SPAIN – The return of German institutional investors is helping to revive the "dead" Spanish real estate market, according to industry experts.

The Madrid office market is "beginning to awaken from its slumber" as German institutions return to compete with local investors, according to a report by Savills.

Transaction volumes rose to €155m in the second quarter of 2013, triple the €45m traded in Q2 2012, while the share of non-domestic investors rose to 41%, its highest level in five years.

Savills and others see recent acquisitions in Barcelona as indications German institutional investors are set to return to the Spanish market more widely.

Pablo Pavia, director of investment at Savills, said: "Deka purchased an office building in Barcelona's CBD, and Union Investment a hotel, also in Barcelona. Their arrival in the Madrid office market is just a matter of time."

Union Investment revealed it was monitoring Madrid.

Spokesman Fabian Hellbusch told IP Real Estate: "We are actively monitoring the markets in the Southern European peripherals. We want to be prepared to re-enter Spain when opportunities in Barcelona and Madrid arise."

Deka Immobilien declined to comment.

Manuel Martin, head of property for Spain at Henderson Global Investors, also said the deals by Deka and Union "may mark the beginning of a series of deals that should put life into a market that has been dead for the past six quarters".

Martin said the investor profile in Spain had moved from private equity and opportunistic investors to "traditional core and core-plus" investors over the past three months.

"Indeed," he added, "we are seeing a number of institutional investors from Germany back in the market looking for quality product."

While Savills claimed the Madrid office market was beginning to benefit from greater international investor interest, Henderson Global Investors has urged investors to target the more defensive retail property sector.

In a recent report, the fund manager said: "For cross-border investors, there are likely to be better opportunities in retail, particularly good-quality shopping centres and parks.

"Such investments should be long-term, however, as rental growth is a distant prospect."