Property investors focus on Spain for 2021: Over half plan to buy more this year

DESPITE the pandemic's having caused a slowdown in personal property purchases, investors are keen to keep buying and plan to expand their portfolios this year, in both residential and commercial buildings.

Although 2020 was a disappointing year for the property industry as a whole, the back end of the year showed strong signs of recovery – new builds, in particular, bounced back, with sales and purchases rising by over 4% in the final quarter of 2020, compared with figures from the same three months in 2019.

Recent research shows 55% of property investors across Europe intend to buy in Spain in 2021, which is expected to translate to a growth in this type of home or commercial premises purchase in the country of between 10% and 20% based upon 2020 figures.

Mikel Marco-Gardoqui, chief executive and head of capital markets at CBRE Spain – which commissioned the EMEA Investor Survey 2021 – said there is 'cause for a certain level of optimism' in the property industry, partly fuelled by the vaccine roll-out across the continent.

Investors' approaches in Spain this year are fairly diversified, says Marco-Gardoqui, and the EMEA Investor Survey has asked them about the nature of their buying plans for the first time – around a third are looking at value-added strategies, whilst 26% are expecting to opt for core-plus.

They have mostly stated that they intend to focus heavily on ESG (environmental, social and governance) criteria this year, and three-quarters of investors looking to buy in Spain say they have already applied these practices.

The survey says 56% of them are particularly keen to attract and retain solvent tenants, and to work towards growth in income from rent across the board by expanding their portfolio of homes and business premises to let, whilst renovations and resales are of 'serious interest' to at least 50%.

Pressure on landlords to keep home rental prices affordable, especially in large cities, could mean residential property investors who are able to undercut market rates for tenants will find the houses and apartments they buy in high demand.

Types of property that attract investors to Spain in 2021

In spite of the sharp rise in home-working forced upon most countries by the pandemic, sales and purchases of office blocks continue to be one of the favourite areas for investment, with 52% saying this is their preferred option – and which Marco-Gardoqui says is 'very positive for the long-term market' for high-quality commercial premises. 

Multi-family property, such as apartment blocks or complete urbanisations of several villas, are the second-most popular type of investment in Spain for 2021, with 14% saying this is their number one option, and the same proportion of investors said they would choose to focus on industrial and logistical property.

Premium office buildings, multi-family residential property and industrial or logistical buildings are the type where 'investors are not expecting discounted prices', says Marco-Gardoqui, or, if they do, they will not be looking for serious bargains – only up to around 10% below market price at most.

For shopping centres, hotel complexes and holiday resort-type structures, investors would typically be seeking to pay prices discounted by at least 30%, says CBRE Spain's head of research, Lola Martínez Brioso.

Online shopping boosts demand for logistical warehouses

Overall, now is said to be a good time to invest in office and residential property, but not so much for retail, according to MVGM, which has noticed a sharp rise in interest in 'build-to-rent' schemes, particularly among European investors seeking to break into the Spanish market.

MVGM says the newly-fashionable logistics centre investment market 'still has room to grow' and has not peaked yet, since the pandemic has 'completely transformed' the sector: Companies now need more space for handling a rising demand in online shopping – storage, delivery and packaging centres – and the growth in 'e-commerce' has created new jobs and a need for premises, such as data centre offices.

This is one of the many aspects where the pandemic has 'totally changed the face' of the property market, both commercial and residential, says MVGM – the company recalls how last year's lockdown led to a sudden surge in enquiries about homes with gardens, terraces, pools, and generally more outside space.

As for location, investors who already have a presence in Spain would choose Madrid above any other major city in Europe – 28% said the Spanish capital was their first choice - whilst second choice was Amsterdam, with 13% saying they were focusing on the largest Dutch metropolitan area.

Europe-wide, London, Berlin, Frankfurt, Paris, Munich and Hamburg also proved popular.