During the first quarter of 2016 almost 60% of Madrid’s office take up and more than 50% of deals took place outside the M-30 ring-road. This is due to the shortage of supply of quality office space in the urban area of Madrid, which has diverted the bulk of demand to the city’s periphery for the first time since 2009.

After seven consecutive years in which companies in Madrid have taken advantage of the market conditions allowing them to rent affordable office space within the M-30. This is certainly a turnaround in terms of activity.  Companies have to seek a balance between location, price and quality. The location factor has tipped the balance until now, when there is a severe lack of quality product in central Madrid. Companies are no longer as willing to pay higher prices simply for the best location. The trend for flexible working is allowing them greater opportunities to optimise their office space and focus on providing a more comfortable environment for their employees.

Benson Elliot has agreed the sale of Parc Glories, its landmark office development in the Diagonal-Glories sub-market of Barcelona, to listed Spanish property company Inmobiliaria Colonial. Following Benson Elliot's July 2015 sale of its Cornerstone development (in Poblenou) to UBS Asset Management's Global Real Estate business, the sale of Parc Glories takes the total end value of Benson Elliot's Barcelona disposals to c. €200 million over the course of 12 months.

Total investment volume into European commercial real estate in the first quarter this year was €36.8bn, 30% lower than the same period last year.

However, several European countries that Savills analysed are enjoying increasing investment activity this year. Italy (54%), Sweden (33%), Poland (15%), the Benelux (12%), and Finland (479% - due to some sizeable portfolio and retail transactions) have all performed well, proving that investor appetite is healthy for quality assets in markets with strong fundamentals. In terms of sectors, industrial has gained ground, increasing by around 19% yoy. This was driven mainly by transactions in the logistics and distribution sector in the UK, Germany, Sweden, Spain and The Netherlands, which account for more than 80% of the total activity. 

On the occasion of call of the Annual General Shareholders’ Meeting scheduled for 28 June, Colonial has submitted the proposal of agreements and the execution of an investment plan for more than €400m. These investments will be materialized in 4 different projects: 3 of them in Spain and 1 in France. In addition, part of this investment will be financed by the issuance of new Colonial shares, which will result in a capital increase of more than €260m. 

European commercial property has experienced something of a renaissance in the eyes of institutional investors, with investment volumes rocketing and even topping 2007 levels in some instances. According to Knight Frank’s latest European Quarterly Report, a total of €64.5 billion was invested in European commercial property in Q4 2015, taking volumes for the full year to €238.5 billion, a 25 percent increase on 2014.

Sometimes it seems, for an institutional investor, that adding value to a real estate portfolio is as simple as dropping capital into a noncore bucket. Unfortunately, unlike money, investment strategies cannot always be taken at face value.

Investors globally are expecting 65 basis points greater return output from their real estate portfolios in 2016 than they expected in 2015, according to the 2016 Institutional Real Estate Trends survey conducted by Kingsley Associates and Institutional Real Estate, Inc.

Two surveys, each dealing with different aspects of real estate investment in Europe, have reinforced the view that, despite a growing feeling that markets are reaching peak levels, there is unlikely to be any change soon in the high volumes of transaction activity witnessed in recent years. The reasons for the activity still stand and investors remain persuaded that European real estate will continue to give them the yields and returns that they are looking for in this low interest-rate, low-return investment environment.

The decision by institutional investors on how much of the overall portfolio to allocate to real estate, commercial and residential, is driven by a balance of quantitative analysis and qualitative judgement underpinned by bespoke long-term liabilities. The “optimal allocation” to real estate for pension funds and insurance companies — and the average allocation of the two investor types varies — is the subject of an enormous body of academic research, with literally as many answers as there are investors.

Investors from Southeast Asia are following the lead of their Chinese and Taiwanese counterparts by investing in overseas real estate markets, particularly Europe, according Robert Scholten, the Asia Pacific head of real estate finance for ING Bank.

Scholten said investors from the Philippines, Malaysia, Indonesia and Singapore are beginning to look at assets in Europe and the US as they seek to diversify their portfolios and hunt for higher yields and stable cash flows.

Hispania registered rental income of EUR30 million during the first three months of 2016, up from the EUR5 million seen in the corresponding quarter in 2015. 

In its latest review, Preqin finds that sovereign wealth funds investing in real estate in 2016 have moved away from higher risk investment strategies, and are increasingly targeting strategies with a lower risk profile.

The biggest buyer of soured real-estate debt in Europe says disposals of non-performing loans from the region’s banks and governments will continue until at least 2021.

Cerberus Capital Management LP, which acquired more bad loans in Europe than any of its peers in the past two years, expects the market to remain busy, said John Snow, the private equity company’s chairman and former U.S. Treasury secretary for President George W. Bush. 

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.  

The Spanish economy showed fresh signs of resilience in April as unemployment fell more than forecast and a gauge of activity beat expectations while the nation gears up for a June election.

Spanish alternative investment firm Meridia Capital Partners has announced the first investment of its latest real estate fund, acquiring a 42,000 sqm portfolio of nine assets.

The properties, located in metropolitan areas of Madrid and Barcelona, were purchased through Meridia III.

Large pension funds and public pension reserve funds have clearly increased their allocation to alternatives, especially the latter if they are free from investment restrictions, according to an OECD survey of nearly 100 funds.

Increases in global real estate allocations by institutional investors are set to run into trillions of US dollars, according to Fidelity International.

Minor allocation increases of between 1% and 2% in the next two to three years from European and Asian institutions alone will translate into $450bn (€397bn) of new capital targeting the asset class, according to research by the investment manager. The figure is almost as much as the total turnover in commercial real estate investment last year.

Tripping.com is expanding in Europe as the search engine for vacation rentals seeks to take advantage of an increase in tourism and triple the value of bookings flowing through its site to about $500 million this year.

This is a detailed guide about the legal insights of Commercial Real Estate investments in Spain. The information in this publication is provided for general information purposes only and may not be relied upon for any specific transaction. We do not accept any responsibility for any inaccuracy, omission or statement that might prove to be misleading. Readers are advised to seek professional advice before investing or doing business in Spain. 

Investment in commercial real estate is breaking records — surpassing pre-crisis levels in Spain. What are professional investors looking for now in the Spanish market?

“Value-added” opportunities is the short answer. With prime real estate hard to come by, investors are seeking opportunities to renovate or refurbish properties for profit.