In absolute terms, the office and hotel sectors were hit hardest by the pandemic; at the end of Q3, the office sector recorded just 1.5 billion euros in investment, down 40% from 2019. By contrast, other sectors such as logistics – driven by the rise of e-commerce – and the multifamily sector, are rapidly becoming firm favourites among investors, attracting similar volumes to last year. A number of large-scale transactions in the retail sector (including properties divested by Intu) have brought figures for 2020 above those of 2019.
The market is becoming increasingly polarised. While prime property continues to be of interest to both investors and occupiers, the value of secondary property is clearly starting to decline in certain segments and locations. Prime yields are unchanged across virtually all segments, with the exception of prime logistics properties, which have contracted to an all-time low of circa 4.75%. Although the retail sector has taken a real bruising, retail parks and supermarkets have proven resilient and are currently viewed as defensive investments.
Demand for property varies considerably. For instance, office take-up fell by 50% in Madrid in September and tumbled even further in Barcelona. While few can deny that remote working is here to stay, we are yet to see what kind of impact this will have on actual demand and working models once the pandemic is over. Although weakening demand and a rise in supply should eventually push office rents down, prime rents and average rents remain stable for the time being. By contrast, logistics take-up remains unchanged from 2019 across Spain, with the Central Area accounting for the bulk of activity. Operators from many different sectors have been expanding; e-commerce operators are particularly active and account for 50% of total take-up. In the residential market, according to the latest figures by INE (August 2020), housing sales are down 12.1% y-o-y, with resales dropping 16.1% to 24,626, while new-build sales increased 6.4% to 6,768.
Finally, there is still ample liquidity in the financial markets and, faced with the prospect of ultra-low interest rates in the foreseeable future, investors will continue to keep a close eye on any potential opportunities across all sectors, focusing primarily on ensuring a secure revenue.