yesterday at the presentation of a report about trends in the real estate market in Europe – he highlighted that the best international scenario favours the arrival of new projects.

Bou affirmed that there is “widespread optimism” amongst the main players in the sector. “Even 2017, with Brexit and Trump, was a year of record investment, and so 2018 ought to be even better, given that we do not have any of that”, he said. In this sense, he also indicated that there is greater political stability in Europe following the elections in France and Germany,

Another factor that will favour the achievement of this investment record is that the European Central Bank (ECB) is going to maintain interest rates low. Bou confirmed that the uncertainty hanging over the sector is not knowing when the current expansive cycle will end; he put a date on the horizon. “Next year, the uncertainty in this regard may increase with the appointment of a new Chairman of the ECB”.

Madrid, the fifth most attractive city

PwC’s survey, compiled in collaboration with the Urban Land Institute, places Madrid as the fifth-ranked European city for conducting real estate business. If we look at the small print, the Spanish capital is ranked in sixth place in terms of the development of projects and in fifth place for the capture of investment.

The research confirms that significant growth is expected in the capital’s office rentals. “Compared to other European capitals to the north, the growth in rental prices has been restricted by the setback that the Spanish economy suffered following the global financial crisis”, he said. PwC highlights the evolution of the retail and hotel sectors, and the repositioning of offices. Madrid has risen four places in the ranking with respect to last year.

Barcelona, which has risen by five places, is now ranked in eleventh place overall. The Catalan city was ranked in thirteenth place in terms of investment and in ninth place for the development of real estate projects.

The report indicates that Barcelona is one of the cities that could most benefit as a result of Brexit, although it warns of the dangers of secessionism. The analysis highlights that the retail, office and residential sectors are currently at a critical point. So too is logistics. “Boosted by demand from e-commerce companies, investors and property developers are buying logistics warehouses and developing new spaces in Barcelona in a speculative way, for the first time since the global economic crisis”, according to the report. “Some people are now talking about a price bubble in the logistics sector in light of the boom that it is experiencing”, added Bou.

The 800 surveys that have been used to compile the study were conducted prior to 1 October 2017, and so they do not reflect the impact on the real estate sector of the political crisis resulting from the Cataluña-independence process. “Having overcome the initial shock, investment has been recovering gradually”, explained Bou. Most overseas investors have returned. “Some people have decided not to invest, but others saw an opportunity in terms of prices and competition and came back quickly”, he said.

Would Barcelona and Madrid have occupied similar positions in the ranking if the surveys had been carried out after 1-O (1 October 2017)? Bou highlighted that Madrid is always ranked higher than the Catalan capital because it is a larger city.

Original story: Expansión (by Gabriel Trindade)

Translation: Carmel Drake

PwC: Spain’s RE Sector Retains Appeal As World Uncertainty Intensifies

26 January 2017 – Cinco Días

According to the findings of the Real Estate Market Trends in Europe 2017 report, prepared by PwC and the Urban Land Institute, the real estate market is currently preparing itself to face a 2017 full of geopolitical uncertainties, just like it had to last year when Spain had an acting Government for more than 10 months. The RE report has been compiled on the basis of a survey of 781 of the main players operating in the sector.

In this way, the year that has just begun is probably full of more uncertainties across more countries than ever before (Brexit and up-coming elections in France, Germany and The Netherlands, as well as potential repercussions from the new policies of Donald Trump in the USA) and in the face of such situations, investors tend to react with caution.

In the real estate sector, experts forecast that the market will continue to evolve in a positive way because it will remain attractive thanks to the relationship that exists between risk and return. Within Europe, Spain stands out amongst the major markets thanks to its attractive prices and the potential it has across many segments, such as the hotel sector, residential segments (including halls of residence for students, nursing homes for the elderly and the health sector) and offices for shared services.

In this way, the experts that participated in the preparation of this study agreed that whilst the returns offered by the real estate sector in the main countries in Europe will grow at a slower rate because this business is starting to stabilise, Spain will continue to be one of the most attractive destinations.

In terms of the potential effect of Brexit, most investors agree that its impact is going to be limited to the British real estate sector and will not have a significant impact on property-related investments in other EU countries. What’s more, 76% of those surveyed said that, in their opinion, such investments will be maintained or may even increase. Nevertheless, the expectations in terms of returns from the real estate sector as a whole across Europe are more moderate this year following several years of extraordinary growth.

Moreover, 35% of those surveyed expect to receive lower returns on their assets over the next 12 months and 53% recognise that it will be very hard to improve upon the returns achieved last year. Another aspect described in this report is that the European market in general and the Spanish market in particular is characterised by a scarcity of prime or premium assets and the feeling is, according to 58% of those surveyed, that those assets that are available, are starting to become over-valued. In this environment, “the importance of asset management intensifies as it is the key element for managing risk and return”, explained Rafael Bou, Partner responsible for Real Estate at PwC. (…).

Looking ahead to the future, 91% of those surveyed said that technology “is going to change” the way we use real estate assets. The most important trends between now and 2030 relate to: the boom of the collaborative economy, robotisation, teleworking, self-driving cars and new buying habits.

According to the report, Berlin leads the ranking of European cities with the best investment prospects for the second year in a row. Madrid and Barcelona occupy 9th and 16th positions, respectively, given the “strong outlook for rents and the improvement in the country’s overall situation”.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Land Shortages Curb Investors’ Return To RE Development

2 March 2016 – Expansión

CBRE, the Urban Land Institute and Esade gathered together representatives from several real estate groups yesterday in Barcelona; they all agreed about the lack of assets for sale in the market. Benson Elliot, Colonial, Merlin Properties, Vía Célere and Unibail Rodamco have suffered in the last two years from the avalanche of investors that have set their sights on Spanish real estate and have exacerbated the lack of assets on the market. The CEO of Unibail Rodamco in Spain, Simon Orchard, said that “we are forced to develop, because the type of product that is in demand does not exist”. The Director of Merlin Properties, Luis Lázaro agreed with him, “no warehouses have been constructed in Madrid for ten years, but the demand is there, which is leading us to construct turn-key projects”.

The CEO of Colonial, Carmina Ganyet, added that “the lack of quality products does not only relate to the location of buildings, it also manifests itself in terms of their features”, and as such, the group allocates around 20% of its investment to new construction projects, which also offer much higher returns, of 10% and 15%. The Head of Benson Elliott in Spain, Gregg Gilbert, said that his fund is looking for “this kind of return on all of its projects”. And the founder of Vía Célere, Juan Antonio Gómez Pintado, added that the biggest problem is the lack of land and “the government is lagging behind in this regard”.

Original story: Expansión (by M. A.)

Translation: Carmel Drake