Foreign investment in real estate rises in Barcelona, falls in Madrid

Unlike Madrid, the Catalan capital ends the year with greater investment in the sector than in 2015

Investments in the real estate market have behaved very differently in Barcelona and Madrid in 2016. In the Catalan capital, foreign investment has continued to grow, while in the Spanish capital it has fallen. Barcelona has maintained the same overall level of investment as last year, while Madrid saw a significant decline. And in the Catalan capital investments in commercial property dominate the market, while in Madrid it is investments in office space that leads the market.

The latest figures show that Barcelona is an attractive proposition to international investors. Historically Barcelona mostly attracted investment from Spain. This continued until 2015, when foreign investment exceeded domestic for the first time. This trend has gained momentum in 2016. At the close of the third quarter, 65% of all real estate spending in Barcelona comes from abroad. Meanwhile, Spanish investments in Barcelona have fallen to 35% of the total, according to the latest report from Cushman & Wakefield, a real estate company.

These figures are in sharp contrast with the behaviour of the Madrid market, where foreign investment has declined with respect to domestic investment. At the close of the third quarter, Spanish investment contributed 58% of Madrid’s total, while foreign investment has fallen to 42%. In 2015, however, Spanish investment represented 40% of the total in Madrid and foreign investment accounted for 60%. According to Cushman & Wakefield, the current situation is almost exactly the opposite.

Moreover, this paradigm shift has taken place at a time characterized by the return of major transactions such as the sale of Diagonal Mar shopping centre and the Pullman Skipper Hotel, and at the same time as Barcelona’s real estate market is recovering its strength after some disappointing years. Thus, while in 2012 and 2013 Barcelona’s real estate market began to show signs of a recovery following the economic crisis, accounting for 30% of total investment in Spain as a whole, in succeeding years it ran out of steam, falling to 10%. Nevertheless, in 2016 the investment market in Barcelona has regained its momentum. According to Cushman & Wakefield, by the third quarter spending already exceeded €1bn, 18% of total investments in Spain, in keeping with Catalonia’s contribution to Spain’s GDP.

Meanwhile, the real estate firm CBRE estimates that, as of 30 September, Barcelona attracted €1.3bn in investments. A very similar figure to 2015 and 20% of total real estate spending in Spain, according to CBRE, who noted a significant difference: while the level of investment in Barcelona has remained stable, in Spain as a whole spending is at around €6.4bn, 16% lower than last year. CBRE’s Director in Barcelona, Anna Esteban, predicts that the Catalan capital will end 2016 with "investment surpassing the figure for the previous year".

Besides foreign investment, Madrid is experiencing a decline in total investments, despite large transactions such as the sale of the Foster Tower for €490 million to Pontegadea, the estate agency owned by Amancio Ortega, the president of Inditex. Thus, Madrid ended 2015 with a total spending of more than €5bn, while in 2016 —at the close of the third quarter— the total volume amounted to only €1,750 million, much lower than in 2014.

Different models

In addition to the fluctuations in the market, 2016 has also seen other changes in the model. In Barcelona, the commercial sector (shopping centres and retail space) attracts a higher proportion of investment, with 57% of the total, while offices provide only 22% and hotels 10%. In Madrid, however, office spaces remain the principal attraction for investors, with 61% of the total, while the commercial sector accounts for 20% of investment and hotels 14%.

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