New wave of global investors swarms Spain

Hot on the heels of US opportunistic investors, a new wave of capital from all parts of the world is now targeting the distressed real estate markets of Spain, according to Patricio Palomar, head of research and investment strategy at CBRE’s office in Madrid.

‘We’re seeing the Asians, particularly the Chinese, but also investors from Latin America who are very active,’ he said. Of this group, the Mexicans are the most visible, he added.

Palomar made the comments at PropertyEU’s Investment Briefing on distressed opportunities in Southern Europe held at the London office of TIAA Henderson Real Estate on Tuesday. In the past 18 months or so, investment activity in Spain has really come back, he said, pointing to the strong growth in investment volumes over the period. ‘We’ve seen investment volumes doubling year on year and they more than doubled again in the first half of this year alone. Spain has definitely been more active than Italy or Portugal in the past five to six quarters.’

In the first six months of this year, investment volume in Spain reached more than €3 bn, Palomar said. ‘If you look at the trend, 2013 was an inflection point. Over the full year, investment volume reached €3.2 bn. But this year, we will finish at the levels we booked in 2006,’ he predicted.

The growth in the first six months was visible in all sectors, he added. ‘The only one that is not really growing is industrial/logistics where there have been a lot of delays in negotiations.’

A key development since the beginning of the year has been the spate of IPOs by tax-efficient SOCIMIs, the Spanish equivalent of the REIT. ‘In terms of IPOs, Spain is number 1 this year in Europe. Over the past year, the SOCIMIs have been very successful, raising €3 bn from the market. And altogether they have already deployed 60% of the total capital raised,’ he pointed out.

While a number of the newly established listed vehicles have been relatively small, there has also been a group of big SOCIMIs such as Merlin and Hispania which have received a lot of interest from global investors including the likes of George Soros. ‘They have been quite active in chasing after properties in Spain and more are on the way,’ he said. Three vehicles that are currently making preparations for a flotation in Spain include Quabit, Norfin and Fidere. The latter is a vehicle being set up by US private equity giant Blackstone.