JLL: Foreign Investment in Catalan Real Estate Rose by 137% in 2018

15 June 2019 – La Vanguardia

According to data published by the real estate consultancy JLL, overseas investment in the Catalan real estate sector rose by 137% during 2018, despite the fact that total investment fell from €1.13 billion in 2017 to €995 million in 2018.

In fact, domestic investment plummeted by 85% to €363 million from €859 million, but almost all of that decrease was offset by the arrival of funds from overseas. Of those, investment funds deposited 57% YoY more in 2018 (€574 million) and Socimis invested 47% YoY more (€326 million).

Having overcome the political uncertainty seen in 2017, international investors showed their commitment to Cataluña in general and Barcelona in particular, not least because the city has been declared as one of the world’s influencer cities by JLL.

In the business context, the city is particularly attractive for investment in the office, logistics and commercial sectors, ranking in first place in all 3 markets when compared with its European counterparts.

Specifically, the Catalan capital’s offices generate yields of 3.75%, whereby outperforming Milan (3.6%), London, Madrid and Stockholm (all 3.5%). Its logistics assets generate returns of 5.10%, compared with 5% in Madrid, and its shops in central locations generated yields of 3.25% in Q1 2019, compared with Madrid (3.15%) and Paris (2.75%).

All of this is welcome news for the region that has been hit hard by the political uncertainty of recent years.

Original story: La Vanguardia (by Pilar Blázquez)

Translation/Summary: Carmel Drake

Knight Frank: Investment in Offices Amounted to €1.3bn in Q1 2019

7 May 2019 – Eje Prime

According to data compiled by Knight Frank, investment in the office sector amounted to €1.3 billion during the first quarter of 2019.

By type of investor, in Madrid, 45% of buyers were funds, 25% were institutions, 18% were real estate companies, 9% were corporates and 3% were Socimis. Meanwhile, in Barcelona, 64% of purchasers were investment funds, 19% were corporates, 13% were private investors and 4% were real estate companies.

Yields in the prime areas remained stable at around 3.75% in Madrid and 4% in Barcelona, which are in line with previous years and similar to those observed in other major European cities.

The average prime rent in Madrid also remained stable at around €30.50/m2/month, with prices rising to €38/m2/month in some of the most sought-after spaces in the CBD. In total, 124,000 m2 of office space was leased in the capital during Q1 2019, up by 4% YoY.

Original story: Eje Prime 

Translation/Summary: Carmel Drake

JLL: 47 Halls of Residence for Students are Under Construction in Spain

24 April 2019 – El Confidencial

The student hall sector is on a roll. With almost fifty projects underway (47) and 17,500 new beds to be added to the existing portfolio by 2022, experts forecast total investment of €1 billion in the sector over the next 4 years.

In 2017, investment in the sector amounted to €560 million, ten times higher than the figure recorded in 2016 (€50 million). Last year, the number dropped to €141 million, but according to Nick Wride, Director of Living and Alternatives at JLL Spain, that was “due to a lack of residences in operation available for sale”. Moreover, it was still the highest figure ever recorded excluding corporate transactions – the data in 2017 was impacted by the completion of 2 large corporate deals.

Last year, 18 operations were closed involving the purchase of land or buildings for conversion. 55% of the investment was undertaken in Madrid and Barcelona, with the remaining 45% made in the main regional cities, such as Málaga, Sevilla and Granada. The operators behind the new beds under construction include Nexo, Resa, WPCarey, Invesco, CBRE GI, Axa and GSA, amongst others.

Student halls offer some of the highest yields in the sector: 5.5% in the secondary cities and 5% in Madrid and Barcelona, in line with those generated by nursing homes (5.5%) and logistics assets (5%), but well above those seen in other segments such as retail premises (3.15%), offices (3.50%), residential (3.50%) and hotels (4%).

The reason is the enormous demand that exists for these types of assets. In Spain, almost half a million students need accommodation, but there are currently just 91,000 student beds. The gap is clear, and growing, boosted by an increase in the number of domestic and international students travelling away from home to study. Those not finding student accommodation have to rent in the private market – an informal, heterogeneous, inflexible and potentially expensive option (particularly in Madrid and Barcelona where prices are soaring).

