Mr Bernat Mullerat
Partner

Bernat Mullerat is a partner at the Corporate and Real Estate Practice Groups of CUATRECASAS in Barcelona, Spain.

He has advised on many real estate transactions, mainly acquisition of shopping centers, hotels and office buildings, as well as hotel and tourist resort management. He advises on regulatory and contractual matters related to tourist and timesharing transactions. He also handles national and international transactions to develop and sell renewable energy projects.

He was co-chair of the Real Estate Section of the International Bar Association (2022-2023), vice-chair of the British Chamber of Commerce in Spain (2005-2010) and senior vice-chair of the Environment, Health and Safety Law Committee of the International Bar Association (2008- 2010).

He speaks regularly at national and international seminars and conferences on real estate and the environment.

He is the author of several law review articles on Spanish real estate and environmental law.

Key developments in the Spanish real estate market: resilience into a new cycle

The Spanish property market has long been a focal point for both domestic and international investors. Over the past few years, the market has experienced significant changes driven by economic factors, regulatory shifts, and evolving investor preferences. This article reviews the key developments and trends shaping the Spanish property market in 2024.

Economic recovery and market resilience

Spain’s economy has shown remarkable resilience in recent years, bouncing back from the global financial crisis and the subsequent European debt crisis. The country’s GDP growth has been steady, and unemployment rates have gradually declined. This economic stability has had a positive impact on the property market.

Commercial real estate

In recent years commercial real estate has gone through a difficult phase due to the increase in interest rates. Investment in commercial real estate has been severely impacted by these hard financial conditions. The high interest rate environment has been here for longer than expected.

The second half of 2024 is likely to bring a decline of interest rates to stimulate economic growth. This long-awaited economic measure will improve investor sentiment across most asset classes, but not affect them equally.

Hotels and leisure are the asset class that has best resisted high interest rates. The end of restrictions to international traveling after the pandemic resulted in a record investment year in 2023. According to the European Investor Intentions Survey, Spain is positioned in 2024 as the preferred destination for investors. Geopolitical stability has also played a role in the boosting of hotel investment.

Office investment has been impacted by the debate on the future of offices, increased lease flexibility and occupier demands. These global trends, also affecting Spain, plummeted office investment in 2023 by more than 40% decrease compared to 2022.

While office investment continues to be focused primarily on Madrid and Barcelona, there is a growing need for conversion of assets to account for tenant demand of more energy efficient buildings, ESG requirements and higher quality premises for adaptable occupier needs.

The tight fundamentals for office investment are driving some investors towards changes of use of obsolete office buildings to be transformed into living and hotel use.

Investment in retail assets suffered a sharp decline in 2023 due to a variety of factors, including financing conditions, high inflation, moderate consumption patterns. However, the prospects for 2024 seem more positive.

The curve of e-commerce has relented since the pandemic but is still a factor influencing the lower demand for retail.

The logistics sector has maintained robust interest from investors while showing timid signs of slowing down. Due to the steady growth of e-commerce, investor interest in logistics is focused on value-add products where asset development or repositioning offer better return.

There is a strong competition for logistic assets with growing sale and lease back opportunities.

Housing and other living assets

Housing continues to set a pattern of continued growth. Home prices have revealed a strong resistance to price decreases.

Construction costs, regulatory requirements and slow planning and licensing processes prevent construction from tackling the growing demand of new homes. Such higher demand is driven by the employment growth, higher salaries, immigration and, in certain areas, robust demand by tourism. Demographic growth is pushing housing prices up.

Access to housing is an extremely delicate matter for Spaniards, particularly for households with lower income and acutely in certain areas. National and regional governments have adopted measures to address increasing rental prices. Tight rent controls have been imposed in 140 towns and cities in catalonia. These measures have proved so far as having little effect in the fight against rental increases.

The deficit of government sponsored affordable housing seems now systemic due to the lack of governmental investment for many decades.

The above constraints contributed to rapid development of build to rent schemes since 2021. The appearance of this asset class is caused by the strict requirements for accessing to the mortgage market for many households as well as by a change in sociocultural patterns. However, the sharp growth in build to rent is now slowed down due lower yields and regulatory changes addressed to reduce rents.

Development and investment in alternative living asset classes such as senior, purpose built student accommodation and co-living are expected to continue growing due to the robust fundamentals behind each of them.

Conclusion

The Spanish real estate market is poised for significant growth and transformation. Sustainability, flexible workspaces, e-commerce, logistics, retail transformation, and investment dynamics are key trends shaping the market.

Stakeholders who stay ahead of these trends and adapt to changing market conditions will be well-positioned to capitalise on the opportunities that lie ahead. As always, careful planning, strategic investments, and a keen understanding of market dynamics will be essential for success in this evolving landscape.