International funds and retail fire up investment by 84% in Q3 2018

The real estate business in Spain gathered €3.750 Bn between July and September, moved by the growing interest by foreign investors and the rise of the commercial segment.

Spanish real estate is still getting capital a lot. Only in Q3, direct investment in RE assets in Spain amounted to €3.750 Bn, 84% more than the same period last year, according to the last data published by BNP Paribas Real Estate. Money keeps flowing towards the sector, especially thanks to the bet of international funds in Spanish real estate. Operations performed by these firms represent 65% of the total amount during Q3 2018. Specifically, foreign investment was led by the US, Germany and the UK. Investment funds toppled socimis as the main investors in real estate assets in Spain between July and September. As a matter of fact, this tendency is kept from 2015, the only year in which these investment firms gathered most of the business opportunities in the sector.

As David Alonso, Head of Research at BNP Paribas Real Estate points out, most of the investment funds and REDs pick “speculative operations vie the purchase of land to develop product between 12 and 24 months ahead”. This highlights the trust to mid-term of buyers for Spanish real estate. Despite the direct investment in assets is on the rise, the accumulated investment volume in 2018 reached €7.760 Bn 4.2% less that the same period last year. The consultant relates this drop with the fact that many operations are not closed due to the lack of stock for sale, due to the “high aims” of some owners.

Retail: king of investment

Retail has hoarded between July and September 31% of investment performed in Spanish real estate. The disembursed capital in commercial assets rose in this quarter to 1.140 Bn Also, that sector keeps the yields to levels around our 3% in high street, between 5% and 5.25% in the case of prime shopping malls, and 5.75% in prime commerce estates.

The largest operation of the quarter was the purchase of four shopping centers from Unibail Rodamco by the South African fund Vukile, for €490 M. The sale by El Corte Inglés of two Commercial premises in the main streets of Princesa (Madrid) and Gran Vía (Bilbao), for a close to €100 M are also a highlight. The growth paces of retail in Spain for retail in Spain predict a good end of the year for the sector. It’s estimated that considering the underway operations, an investment volume in the commercial segment of over 4 Bn in 2018, 15% more than in 2017.

Residencial, logistics and offices on the right path

The Residential market also gets a lot of interests among investors, especially among international funds, betting on the purchase of assets from the balances of financial entities and servicers. Between July and September, the investment volume in real estate reached the milestone of €980M.

Regarding the office segment, in Q3 investors have purchased 770M in this type of assets. The yield in this segment stays around 3.25% in Madrid and 3.5% in Barcelona.  As a matter of fact, it was in these large cities where the most relevant operations took place: the purchase by Blackston of the Planeta building in Barcelona for 210 M and the sale of five properties in the Avalon commercial real estate to the Barings fund. Another market that has risen up in the last month was the logistics one. The investment volume between July and September reached 475 million Euros. The excess of capital and the product shortage generated an investment pressure that turned, according to the consultant firm, in an adjustment of prime yields, being set at 5.75% at the closing of the ninth month of the year. Between the most relevant operations in the Spanish logistics in the last three months are the purchase by Blackstone of four industrial premises from Lar for 120 million, and the first operation byTritax in Spain with the purchase of a logistics center by Mango for €150 million.

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