by Juan Castaño, Head of Real Estate & Hospitality for Spain and Portugal, Natixis
The Spanish real estate sector has enjoyed strong and growing momentum over the past five years, driven by an improved economic outlook. The 2008 financial crisis pushed asset prices down severely, creating investment opportunities and attractive yields when the economy recovered.
A bright outlook that should stand the test of time
In our view this momentum will stand the test of time. On the one hand, large Spanish banks have cleaned up their balance sheets and confidence in the real estate sector has recovered: controls have increased considerably both in Europe and in Spain, with banks now diligently monitoring end customers’ solvency. On the other hand, unlike in previous crises, the recovery in real estate in Spain was driven by an economic improvement and not the other way around. If there were a market correction, it would be more due to Spanish and international macroeconomic factors than inherent features of the local real estate market.
Medium-sized towns are particularly attractive
In the residential sector, Madrid and Barcelona are the focus for investment and continue to offer attractive opportunities, although prices have already recovered considerably since the crisis. Medium-sized towns of more than 200,000 inhabitants that were hard hit during the financial crisis are particularly attractive, while small towns are enjoying increased visitor numbers and carry higher profitability, but also greater risk.
Growth in the office sector, slow down in hospitality
The office sector is also growing, buoyed by new trends in working spaces. Investment in the hotel sector hit a record in 2018, exceeding €5bn, and the country now ranks number two behind the UK. Tourism should continue to develop as tourists seek out safe destinations but investment is set to slow, particularly in properties that are not so well located.
Exponential growth in the logistic sector
Meanwhile in the shopping mall sector, it would be wise to focus on large malls, as smaller centers are under threat from e-commerce. The logistics sector is underpinned by digital trends and changing spending habits, with exponential growth in this area over the past four years, particularly for well-located logistics centers.