Back Again

The recovery of Spain's residential and industrial real estate market after the COVID-19 pandemic will be relatively quick.

Spain’s real estate sector was growing slowly but surely before the pandemic brought it to a standstill. The reason behind Spain’s prosperous real estate sector was threefold: first, many affluent European citizens like to have a chic residence in sunny Spain to flock to during the colder months of northern Europe. Moreover, the Spanish government has allowed foreign citizens to acquire a permanent residence permit in Spain by purchasing high-value real estate in the country. Spain currently grants residence visas to real estate buyers to live if the value of their property is equal to or more than EUR500,000. This, too, has created a spike in demand for real estate in Spain. Even more importantly, however, Spain has become home to a large number of industrial real estate developments such as warehouses and last-mile delivery depositors in light of the growth in e-commerce after the pandemic. The combined demand by domestic, EU, and international buyers, coupled with Spain’s robust logistics sector, was turning the real estate business into a real money-spinner until, that is, the COVID-19 pandemic showed its unpleasant face in Spain, and brought the real estate sector to a halt in the early 2020. There are hopes, however, that the Spanish property market—and the huge supply chain behind it—are rising again.

Most commentators believe that with the gradual lifting of COVID-19 restrictions across Europe, the real estate market will initially experience a rise in demand from the domestic market, which will kickstart the country’s property sector: the market has been practically on hold throughout 2020 and even the first few months of 2021, and now the accumulated domestic demand is about to hit the market and put an end to its months of stagnation. At the same time, e-commerce giants that are trying to secure themselves a foothold in Spain are on the lookout for large, industrial properties. Gustavo Cardozo from Panattoni Europe told TBY that “we have become the leaders in the development of logistical real estate buildings, with more than 6 million sqm developed in the last four years, and that figure will increase dramatically in 2021,” adding that the pan-European logistical real estate developer’s entry to countries such as Spain is essential for his company’s market position in Europe.

The property market truly needs this shock, so much so that the association of promoters and constructors in Spain (APCE) has already asked the government to present the domestic buyers with an array of incentives, including the reduction of VAT for new developments from 10% to 4%.

All in all, “the general optimistic belief between promoters is that COVID-19 effects on the newly built property market would only be a delay in launching new promotions, but they do not foresee significant reductions on the price,” according to Houses in Spain, a major real estate agency.

Other commentators, however, may not be quite as optimistic. Although the southern European nation will enjoy a 4.4% GDP growth after a bleak 2020, the real estate market may not regain its former prosperity anytime earlier than 2022, because the planning, construction, and marketing of real estate—whether residential or industrial—is a time-consuming matter. There is always a lag of 1-3 years between a perceived rise in demand and the point where properties become ready to meet that demand in the market.

Nevertheless, construction work is already underway, though it will take some time until the keys to villas and apartments under construction in areas such as Alicante, Andalusia, Murcia, and Costa Blanca are ready to be handed in to their happy new residents. It will thankfully take a shorter length of time for logistical developments across Spain to become ready and serviceable.

Fortunately, the infrastructure needed for resuming construction of logistical facilities is relatively untouched by the pandemic. Logistics giants across Spain are eager to return to business as usual. Logicor is one such company, which operates a large array of logistics facilities across Europe, including in Spain.

Alejandro Rumayor Fernández, Logicor’s country manager for Spain, noted in an interview with TBY that “the Spanish market is a strategic growth market for the company.” He went on to add “It is easy to see that the growth of e-commerce in Spain makes the country an extremely attractive market to pursue in terms of logistics investment and growth,” adding that his company is willing to keep a presence in strategic Spanish markets “such as Barcelona and Madrid” as well as in secondary markets where modernization is underway.

The fact that major European logistics companies have not lost faith in Spain, even during a period of stagnation and slowdown in construction, is definitely a good sign for the nation’s industrial and residential real estate market: companies are sure that there is money to be made in the country’s property development sector, and their continued presence in the country can speed up the launching of new construction projects in the post-coronavirus Spain.

Given the high demand for real estate in Spain and the nation’s world-class brand image, a quick recovery is not too optimistic. The property market, after all, recovered pretty quickly after the financial crisis of 2008. Juan José Vera Villamayor, managing director of Montepino, a logistical real estate developer formed in Zaragoza, remembers that “we were the first to promote a new logistics area since the 2008 crisis, and we sold that asset to a foreign investment fund.”

There is hope that the recovery will be even easier this time. The COVID-19 has created a change in lifestyle for many creative professionals, executives, and freelancers. Many such people are embracing the new culture of teleworking, and is there a better place than the picturesque Spain to settle down and telework? At the same time, the pandemic has increased the importance of e-commerce and last-mile warehousing; with a population of 46 million Spain is an important target market for many e-commerce giants, who wish to secure themselves industrial warehouses and distribution centers in the country. This, too, will surely translate into more demand for property in Spain in the coming years.

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