Madrid and Barcelona will provide some of the best opportunities for investors to create value over the next four to five years as they are expected to see rents rise by some 20% by 2019.

Madrid and Barcelona will provide some of the best opportunities for investors to create value over the next four to five years as they are expected to see rents rise by some 20% by 2019.

Speaking at PropertyEU’s Spain & Portugal Investment Briefing earlier this week, Patricio Palomar, head of research & investment strategy for CBRE in Spain, said that the country's two major cities will be among the top four markets in Europe in terms of total return offered to investors.

‘In the case of Barcelona, we expect rental growth of 17.5% which, when adding the forecast yield compression, means the city will provide one of the best return perspectives over the next few years,’ Palomar noted.

A string of foreign investors - largely from Northern and Southern America - have flocked to Spain in the past few months, resulting in a 100% rise in investment volumes in the second half of the year, he added. In total, cross-border investors represented some 65% of transactional activity in Spain last year, according to figures from CBRE.

Palomar: ‘One reason why all these foreign players are re-entering the market is the major adjustment in prime office rents in Madrid and Barcelona, Europe's biggest in fact after Dublin. Contrary to the Irish capital however, Spain has not started the recovery process in terms of rental values yet.’

Public authorities and banks looking to dispose of real estate assets are expected to provide new interesting investment opportunities in the near future. 'Sareb, Spain's bad bank, is looking to sell a number of corporate loans with several listed and non-listed companies as borrower including Colonial, Metrovacesa, Testa and Realia.'

He added: 'Public disposals will also continue this year with Madrid and the regional government in particular organising auctions for single buildings in the city.'