All this makes the market for student accommodation extremely attractive.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

JLL: Prime Retail Rents Grew During Q1 2019

23 April 2019 – Eje Prime

The rental prices of prime premises are growing in Spain. In 2018, the rental prices of retail parks rose by 5.4%, whilst high street rents increased by 5% and shopping centre rents by 2.6%.

According to a study by JLL, the growth in the rents of prime premises in Spain is forecast to be amongst the highest in Europe over the next five years, albeit more moderate than in previous years.

Investment in retail assets amounted to €208 million during Q1 2019, with Corpfin’s acquisition of the retail space in Edificio España (Madrid) accounting for the lion’s share (€160 million). Yields remained stable during the quarter.

Original story: Eje Prime

Translation/Summary: Carmel Drake

CBRE: Logistics Investment in Valencia Soared by 90% in 2018 to €80M

10 April 2019 – Las Provincias

According to the real estate consultancy CBRE, logistics investment in the province of Valencia rose by 90% YoY in 2018 to €80 million. Nevertheless, it warned that speculative projects have also increased, namely those that are built without a prior contract or guarantee in place for their subsequent sale or rental. Having said that, the market has been readily absorbing the new properties, so far at least, given the rise in demand for logistics warehouses.

According to Javier Muñoz (pictured above, left), Head of Industrial and Logistics at CBRE in Valencia, more high-quality products need to be constructed, given that only 27% of the warehouses in the province currently comply with logistics requirements.

In terms of the type of operations completed last year, the largest deals involved turnkey projects, whilst the number of speculative projects increased. In total 22 transactions of both types were completed in 2018 compared with 10 turnkey projects in 2017. The total stock increased by 24% as a result to reach 2,832,850 m2, and the availability rate at the end of Q1 2019 was 5.9%.

Rental prices continued to rise, with prime rents reaching €4.50/m2/month, in line with those observed in other European cities such as Rome, Amsterdam and Milan. Yields on logistics assets in Valencia currently amount to 6.7% thanks to the strong performance of the sector and interest from large international and smaller local players alike.

Original story: Las Provincias (by Elísabeth Rodríguez)

Translation/Summary: Carmel Drake

BNP Paribas: Investment in the Real Estate Sector Amounted to €2.0bn in Q1 2018

1 April 2019 – Eje Prime

Investment in real estate assets amounted to €2.0 billion during the first quarter of 2019, down by 5% compared to the same period in 2018, according to data from the consultancy firm BNP Paribas Real Estate.

Investment in the office sector amounted to €900 million, accounting for 47% of the total, with prime yields remaining stable at 3.25% in Madrid and 3.5% in Barcelona.

Investment in the retail segment amounted to €410 million, where prime yields reached 3% on high street stores, 5% on shopping centres and 5.75% on retail parks.

Investment in alternative assets amounted to €305 million, with investors increasingly interested in halls of residence for students and nursing homes for the elderly.

Finally, in the logistics sector, investment amounted to €206 million, boosted by the growth in e-commerce and consumption.

By type of investor, 50% of the transacted volume proceeded from investment funds, whilst Socimis contributed 18% of the total volume.

Original story: Eje Prime 

Translation/Summary: Carmel Drake

Madrid’s Office Market in 2019: Stable Yields & Investment of €3bn

20 February 2019 – Eje Prime

Investment in offices in Madrid is on the rise. Total investment of €3 billion is forecast in the office market in the Spanish capital this year, which will see it maintain the yield for prime offices at 3.75%. In terms of office rents, a boom of 9.8% is forecast, along with a decrease in the availability rate, which is set fall from 11.6% in 2018 to 9% in 2021. Modest growth forecasts for the sector, with a lower supply of prime spaces, are going to contribute to an increase in rents.

With this data, Madrid is positioning itself amongst the capitals with the lowest yields on its luxury offices, with a figure comparable to those of Singapore (3.34%), Amsterdam (3.35%) and Paris (3%), but well below those of Moscow (8.5%) and Washington DC (6.2%), according to the Global Outlook 2019 report, compiled by Knight Frank.

In terms of the growth forecast for office rents, the Spanish capital is expected to maintain stable growth (…).

