The residential real estate sector has withstood the coronavirus test with dignity and even strengthened its position. The commercial segment was not so lucky. Offices and retail premises were particularly badly affected. We tell you about the main conclusions of the economists of the Central Bank of Spain, which will be useful to private investors.
The сorona crisis has affected the commercial real estate sector more than anything else. Curiously, the current situation contrasts sharply with the housing market, which is on the rise throughout Europe. And this is not an accident.
Firstly, business facilities are more sensitive to the economic situation. The demand for retail space, for example, correlates with forecasts of the economic cycle. And housing is a basic human need. Not only investors buy houses and apartments, which makes this sector more stable.
Secondly, the current crisis, due to its nature (social distancing, numerous knockdowns, mobility restrictions), has hit small local operators hard. This has exacerbated the negative dynamics of indicators in some sectors of the sector, for example, in the hotel and retail sectors.
Experts of the Central Bank of Spain have analyzed1 how the pandemic affects the commercial real estate market.
Examples of commercial real estate in Spain:
2 500 000 €
Hotel on Costa Brava, Spain
Spain
Costa Brava
The hotel is on the first line from the sea
A beach hotel on the first line from the sea in one of the tourist towns on the Costa Brava.
Restaurants, bars, shops and other necessary infrastructure facilities are located near the hotel.
Number of rooms: 44 (47)
Number of buildings: 2
The hotel has a total of 44...
INDOM
51 000 000 €
Commercial apartment building in Madrid, Spain
7800 sq.m
Spain
Madrid
Apartment building in the center
Apartment house in the center of Madrid is a grandiose beautiful building in the area of Paseo de la Castellana- Cuzco Avenue.
Building area 7800m2: residential premises + offices + restaurant with a license
Price: 51,000,000€ (possible to bargain) + 5% agency commission
INDOM
1 100 000 €
Shop in Barcelona, Spain
128 sq.m
The commercial premises are located in the center of Barcelona on PLAÇA DE DIAMANT squareThe room is located very well, clearly visible.Room area: 128 sq. m, facade 14 meters.The actual cost of renting this room: €5 500 – 6 500/ month
NF Group
1 200 000 €
Commercial property in Madrid, Spain
Spain
Madrid
Bar in the center of Madrid
Commercial premises for long-term rent for a bar, in a central, prestigious area of Madrid.
The contract with the tenant was signed in April 2018 for a period of 5 years.
The tenant has made a major renovation of the premises.
According to the contract, the tenant pays the rent...
INDOM
1 100 000 €
Commercial property in Barcelona, Spain
537 sq.m
The premises are located in the prestigious commercial area of San Gervasi, a stone's throw from Via Agusta Avenue and Gal-la Placidia Square. Transport links are well developed here, Gracia station is located nearby.At the moment, the room is leased to a wedding salon. The wedding salon is a two-storey room with an underground floor and a...
NF Group
10 000 000 €
Commercial property on Costa Brava, Spain
6658 sq.m
A 4-star hotel in Sant Feliu de Guixols on the Costa Brava. It is located within walking distance from the sea. The total area of the hotel is 6658 sq.m. The number of rooms is 96. It is built in 4 floors plus one underground. An elevator is installed. The hotel has a restaurant, private parking, a spa area, an outdoor pool, a bar, several...
ESTATE BARCELONA
7 000 000 €
Hotel on Costa del Sol, Spain
2500 sq.m
Spain
Costa del Sol
Apart-hotel 800 m from the beach
A building of 2500 m2 with tourist apartments, acting as an apartment hotel, in the city of Malaga, 200 m from the railway station and 800 m from the beach.
34 apartments: 9 apartments with 1 bedroom, 13 apartments with 2 bedrooms, 8 apartments with 3 bedrooms, 4 apartments...
INDOM
450 000 €
Commercial property on Costa del Sol, Spain
A cozy restaurant located in the La Mairena area of Marbella. Stunning panoramic views of the sea and the entire coast. Open spacious terraces. Excellent design environment and cozy atmosphere. Convenient Parking. The restaurant is located opposite the German school.
