Spain as one of the most popular country among international real estate buyers in recent years didn’t have a good time in the past months. But now comes a very interesting time, which probably will never have any analogues: deferred demand from investors superimposed on the difficult financial situation of some owners. The Director of Business Development of Estate Barcelona Andrey Karachun comments on the situation, being in the thick of events.
About the author:Andrey Karachun
Development Director
DECART PROPERTY INVESTMENTS
The most often concerns we receive from clients is the fall of prices on the Spanish realty market. But in spite of predictions, there is no decline yet. Although new project pop up with lowered costs, it is connected more to the need of fast sale due to general difficulties in the economy of the country. Owners have their own reasons for it, whether it is for saving the business or leveling the financial situation. But dumping is currently absent on the market. The price reduction is weightless for the market, within 5-15%.
Hot offers are not published online
The media nor the streets of Spanish cities have offers for urgent sale of premises with discounts. Usually hot properties are reserved by the agencies and sold in a short time among their own clients from the waiting list.
An open pharmacy and two closed commercial premises in the Eixample district of Barcelona. The reasons why a particular office did not resume work can be very different. It is clear that the business of pharmacies is not in danger, but whether the room on the right will open depends on the situation in a particular company.
The real estate market in Spain has woken up after almost two months of lethargy due to the coronavirus pandemic. There were different opinions of the market reaction to the crisis during the quarantine period, the expectancy of a fall was from 3% to 50%.
Various hypotheses appeared: that owners will seek to sell real estate to get cash; that the market recovery schedule will have a V or U shape; that real estate will turn into a safe haven asset against the background of an unstable situation on the stock exchanges, and much more. Now that the market has finally come to life, we can verify which of these forecasts came true.
Although it is too early for final conclusions, some data is already available to us. First of all, real estate prices will not change much right after the reactivation of the market. In support of this, in early May, Idealista published a report according to which real estate prices in Spain in April did not fall, but even slightly increased (0.5%) compared to March, and the average annual growth was 2.5%. Property values have risen in 52% of the provinces and 51% of municipalities. Among the provinces, the highest growth rate was observed in Barcelona (3.6%), Cuenca (2.9%) and Alicante (2.0%).
At the end of May, experts from the AIC Association (API Barcelona) reported a sharp increase in demand for properties that accumulated over two months of downtime. A record number of property views were registered, and prices remain at the same level as at the beginning of the year.
The official representative of the API Barcelona says that the market is back to work, buyers look for properties, and sellers have actively contacted agencies to put their property up for sale.
The reduction is yet to come
However, many experts are confident that individual advantageous offers will appear on the market. Potential investors are advised to keep eyes open to catch them fast. We are absolutely sure that the decline in prices is coming: too little time has passed since the economy stopped, and the real estate market has not yet had time to react. We think that similar to past crises investors will have about six months of excellent opportunities, but they will still have to fight for them.
Fernando Encinar, the Head of Research at Idealista, emphasizes that the degree of price reduction will vary depending on the type of housing and its location.
Forecasts
S&P experts predict a drop in prices in major cities such as Barcelona and Madrid by only 3.0−3.5%. At the same time, the decline will be observed mainly in the secondary market, while in the market of new buildings it will be quite insignificant.
Tinsa forecasts that the real estate market on the coast will face a stronger drop in prices due to a decrease in the number of foreign buyers. At the same time, the price of country houses in the bosom of nature with their own private territory, located 30-40 km from the city will remain. In anticipation of the second wave of the epidemic, the demand for such facilities has increased significantly.
Nevertheless, all experts agree that this crisis has nothing to do with the 2008 crisis and the recovery after it will be much faster: already in the first months of 2021, the market will confidently go up to gradually return to pre-crisis indicators.
Commercial Real Estate. Lease. Purchase
There are no offers for the sale of space in the best locations. But there were ads for renting in places where there used to be a queue of tenants. But on Central streets like Paseo de Gracia, everything is still stable. We didn't see any ads. Many shops and cafes have already opened.
Property on the right is out for rent at the moment. Obviously, the owner didn't agree with the old tenant. Сlothing stores in the city center are usually small and non-branded, often complete their rentals. Even a discount is not a solution to their problems.
Owners negotiate with tenants
Owners who faced unpaid bills in March, April and May first tried to negotiate with their tenants. As a management company, we negotiate on behalf of our clients. It is in our best interest to maintain a long-term relationship. We used all possible ways to resolve this issue: we agreed on deferred payments, provided discounts for the period of quarantine and helped arrange state aid.
The rent discounts in question usually ranged from 20% to 50%. The discount amount depends on the location and the relationship with the owner. Our company, for example, received a 60% discount on renting an office located in the center of Barcelona, the initiator was the owner himself.
If the owners can't resolve the issue with the old tenant, they contact the agency to find a new one. The average time for a search and signing a contract with a new tenant takes from two weeks to one and a half months.
Closed office of the electricity supplier company. But the company for sure will not move out of this room. For now they just work remotely.
