Market Trends of Spain Commercial Real Estate Industry
This section covers the major market trends shaping the Spain Commercial Real Estate Market according to our research experts:
Increasing demand for logistics property driving the market
During the second half of 2021, e-commerce revenue increased by 13.7% year on year, reaching EUR 13.661 billion (USD 14.51 Billion), despite the relaxation of limitations on the majority of bricks and mortar retail locations. This demonstrates that during the epidemic, customers gained significant experience purchasing things over the Internet, resulting in a portion of buying remaining online. As a result of this e-commerce push, logistics adoption continues to rise. In 2021, the demand for logistics floorspace reached new highs, with over one million square meters transacted in Madrid.
Almost all the floor space was taken up along Madrid's major logistics corridors, with 52% along the Henares Corridor (A-2 highway) and 42% along the Southern Corridor (A-4 & A-42 dual carriageways). There were 81 deals in 2021, 22 of which were signed from October to December 2021. The logistics warehouse construction business is still booming, thanks to robust demand and operators focused on high-quality products.
The overall vacancy rate in Madrid stands at around 9.5% at the close of 2021. In spite of the volume of new offerings and vacant grade-A floor area, over the short term, it is anticipated that the current market dynamics will be capable of soaking up logistics floorspace such that there is no downward pressure on rents due to oversupply.
In Barcelona, in the last quarter of 2021, the average floor area per deal amounted to 11,730 sq m, this being 130% of the figure witnessed in Q4 2020 and some 23% above the average for the preceding quarter (9,500 sq m). In terms of size, the most significant deal of the quarter and 2021 was the letting of a 50,000 sq m warehouse in the ZAL (Zona de Actividades Logísticas).
Substantial growth in hospitality sector driving the market
The hospitality market in Spain is experiencing a solid rebound along the summer peak thanks to higher vaccine distribution rates and restrictions lifting in most of the eurozone countries, allowing international visitors to travel. Both ADR and RevPar increased to EUR 102.9 (USD 109.29) and EUR 57.15 (USD 60.70), respectively, at the beginning of 2021. Hotel investment in Spain reached EUR 3.2 billion (USD 3.4 Billion) in 2021 (including hotels in service, properties to be converted into hotels, and land for hotel use).
In 2021, a total of 127 hotels and 22,249 rooms were transacted in Spain, versus 68 hotels and 7,228 rooms in 2020. Furthermore, another 18 transactions took place for hotel development land and properties to be converted into hotels. Only in two previous years (2017 and 2018) did the hotel investment figures in Spain exceed EUR 3 billion, which highlights how extraordinary this figure is (26% higher than in 2019).
Unlike prior years, when the holiday segment was the primary participant, investment in 2021 was fairly spread between the holiday and urban segments (50%- 50%). Even though investor interest has shifted to vacation properties, high-profile sales in Madrid and Barcelona have helped to balance the market.
In 2021 Barcelona and Madrid were once again the leading urban destinations with EUR 754 million (USD 800.85 Million) and EUR 468 million (USD 497.08 Million), respectively, accounting for almost 38% of the total EUR 1.2 billion (USD 1.27 Billion) for the second consecutive year. In the holiday segment, the Canary Islands and the Balearic Islands were the main destinations, totalling EUR 633 million (USD 672.33 Million) and EUR 541 million (USD 574.62 Million), respectively, representing 37% of the total investment. The pandemic has clearly shown to be a window of opportunity to acquire assets that would not have been exchanged in a different market situation rather than a chance to get big discounts. Prime assets have demonstrated great liquidity and little susceptibility to market uncertainty in terms of rates.
