Barcelona in transition

For the past 10 years, Barcelona has seen a veritable building bubble with escalating prices due to a severe shortage of public space. The pace of development is slowing down, but there are still plenty of interesting new projects that should attract foreign investors, says Jordi Hereu, the socialist mayor of Barcelona who spoke to PropertyEU about the prospects for the real estate sector in his city.

How do you expect the city to change in the next five years?

'Barcelona will need to expand to create new areas in Marina del Vermell and Verneda Industrial, between Sant Marti and Sant Andreu (northeast of the city). The technological area 22@ (southeast of the city) is almost finished. This will be one of the new hotspots for business development in Barcelona. Led by the city council, it is really aimed at regenerating a heavily industrialised area. It started in 2000 and has attracted 411 companies, creating 30,000 jobs. There will be 25,000 houses. Linked to the arrival of the high-speed train in Barcelona in December, we are redeveloping the area of Sant Andreu-Sagrera.'

How do you see the real estate sector developing during this period?

'When we talk about the development of the real estate sector in Barcelona in the medium and long term, we have to consider the fact that access to housing is pivotal to social cohesion. That is why we have started the Metropolitan Housing Consortium to coordinate planning strategies. Between 2007-11 we are planning to build 12,000 social housing units. Half will be to rent, the rest to buy. We are also planning a strategy to prevent overcrowding and we want to redevelop industrial areas which have fallen into disuse, for example, Poblenou in the southeast and areas like Bon Pastor, Turo de la Peira, Trinitat Nova and Coll to the north.'

Is there much space to develop new projects or is it limited?

'Barcelona is limited in space by the sea, the mountains and two rivers so we are developing two new areas (Marina and Verneda Industrial) to accommodate 25,000 new homes. Three new strategic areas are 22@, the Waterfront and Sant Andreu-Sagrera. In the latter area we will create more homes and green areas and other resources. Old industrial and military areas will also be redeveloped. The district of Sant Andreu-Sagrera will be linked to the high-speed train from December; the technological area of the city 22@ is almost finished; the new waterfront development and the ‘Axis of Knowledge’ will link the mountain to the north with the sea. All these new developments will bring together technology, the university and industry through research and development in the future Levante Campus.'

How do you see the role of the international real estate sector during the next five years?

'According to the report Emerging Trends in the European Real Estate Market 2007 by PricewaterhouseCoopers and the Urban Land Institute, Barcelona is the eighth most profitable city in the European Union. Barcelona will continue to be a great international economic attraction. There are many multinationals, specialised in research, biomedicine and new technologies which have their European headquarters here. These are firms which attract talent and creativity to the city. On top of this, Barcelona is the best city in Europe in terms of quality of life, with its central location on the Mediterranean. This means major companies will need the support of the real estate sector to find their own space in the city.'

What does the future hold for local real estate companies?

'They will have to undergo a period of transition and adapt to the new challenges and slowdown in the market as a whole, accompanied by an expected rise in interest rates. Those companies which diversify their risk and investment will be the winners. But in the long term, real estate is a secure investment which will rise in value after this period of transition.'

What does the city do to attract foreign companies?

'Barcelona competes with the major European capitals including Paris, Milan, London, Frankfurt and Lisbon to attract foreign investment. Catalonia, with Barcelona as its capital, attracts 34% of all foreign companies in Spain. In 2006, Catalonia attracted 30% of foreign investment to the country. Some 90% of foreign companies in this region are based in Barcelona. According to the study Foreign Investment in Barcelona, carried out by the city council and Catalan regional government, with the help of the Boston Consulting Group, 97% of foreign companies are happy with their decision to locate here. For the city council, it is a priority to attract more foreign investment, especially that with high value-added. We would like to convert Barcelona into the Davos of innovation. Some 61% of foreign companies here are involved in commerce or marketing, 33% in manufacturing, 29% in logistics and 23% in services. Another 15% are involved in research and development or design. Foreign companies come to Barcelona for the quality of life, geographic location, proximity of clients, competitive labour and production costs and a high quality of human resources.'

Do laws exist to prevent overdevelopment or pollution?

'We are creating a green belt from the Parque Ciutadella in the centre to the Collserola Mountain in the north. We want Barcelona to be an international reference point in terms of lowering pollution and improving the environment. We are planning to restrict movement in and out of the city to reduce traffic and improve air quality. This involves the construction of underground car parking, promoting the use of bicycles and improving the service and sustainability of public transport. In the construction sector, we are applying criteria for energy reduction, through the Technical Building Code and the Solar Energy Order. We are applying environmental criteria in the management of services and the infrastructure of public spaces like the use of water from underground wells to clean the city, the use of sound-absorbent roads and saving water from city fountains. Solar energy is used to fuel the town hall building. The Forum building on the waterfront has the largest amount of solar panels of any building in Spain.'

This interview appears in the November edition of PropertyEU Magazine, which will be distributed at Barcelona Meeeting Point and MAPIC in Cannes.