A good time to enter the market is coming soon
We believe that the most favorable time for investing in foreign profitable real estate will come soon. This will open up opportunities that have not been available in the growing market for the past seven or eight years. But since we are dealing with a more conservative investment tool, and the real estate market is not as volatile as, for example, the stock exchange, we need to wait a little.
The response to economic events usually lasts three to six months. This is why we are preparing our clients for future transactions right now. After all, at the time when options will appear, you will have to work ahead of time: there are quite a lot of people who want to get a good asset profitably. You need to be ready to transfer funds quickly.
As for the cash, I want to clarify right away: we are not talking about cash in the mattress. This is money that professional investors have long started to withdraw from assets that have become illiquid, such as bank deposits that do not cover inflation with their rates, and "junk shares" of companies in distress. Absolutely all the clients we work with have moved from the ruble to the Euro, and some who managed to open accounts in Spanish banks have concentrated their savings there.
Do not count on total discounts in the best locations
It should be understood that in the central streets of Barcelona, which have been in demand among tenants for decades, you should not count on total discounts. 5-10%, but not more.
API experts agreed that a favorable moment for purchases is still ahead. The task is to monitor the market and track when there are offers that are profitable for our investors. These will be occasional offers and quick deals. Therefore, there is no need to hurry when choosing a property, but you need to compare the risks and make a purchase decision if you have a good property without delay. We often have a situation when the client postpones making a decision and as a result does not have time to sign the pledge agreement because the property is reserved by another buyer.
Examples of commercial real estate in Spain:
5 800 000 €
Hotel on Costa Daurada, Spain
1047 sq.m
Spain
Costa Garraf
Apart-hotel on the first line
A beautiful apartment hotel on the first line from the beach,
with access to the beach in Castelldefels.
The building area is 1047 m2
Year of construction: 1964
There are 28 apartments in total, each with an area of 33 m2.
The condition is good.
High...
INDOM
1 600 000 €
Hotel on Costa Brava, Spain
Spain
Costa Brava
Hostel 1* 300 m from the beach
The current 1* hostel with the possibility of upgrading the category
after the repair.
Location: the center of the popular tourist town of Loret de Mar on the Costa Brava, 5 minutes from restaurants, bars, cafes, shops,
just 300 m from the beach.
50 rooms
In...
INDOM
60 000 000 €
Hotel in Madrid, Spain
5279 sq.m
Spain
Madrid
Hotel 5***** in the center of Madrid
A very expensive, luxurious hotel 5***** in the historical center of Madrid.
A very beautiful old building built in 1908, an architectural monument in which all the decorative elements of the beginning of the last century are preserved (original wooden floor, frescoes, stucco,...
INDOM
261 000 €
Commercial property in Barcelona, Spain
120 sq.m
Credit from 2.5%
Office space in a prestigious area, the house is in excellent condition. The facade of the house and the office windows overlook the main street and allow you to place ads here. The area of the office space is 120 m2, there are various rooms, a hall, a reception, workrooms, a meeting room, document storage rooms and 2 san.nodes. Ceramic tile...
EuropaHome
1 750 000 €
Commercial property on Costa del Sol, Spain
147 sq.m
This charming small hotel is located near the center of Marbella, 600 meters from the beach. The boutique hotel has 7 bedrooms, all with a separate entrance and bathrooms. The hotel has a beautiful tropical garden with a magnificent swimming pool. The hotel has a spacious terrace from where you can enjoy sea and mountain views. There is also a...
ESTATE BARCELONA
1 100 000 €
Commercial property in Barcelona, Spain
549 sq.m
Commercial premises on the ground floor in the elite Sant Gervasi district of Barcelona on one of the central thoroughfares of the city.
The total area is 549 sq.m. on two floors. Ground floor 259 sq.m. Basement 290 sq.m.
The facade is 14 meters.
The facade is 10 meters long. Several panoramic windows.
Currently rented: a well-known...
ESTATE BARCELONA
252 000 €
Commercial property in Barcelona, Spain
98 sq.m
Commercial premises in Barcelona, Poble Sec. A pedestrian street with high traffic.
The total area of the room is 98 sq.m.: the ground floor is 30 sq. m., the basement is 43 sq.m. and the alcove is 25 sq.m. The ceiling height on the ground floor is 4.5 meters.
Currently rented is a nail salon.
The contract was signed in May 2023 for a...
ESTATE BARCELONA
1 250 000 €
Commercial property in Barcelona, Spain
270 sq.m
Commercial premises in the Poblenou area of Barcelona. It is located on the central avenue. A high-traffic street. The room is angular opposite the pedestrian crossing. The total area is 270 sq.m. Several large storefronts. Currently rented is a pet store. The contract was signed on 06/27/2022 for a period of 12 years. The rental price for the...
ESTATE BARCELONA
150 000 €
Commercial property on Costa Brava, Spain
110 sq.m
Commercial premises in the city of Blanes on the Costa Brava. The total area is 110 sq.m. The large facade part. In excellent condition.
The estimated rental price is 850 euros per month.
There is a hood.
Profitability 6.8%
ESTATE BARCELONA
360 000 €
Commercial property in Barcelona, Spain
76 sq.m
Commercial premises in the Eixample district, Sant Antoni zone of Barcelona.