In terms of the availability rate, Madrid is forecast to decrease from 11.6% in 2018 to 9% in 2021, placing it amongst the cities with most available offices, well below Berlin, with a forecast rate of 2.2% (…). Available prime offices will also decrease, which will lead to a rise in rents. According to the study, this is the result of the recovery of the residential market, which is also sparking interest amongst investors.

One of the greatest opportunities in the sector are the coworking offices, which are transforming conventional offices into new spaces for working and incentivising employees. “Whilst some markets are reaching maturity, at the global level, we expect to see a boost to this business in 2019”, say the authors of the report.

In summary, the office market in Spain is expected to be relatively stable during the year ahead, despite global challenges (…).

Original story: Eje Prime (by Marta Casado Pla)

Translation: Carmel Drake

Knight Frank: High Street Investment Soared by 84% to €1.3bn in 2018

31 January 2019 – Eje Prime

The real estate sector has closed another year with a strong performance in the Spanish market. As we approach the end of the real estate cycle in the country, the tertiary sector is continuing to maintain high levels of investment, with growing rents and sustainable yields.

In the retail sector, the investment volume amounted to around €3.7 billion in 2018, according to data from Knight Frank. The main driver of that investment was the high street, where spending soared by 84% to €1.3 billion.

Despite that, the bulk of retail investment in Spain continued to be directed towards shopping centres, which accounted for 54% of the total last year with major operations such as the sale of the Summit portfolio, owned by Sonae Sierra in conjunction with CBRE GI, and of which 87% is now controlled by JT Real Estate.

Moreover, the consultancy firm highlights that interest has increased from investors in shopping centres and isolated retail warehouses in good locations “which allow them to manage last mile delivery points”, said the consultancy firm.

Returns have remained stable across the three segments with yields of 5.25% for retail parks, 4.25% for shopping centres and 3% for high street assets.

Despite the strong performance of the retail sector in 2018, the jewel in the Spanish real estate crown is still the logistics segment. In 2018, investment in logistics assets amounted to €1.255 billion, close to the record set in 2017 of €1.28 billion.

In the last quarter, several large operations were closed, such as Blackstone’s purchase of a portfolio of 55 assets from Neinver for €300 million.

Interest in the segment continues to generate expectations regarding the compression of yields, and so Knight Frank forecasts returns of around 5% this year.

Finally, the office sector has also maintained a robust rate of activity, after the maximums recorded in 2017 thanks to operations undertaken by the Administration. Specifically, Knight Frank estimates that 2018 closed with a gross absorption of 493,000 m2.

Following the trend set in 2017, 52% of the surface area leased was located outside of the M-30, although during the final quarter, it was the secondary centre that accounted for the bulk of the space rented, around 35%.

Prime office rents remained stable at around €30.5/m2/month, and reached maximums of €38.5/m2/month in the most sought-after areas of the business district.

Original story: Eje Prime

Translation: Carmel Drake

Is Málaga the Silicon Valley of the South? Its Offices Generate Yields of 7.25%

7 January 2019 – Eje Prime

Málaga is positioning itself as the possible Silicon Valley of the south of Spain. The second most populated city in Andalucía and the only Spanish city in the Top 10 for the best quality of life in Europe, according to Eurobarómetro, has attracted several technology giants in recent years. The interest from these companies in moving to the area and the lack of available space have driven up prime yields in the office market in Málaga to 7.25%, making it the most profitable place to own an office in Spain, according to data from CBRE.

The international consultancy highlights that Málaga is “consolidating its position as a city of reference in Spain in the development of the technology sector”. Oracle, Accenture, Microsoft, Huawei, Ericsson, Indra, Atos and Cisco, amongst others, have all opened offices in the city. The meeting point for these companies is the Andalucía Technology Park (PTA), recently included in the catalogue of European Digital Innovation Hubs, compiled by the European Commission, and which recorded a turnover of €1.9 billion in 2019, up by 8%.

In addition, the province is home to other smaller clusters, such as Málaga SmartCity and the ‘Polo de Contenidos Digitales de Málaga’, the first hub with those characteristics in Spain and which aims to accelerate projects and companies related to the digital sector.

