Market Trends of Spain Construction Industry
Increase in housing construction drives the market
The market is expected to observe growth during the forecast period driven by the increase in housing permits issued. Spain is a popular, safe, and stable international destination for visitors, investors, and those looking to relocate with a rich cultural tradition. International interest from buyers both inside and outside the European Union is increasing. Real estate regained popularity, especially in seaside resorts and Spain's major cities. In terms of investment, Madrid, Valencia, and Malaga are the provinces with the highest possibilities for recovery.
According to the latest Ministry of Public Works data, construction costs in buildings, including labor and material consumption, have grown annually by over 14%. New non-residential construction, which includes office, industrial, and other building types, has climbed by 21%, a significant gain over the residential sector's growth of 10.6%. Building renovations, including work on residential and non-residential structures, rose by 12.8%.
Despite this situation, the primary indicators of the residential sector—such as building permits, the volume of transactions, and prices—remain in positive expansion for the time being. According to the most recent data, the pandemic caused a dip in housing approvals in 2020, which directly contributed to the loss in building completion certificates recorded in the first few months of 2022.
Increasing demand for leisure and hospitality development projects due to travel and tourism
In Spain, the hotel industry is preparing for tourism to resume its pre-pandemic levels. Investors are purchasing real estate that can be converted into hotels and land for new hotel construction projects. Southern Europe has been a popular travel destination, and in 2022, activity in Italy, Spain, and Portugal will virtually match pre-COVID levels. 2023 is expected to bring about growth and prosperity.
Hotel investment in Spain totaled EUR 3.3 billion in 2022. In contrast to 127 hotels and 19,043 rooms in 2021, 133 hotels and 17,754 rooms were transacted last year. Another 30 properties, including plots of land for hotel developments and structures for hotel conversion, were also bought and sold. By exceeding the EUR 3 billion mark and maintaining its position as the third-best record in the historical series, 2022 has come to a fantastic end in terms of hotel investment (up 3.1% from 2021). Additionally, money is being spent renovating some existing hotels to make them top-notch establishments capable of providing what modern tourists want after a protracted length of time.
Additionally, investors' interest in the 4- and 5-star categories expanded with the entry of foreign brands and hotel repositioning, with sales of these asset classes accounting for almost 80% of the overall investment volume. With 49% of the total expenditure, the 4-star category continued to be the most popular overall. Investment firms continued to dominate the investor landscape in 2022, accounting for 59% of the total volume invested. Additionally, hotel groups were quite active, bringing up 25% of purchasers (compared to 16% in 2021). Individual and family offices showed slightly more caution (5%), while REITs (6%) stayed consistent with last year.