The total area is 75.5 sq.m.
Currently rented - nail salon.
The contract was signed on 10.11.2021 for a period of 5 years.
The amount of rent per year is 18,000 euros.
The property tax in the amount of 576 euros per year is paid by the tenant....
ESTATE BARCELONA
850 000 €
Commercial property in Barcelona, Spain
893 sq.m
Commercial premises in the Sants Montjuic area on the main thoroughfare of the city of Barcelona - Gran via de Les Corts.
The total area is 893 sq.m.
The contract was updated on 15.11.2022 to 30.09.2030.
The tenant is a home goods store, has been renting this space since 2011.
The rental amount per year is 45,600 euros.
The...
ESTATE BARCELONA
3 600 000 €
Shop in Madrid, Spain
1300 sq.m4.8% per year
ResidenceRemote TransactionBusiness on sale
The room is fully rented out. The tenant is a chain of grocery stores
Vartany Group
650 000 €
Commercial apartment building in Barcelona, Spain
1300 sq.m
EuropaHome
166 000 €
Cafe, restaurant in Barcelona, Spain
A small bar-restaurant in Eixample. It is located in an area of dense urban development, where licenses for restaurant activities are no longer issued. A constant flow of customers at any time of the year. HIGH PROFITABILITY - 5.46% NET PROFITABILITY.
Area: 144 m2.
A lease agreement until 2027.
The real estate tax is paid by the tenant,...
EuropaHome
920 000 €
Commercial property in Barcelona, Spain
287 sq.m
Commercial premises in the Eixample district of Barcelona. A building with a history and a beautiful facade. The total area of 287 sq.m.: 41 sq.m. on the ground floor and 246 sq.m. basement. Currently rented - bakery There is a license for the production of bread and bakery products. There is a hood. The contract was signed on 01.12.2023 for a...
ESTATE BARCELONA
390 000 €
Commercial property in Barcelona, Spain
54 sq.m
Commercial premises in the Eixample district of Dreta Barcelona. The total area is 54 sq.m. Currently rented - a candy store. The contract was signed in July 2023 for a period of 10 years. The period of mandatory execution is 1 year. For the first year, the tenant has a discount on rent of 200 euros per month. The rental amount per year is...
ESTATE BARCELONA
2 900 000 €
Commercial property in Barcelona, Spain
338 sq.m
Office space on Barcelona's most famous street - Paseo de Gracia. The total area is 338 sq.m. Good visibility from the street. There is an elevator in the building, a concierge.
ESTATE BARCELONA
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
5 750 000 €
Commercial property in Barcelona, Spain
194 sq.m4.52% per year
ResidenceCreditBusiness on sale
Commercial real estate in the most touristic zone of Barcelona, with a high flow of people. Total area: 119 sq.m. + 75 sq.m. terrace. The price of the asset: 5.750.000€ Financial data: Net annual income: 260.316€ Annual expenses: 660,06€ Net profitability: 4,52% The rental contract signed in 09/2019 till 09/2034. *The photographs...
Retail Experts Factory SL
610 000 €
Commercial property in Barcelona, Spain
152 sq.m
Commercial premises in the Nou Barris area of Barcelona. Commercial pedestrian street. The total area is 152 sq.m. on one floor, the room is angular. 5 large storefronts Currently leased - a chain of coffee shops. The contract was signed on 02/24/2022 for a period of 12 years. The rental amount per year is 32073 euros. The quota for the...
As usual, street retail is in stable demand in major Spanish cities. In Barcelona, this position has been trending among investors for the past three or four years, and the number of interested tenants is much higher than the number of properties being rented out.
Taking into account our recent realities, the requirements of investors for realty have changed in some way. Now many people want to buy a room in which the tenant can work during any quarantine: a grocery store, a bank, a pharmacy, or a production room that sells online.
The demand for hotels and shopping centers has significantly decreased. According to the latest CBRE data for the month of June, the percentage of decline in hotels was 68%, and in shopping centers it reached 76%.
Conclusion: the more opportunities a room has (licenses, permits, space for reconstruction), the more expensive and valuable the property is. In Barcelona, for example, at the intersection of Gran Via and Paseo de Gracia, a slender row of branded boutiques tore up a grocery store. People changed shop windows and thus handled the situation.
A store that has been converted into a grocery store on the corner of Paseo de Gracia and Gran Via in Barcelona. Even on the shopping street stores with everyday goods,or points of elite brands feel the most comfortable.
When it comes to central streets, the demand for premises still exceeds the supply. It takes from two weeks to a month and a half to find a tenant in such places.
Like any professional agency that works with investors, we always select only liquid locations for our clients. We are tied to the result, because we need to effectively manage this property after the transaction. Therefore, we recommend that owners seek help from professional market participants. This will reduce the time and eliminate or minimize the risks of lease agreements.
As before, street retail properties are in high demand in Barcelona. Confirmation of the reliability of the local rental market is the active use of Traspaso, when owners sell their tenants the right to rent. This is only possible, if demand significantly exceeds supply.
