Madrid takes first place in the ranking of property investment

The figures for real estate investment related to the first quarter of 2016 show a total volume of €2.2 billion. These figures point towards continued investor appetite following a record year in 2015, in which the figure of €11.7 billion in transactions was reached in the property sector. They also confirm the forecast that the year will close with a volume of around €8 billion. These expectations are confirmed thanks to the mood of both institutional and private investors from the United States, Germany and the UK, the main players in the first quarter of 2016. Moreover, the negative yields offered by sovereign debt and minimal interest rates should favour the intentions of investors.  

Nevertheless, the figures for the first quarter of 2016 represent a correction of the pace achieved during the previous year, where the volume for the same period in 2015 amounted to €2.85 billion. Essentially this is due to the scarcity of the supply of products for rental, driven by the high volume of acquisitions which have been performed in this market since the recovery began in 2014 and which are beginning to indicate a somewhat mature market.

The investment volume has also been affected by the reduced level of activity with regard to the acquisition of shopping centres, this representing €1.125 billion in the first quarter of 2015 alone. No significant transactions regarding offices or logistics were recorded, however there is demand for these types of assets which will come to fruition throughout the remainder of 2016.

A total of 37 deals were struck during the first three months of this year, the most notable being the sale of a portfolio of hypermarkets belonging to Eroski, acquired by the fund Invesco for €358 million (25%), the sale of the Hotel Villamagna in Madrid for around €180 million (12% of total investment) and the acquisition on the part of Blackstone of a portfolio of 4,500 residential units from Banco Sabadell. Also noteworthy was the acquisition of 23 logistics units by Neinver and Colony Capital for €87 million. Buyer activity during this period has been well balanced between institutional investors, private owners and Socimis (Spanish REITS). The latter have undertaken less acquisitions than during the same period one year ago, where their acquisition plans were still to be found in the development phase.

The most sought-after assets were retail, cornering half of the investment at €800 million, followed by hotels, amounting to €300 million and, in third place, offices, with €219 million invested. Within this context, the strength of occupancy is increasing in all sectors, especially with regard to offices and logistics units. As a result, vacancy rates will continue to fall, thus improving the performance of property investment.

Madrid, the area with greatest investor activity
Madrid remains at the head of property investment, with a total of 41% of the share of activity, whereas Catalonia has lost the second spot to the Basque Country and the Canary Islands. There is a proliferation of alternative locations which are beginning to come to the fore in terms of property investment. Nevertheless, Barcelona remains attractive and investors would clearly acquire well positioned, prime assets on offer in this market.

The trend towards yield compression remains firm and offices in prime zones of Madrid are reporting yields of 4%, a quarter of a percentage point less than at the close of 2015. The same figures for Barcelona are hovering between 4.25% and 4.5%, also under downward pressure.

With these figures, rents for all types of properties and locations will continue to see moderate recovery given that continued growth in consumer spending is anticipated. Despite tensions in the debt market and the political outlook, the upward momentum of the Spanish economy is being felt, as is employment generation.