Spain is in an extraordinary place right now, Humphrey White, managing director of Knight Frank Spain has told PropertyEU at Expo Real.
‘The country is growing at three times the rate of Europe as a whole; it's one of the few stable, safe economies in Europe at the moment,' White said. 'Spain over corrected during the recession – we saw rents fall over 50%, so there is definite rental growth potential. We anticipate at least two to three years of real growth now, across the office, retail and logistics sectors.'
White added: 'There's a healthy balance of supply and demand, very little has been developed since 2008 so supply is fairly contained across the board. Yields have already compressed significantly across all commercial sectors. There's a visible polarisation of grade A and grade B offices – whereas the premium was perhaps 10% in the past, now investors are prepared to pay a 20% premium for grade A premises.'
There's also a new attitude towards asset management which makes the market particularly interesting, according to White. 'All of the Spanish REITs used to be developers,' he noted. 'Now they're back with foreign equity, including a lot of US capital, so they have the cash to stay on top of their portfolios. Currently, they're completely redeveloping a lot of previously obsolete properties in the centre of Madrid in a real game-changer for the capital.'
Spanish REITs are so strong, in fact, that foreign investors have to be at the top of their game to get into the market, says White. 'We've seen even German funds and insurers struggle to buy asset because they’re being priced out of the market by what are essentially local players.'
Post-brexit opportunities
'On the one hand, it's not good news for anyone that Europe’s second largest economy is going through a period of uncertainty,' White said, in reference to a potential fall-out for Spain in the wake of the UK referendum. 'On the other hand, as an investment location, uncertainty in other countries could help divert funds towards Spain.
Madrid's infrastructure is second to none, the airport is right in the city, and you can get to the centre in ten minutes by metro. While not many international corporates are setting up HQs there yet, there’s definitely a great opportunity. These days, Spain has savvy developers that can build office towers to suit major international tenants, which might not have been the case 10 or 15 years ago.'
White concluded: 'Finance is back and readily available for core plus projects, and Spain is no longer an opportunistic market - it's a core, core plus market. It’s not experiencing booming growth this time, but up to 5% per annum which is pretty healthy.'
