Investment Funds Have €40 Bn To Invest In Spain’s Property Sector

Testa aims to consolidate with its listing its position as property ‘giant’

Investment funds have €40 billion to spend in the Spanish real estate market in the short and medium term, according to a survey carried out amongst 200 funds and investors by Cushman & Wakefield. Of the total interviewed, 51% expect to maintain their investment strategy in the coming months despite the virus. This compares to 33% who are reconsidering their risk profile and 16% who are evaluating different asset classes. In addition, 63% of respondents believe that the market in general will return to normal activity in the next 18 months. However, the recovery will not be homogeneous and will depend on the type of asset. Thus, activity in the logistics sector is expected to recover in a period of 3-6 months, compared to other sectors more affected by the crisis. These include retail or hotels, where the recovery will not come until 2021 or 2022.

The fact there is still investment appetite in this environment will undoubtedly support asset valuations in the sector, especially in the logistics and office segment. But it is not all good news. The uncertainty of the virus has slowed down residential real estate transactions. Meanwhile, those that are closed require significant discounts of up to 20% and special conditions.

A Mexican investor has closed the purchase of a residential building located in Claudio Coello, 11. Although the amount initially agreed in February was 15M euros, this has been revised downwards by 20% to 12 M euros due to the virus, equivalent to 6,000 euros per square metre. And all this, after the seller had already lowered the sale price from the 27M euros he initially asked for. The buyer’s aim is to rehabilitate and transform the building into 11 luxury homes and sell them at a price of over 8,000 euros per square metre.