Electricity, water, telephone are provided. Air conditioners are installed....
ESTATE BARCELONA
3 180 000 €
Commercial property on Costa Brava, Spain
1458 sq.m
The hotel is 500 meters from the sea in the town of Blanes on the Costa Brava. The hotel has 40 rooms. The hotel has a bar and restaurant. It is built in 3 floors. There is an elevator. It is sold without a management company.
ESTATE BARCELONA
450 000 €
Commercial property on Costa del Maresme, Spain
192 sq.m
A cozy restaurant located in La Mairena, Marbella. Stunning panoramic views of the sea and the entire coast. Open spacious terraces. Excellent design environment and cozy atmosphere. Convenient Parking. The restaurant is located opposite the German school. Electricity, water, telephone are provided. Air conditioners are installed. An elevator is...
ESTATE BARCELONA
2 800 000 €
Commercial property on Costa Brava, Spain
3100 sq.m
2 star hotel in Lloret de Mar on the Costa Brava. The number of rooms is 70. The building is built in 5 floors. There is a swimming pool and a restaurant. The hotel's brightly decorated rooms are equipped with a fan and satellite TV with international channels. Most rooms have a balcony. The building is detached, excellent transport...
ESTATE BARCELONA
2 300 000 €
Commercial property in Cerdanyola del Valles, Spain
2371 sq.m
Lot of three objects in the area of the city of Cerdanola del Bayes in the suburbs of Barcelona. The total area of 2371 sq.m. Consists of a gas station, a car wash and an office building.
The office building is built on a plot of 458 sq.m. The building of three floors is used for an office and a minimarket when refueling. The total area of...
ESTATE BARCELONA
6 000 000 €
Commercial property in Barcelona, Spain
233 sq.m
Commercial premises in the Eixample district on a famous street in Barcelona. The corner room is a premium location.
The total area is 233.28 sq.m. in one floor.
At the moment, a complete reconstruction of the building is underway, the end date is September 2023.
Until a contract is signed with a permanent tenant, the owner is ready to...
ESTATE BARCELONA
9 000 000 €
Commercial property on Costa Blanca, Spain
6700 sq.m
A 4-star hotel in the area of Javea on the Costa Blanca. It is functioning at the moment. There are 38 apartments in the hotel. The apart-hotel is located in a quiet area, 2 km from Arenal Beach. The hotel has a garden with 3 large seasonal outdoor pools. It offers modern, well-equipped apartments with 1 or 2 bedrooms, air conditioning and a...
ESTATE BARCELONA
695 000 €
Commercial property in Barcelona, Spain
310 sq.m
Commercial premises in the Eixample district in the city of Barcelona.
The total area is 310 sq.m. in one floor.
The tenant is a car service.
The tenant has been working in this room for 60 years.
We are ready to sign a new contract with the new owner on the following conditions.
The rental amount per year is 42,000 euros....
ESTATE BARCELONA
380 000 €
Shop in Barcelona, Spain
Investment offer in the suburbs of Barcelona, Cornella. Commercial premises - offices rented out. Sold together with the current lease agreement.
Leased to a well-known industrial production company. With an area of 250 m2. The contract is until 2023 with an extension of 5 years.
Commercial property with a glass facade of 16 meters in a busy...
EuropaHome
320 000 €
Office in Barcelona, Spain
176 sq.m
EuropaHome
370 000 €
Commercial property in Barcelona, Spain
35 sq.m
Commercial premises in the Sants Montjuic area of Barcelona.
The total area is 35 sq.m.
Currently leased - a well-known chain selling Argentine pies. A network of more than 30 locations in Barcelona.
The annual rental amount is 21,600 euros.
The contract was signed on 06.2023 for a period of 10 years.
The quota for the...
ESTATE BARCELONA
12 500 000 €
Office on Costa Blanca, Spain
Commercial Investment Product
It is a commercial leased by chain nationwide.