The increase in demand for offices in the city also comes in response to the future forecasts for growth in the region. In fact, Oxford Economists names Málaga as the city where the economy is going to grow by the most in Spain over the next decade. The good connectivity of the province abroad and tourism are some of the factors driving those predictions.

In recent years, Málaga has enjoyed a facelift in recent years with improvements in its infrastructures, and the airport and port as anchors for tourism and business. In addition, the population has increased to 570,000 inhabitants in recent years and there are now more than 40,000 companies, of which 87.1% specialise in services.

These drivers have reactivated the office market, which has taken advantage of the boost in demand, on the rise since 2015. Rentals cost €17/m2/month in the city’s best buildings and the occupancy rate in the prime area exceeds 90%.

The shortage of competitive products in terms of location, finishes and facilities, has driven the increase in yields. In comparison with Madrid and Barcelona, the variation in prime yields is great, improving the yields of 3.25% and 4% that were being registered in the two major Spanish capitals at the end of the third quarter 2018.

Moreover, the office market in Málaga also generates higher yields than the market in Bilbao, although it is not far behind with average yields of 7%, as well as those in Sevilla and Palma, which do not exceed 6.75%. The yields in Valencia and Zaragoza amounted to 5.25% and 6%, respectively, in September last year (…).

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Aena Mobilises Mega-Investments in Barajas & El Prat Amounting to €4.2bn

29 November 2018 – El Confidencial

The largest property developer in Spain is not a real estate company, it is AENA, a company that does not depend on the real estate sector for its business, on the contrary. It has started a race, together with external partners, to mobilise investments worth more than €4.2 billion focused on two projects: the urban development of Barajas and El Prat, annexes of the airports in Madrid and Barcelona. Together they represent the largest real estate project in Spain, and they are very focused on logistics due to the proximity to both airport centres, but also on offices. In office space, alone, the firm wants to promote almost 1 million m2 across the two urban areas.

This contradiction that the largest property developer is not an agent of the real estate sector is due to the fact that AENA is a very large landowner. For years, all of its plots have aged as if they were wine. The airport city in Barcelona, for example, was projected more than 14 years ago. But only now has Deloitte been engaged to look for international funds to mobilise that investment and Garrigues been contracted for legal advice about the monumental project.

And it is a long-term project. In the case of Barcelona, the most advanced of the two, it plans go out 20 years. In Barajas, the proposal is twice as long, 40 years. Moreover, according to sources in the sector, of the 622 hectares of net plots in Barajas, 396 hectares are awaiting development.

Given that the blocks of land are so close to the airports of the two capitals, logistics is the fundamental basis of the proposals. According to the latest report from Jones Lang Lasalle, logistics assets are generating yields of between 6% and 7%, a high rate when interest rates are so low. In the case of Barajas, for example, the planned logistics development represents the bulk of the project, 1.2 million m2 of constructed space, which will be the largest logistics centre in Spain, with the added synergy of connecting the current airport cargo area with the so-called Corredor del Henares.

In terms of office space, the plans also involve enormous dimensions. At El Prat, 362,000 m2 of constructed space is planned, almost as much as in the whole of the 22@ district promoted to date (…). And in the case of Madrid, it is even larger. At Barajas, the volume of planned offices is triple that figure, although it will have to be constructed over four decades.

In addition, there will be hangars, commercial areas, hotels and cargo services for aeroplanes. In practice, it will be like building two new cities, one in Barajas and the other in El Prat.

The immediate plans

The closest projects are the phases that have been planned for the next five to eight years. At the airport in Barcelona, the phase that AENA has called “catalysing” spans the first five years, during which time €387 million will be invested in total to promote almost 400,000 m2 in different types of urban planning projects.

These investments will run in parallel to the airport projects that have already been approved. In this way, AENA has already committed investments amounting to €690 million in El Prat, which include a new satellite terminal (…), to be carried out over the next four years.

This phase is longer at Barajas. It will last for eight years and will involve a forecast investment of €953 million, according to the Adolfo Suárez Madrid-Barajas Real Estate Plan. During this phase, more than 500,000 m2 will be constructed (…).

Original story: El Confidencial (by Marcos Lamelas)

Translation: Carmel Drake