Spain Commercial Real Estate Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Market Overview

Spain's commercial real estate market is expected to register a CAGR of approximately 9% during the forecast period.

The COVID-19 pandemic has promoted e-commerce as a consumer habit, with total logistics investment volume of EUR 1,400 million in H1 2021 (led by the sale of the Montepino Portfolio), indicating a 250% year-over-year rise. The economy was already in the 'New Normality' at the end of the first half of 2020, but a substantial drop in production and employment is projected as a result of the government's pandemic containment measures. Logistics has continued to be one of the most active real estate sectors, with record levels of activity.

The hospitality industry was one of the hardest hit by the COVID-19 pandemic in 2020 and the first part of 2021, with a significant drop in liquidity. This circumstance, combined with new asset-light trends, has prompted hotel owners to contemplate selling part of their assets in order to raise cash and alter their business model. The total amount invested in Hospitality in H1 2021 was EUR 995 million, surpassing the total amount invested in FY 2020 and becoming one of the strongest half-year results in the last 15 years.

Consumer attitude and footfall grew steadily as the sanitary condition improved thanks to breakthroughs in mass vaccination, as well as a desire to socialize and pent-up demand. On the retailer side, previous trepidation over Covid-19's unclear landscape has translated into increased rental demand for strategic sites at more inexpensive rentals. Retail investors have primarily focused on premium core assets with long-term contracts, with supermarkets being the most in demand.

By the end of 2021, Spain returned to pre-Covid levels of investment. In terms of investment deals in Spain, the year ended with a total of EUR 12.1 billion, up 57% from the previous year's figure. The logistics distribution and office sectors, in particular, have seen an increase in investment.

Scope of the Report

Commercial real estate is a property that is used exclusively for business-related purposes or to provide a workspace rather than as a living space, which would instead constitute the residential real estate. Most often, commercial real estate is leased to tenants to conduct income-generating activities. In general, it includes buildings that are used for commercial purposes and include office buildings, warehouses, and retail buildings (e.g., convenience stores, 'big box stores, and shopping malls). It focuses on the market dynamics, technological trends, insights, government initiatives taken in the commercial real estate sector, and COVID-19 impact on the market. Also, it analyzes the key players present in the market and the competitive landscape in the Spanish commercial real estate market.

The Spanish commercial real estate market is segmented by type (offices, retail, industrial, logistics, multi-family, and hospitality) and by key cities (Madrid, Valencia, Barcelona, Catalonia, Malaga, and Other cities). The report offers market size and forecasts for Commercial Real Estate Market in Canada in value (USD Billion) for all the above segments.

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Key Market Trends

The Logistics Property Sector Driving the Market

During the second half of 2021, e-commerce revenue increased by 13.7% year on year, reaching EUR 13.661 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 in the months of 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 the final quarter of 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 a50,000 sq m warehouse in the ZAL (Zona de Actividades Logísticas).

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