Population ; Benidorm
Building; 9,900m2 plot
(sales room), 5.072m2
t (warehouse and dependencies) 4,316 m2
Contract date, February 24, 2016
Contract for 20 years (8 years of mandatory compliance)
Annual rent: € 815,868 annual + annual CPI
IBI: € 45,000...
Mercury Group
13 147 800 €
Office on Costa Blanca, Spain
Commercial Investment Product
It is a trade rented by chain nationwide.
Location : Benidorm
9.900m2 solar building
Ground floor (sale room) 5.072m2
First floor (Store and dependencies) 4.316m2
Price For sale € 13,147,800
According to the Ministry of Development, the number of permits issued for the construction of non-residential buildings in 2020 decreased by 18%. A similar decline was noted in the housing sector. Therefore, the share of commerce remained stable at just over 20%, as in previous years.
However, if you look at the different sectors of commercial real estate, you can notice significant differences. Thus, the number of permits for the construction of industrial facilities and offices decreased by 39% and 20%, respectively. And in the commercial services and logistics sectors, on the contrary, there was a slight increase of 1% compared to the results of 2019.
This imbalance, as Central Bank economists note, is related to the reaction to the coronacrisis. The companies believe that in the current conditions the share of e-commerce will increase, hence the demand for warehouses and logistics services.
The cost of planned projects in the field of commercial real estate has also decreased. The biggest decline is again in the field of office and industrial real estate (-16% and -37%, respectively). But even against this background, warehouses look much better (+8% to the cost of projects).
Source: Banco de España
Sales Have Collapsed
In the first half of 2020, sales of commercial real estate in Spain collapsed by 60%. The recovery began in the third quarter, but it was not enough to surpass the results of the previous period. As a result, by the end of the year, sales of commercial real estate decreased by 33.8%.
Sales in the prestigious areas of large cities, which usually generate the greatest retail activity, have sunk especially strongly. The decline for the year was 47.9%.
As for the type of commercial real estate, offices coped with the crisis the worst, with a decline in sales of which reached 47%. The number of transactions with retail facilities decreased by 33.6%, with warehouses - "only" by 30.6%.
Source: Banco de España
Lending at a Minimum
Banks have also reduced their turnover in commercial real estate. The volume of loans dropped by 36% in 2020, reaching a minimum over the past 15 years.
The analysis also shows that the conditions for issuing loans have tightened. The acceptable threshold of the loan/collateral ratio (LTV) is decreasing – more and more often banks issue a maximum of 80% of the property value.
At the end of the first quarter of 2021, the outstanding balance of mortgage loans secured by commercial real estate reached €84 billion, which at that date was 15% of the total mortgage portfolio of Spanish banks. At the same time, the volume of such loans remains significant if measured by the own funds of credit institutions. These products account for 40% of the Tier 1 Ratio (an indicator of the bank's fixed capital in comparison with total risk assets). Therefore, a significant decrease in the solvency of debtors in this segment can lead to problems in the entire banking system.
The Price Correction Continues
Commercial real estate in Spain in 2020 has fallen in price in all directions. At the same time, prices did not fall as significantly as sales.
According to the results of the IV quarter of 2020, business facilities lost an average of 8.8% of their value. For comparison, Spanish commerce finished 2019 in a small plus, prices increased by 0.9%.
Preliminary data show that the price correction continues in 2021.
Economists of the Central Bank of Spain believe that due to the pandemic, the trends that began to form earlier have accelerated. For example, the development of e-commerce, which requires advantageously located logistics centers, has mitigated the impact of the crisis on this type of real estate. The reduction in the number of transactions in the street retail segment may reflect the market's reaction to new consumer models associated with a sharp increase in online shopping. Similarly, the trend towards remote work has led to a decrease in demand for office space.
At the same time, we should not discount the opportunities that have emerged due to the current crisis. The main thing is that the objects have become more accessible. And sellers are probably now ready to make concessions to buyers. Therefore, investors who are counting on long-term investment of capital can benefit from the current situation.
