Spain is the country in the south of Europe which has most advanced in its economic recovery, while Madrid has been confirmed as the “fourth best city in continental Europe in which to invest. Madrid property investment is the trend”
The ‘Real Estate Market Trends in Europe 2016’ report, produced by PwC and Urban Land Institute, makes it clear that despite changes in local government and the uncertainty around Edificio España’s mega project, the city continues its love affair with foreign investors.
The European real estate sector’s principal actors only put Berlin, Hamburg and Dublin ahead of Madrid as markets to watch out for. The Spanish capital’s potential was proven after it mobilised more than 5 billion Euros in real estate investments between October 2014 and September 2015.
“An increasing number of people are looking to invest in Madrid, despite the fact that it is a small market,” says the PwC report, which states that “the recovery has been so good that German investors, pension and insurance funds, and sovereign wealth funds are considering a city they wouldn’t have wasted a minute looking at previously.”
Among Spanish cities, Barcelona also figures as one of the most attractive cities for 2016, in twelfth place. Of course, investors and experts consulted by PwC did warn of an “overheating” in both cities’ prices and warn of difficulties in finding quality assets: “in the best buildings the vacancy rate is less than 2.5 per cent.”
Marketing and diversification
Prior to the shortage of high-quality property assets, nearly 80 per cent of those surveyed by the consultancy firm confirmed that marketing and development were the best alternatives for achieving profitable investments. The surge in real estate marketing will be accompanied, in turn, by greater visibility for other sectors – beyond businesses and offices – such as medicine and health, hotels, student accommodations, data centres or distribution centres.
These alternative sectors – which 75 per cent of those surveyed considered good business opportunities – are already feeling the favourable effects of large-scale, global phenomena, such as urbanisation, the ageing of the population and advance in technology.
This trend in marketing and diversification in alternative assets will be strengthened by a continued influx of assets favoured by the continued scenario of low-interest rates in Europe and the entrance of an ever-growing number of Asian and American investors.
Times are changing
The document covers a series of substantive changes happening in the real estate business, which have to do with how the industry is seeking to adapt itself to clients’ needs and to disruptive forces, such as technology, demography, social changes and rapid urbanisation. This has translated, for example, to changes in the following areas:
1. A market of cities, and not countries. Investors are concentrating more on cities than countries and are investing in alternative sectors, which are more geared towards capturing improvements in profits.
2. Returning to city centres. The most advanced developers and investors are innovating in order to try to get ahead of occupancy demand, which changes rapidly. Urbanisation is driving demand in city centres, with lower interest in the suburbs and long daily commutes.
3. Space, in terms of productivity. Due to technology, we find ourselves with a more informed clientele, who consider their living spaces, not just in terms of cost and contract terms, but rather in terms of the productivity that the spaces offers them, particularly in an environment of rapid change in the labour force, in the way people work, and in the business and social customs of the population.