‘Our survey of major investors shows that 20% favour Spain, 29% Germany and 12% the UK,’ said Carlos Zamora, head of residential, Knight Frank Spain. ‘Spain, Germany and Ireland are the only three countries in Europe with positive forecasts for 2018 for all three main sectors – offices, residential and logistics.’

The Spanish market has been steadily building up strength in 2017, with transaction volumes of €9.2 bn in the first three quarters of the year, up 20.3% on the year before, in net contrast with Portugal which saw a 20% fall to €0.9 mln and Italy with a 14% decline to €6 bn.

‘Spain is on the up, rents are growing and confidence is high,’ said Maurizio Grilli, head of investment management, analysis and strategy at BNP Paribas Real Estate.

Economic growth is powering the positive momentum across sectors. Residential is strong, with Madrid, along with Paris, recording the best performance in Europe last year. Prime residential prices increased by 10-20%, while prices across the market rose by 3%.

‘We are in a recovery market, but we are not repeating the mistakes of the past,’ said Zamora. ‘In 2017 80,000 houses were built, while in 2006 it was 700,000, so we are very far from the pre-crisis boom. Growth is now sustainable.’

Residential in demand
Foreign and domestic investors are scouring the country for opportunities in residential, said Oscar Perez, investment director, Qualitas Equity Partners: ‘There is interest across the board. There are Spanish family offices investing in build to rent, but we also have South Korean investors looking for farms in Extremadura.’

The office sector is also performing well, especially in Madrid, where take-up in the last quarter of 2017 doubled to 210,000 m2, reaching an annual figure of 570,000 m2. Prime rents, which were €23/m2 in 2013 are now €30.5/m2 and are forecast to rise to €33 by 2019.

‘The vacancy rate in the Madrid CBD is at an all-time low’, said Borja Goday, head of Iberia, Patrizia Immobilien. ‘We will see rental growth because there is not enough space in the city centre to meet demand, while people who cannot afford CBD rents will move to secondary locations.’

Logistics stands out
Logistics was the star of the show last year and is set to repeat the performance in 2018. Take-up in Madrid more than doubled to 921,000 m2, while the investment volume across Spain was the highest ever recorded at €1.28 bn.

‘Online sales represent 4.5% of total sales in Spain, compared to 18% in the UK and 15% in Germany, so it is clear there is a great opportunity for growth,’ said Zamora.

‘Logistics is my favourite sector in Spain,’ said Grilli. ‘We expect a boom in demand for e-commerce goods. It is inevitable that e-commerce will grow and that more warehouses will be needed.’

Investors are also increasingly looking at alternative sectors in Spain. Student housing is attracting many investors, said Antonio Roncero, head of transactions Iberia, CBRE Global Investors, because ‘it is a defensive, resilient and higher-yielding sector.’ Part of the attraction is that Spain is attracting students from other parts of Europe as well as Latin America.

‘Senior living and healthcare are sectors that should also do well in Spain,’ said Grilli. ‘There are regional differences in legislation, but the demographics make it interesting. It is also higher-yielding than other sectors.’