• 2023 Spanish Real Estate Market Overview

    March, 2024

Real Estate investment reached €11.1 billion in FY23 (c. -32.6% vs. FY22). FY23 has been a very challenging year, marked by a high level of uncertainty and a persistent high inflation (decreasing from the second half of the year). In this context, the ECB continued raising interest rates during the year, reaching a level of 4.5% (+200 bps during the year) by September 2023, last month of interest rates hike. This macroeconomic situation has been translated into an inevitable rise in prime and secondary yields in most real estate sectors.

In this environment, most investors have decided to remain more cautious in their investment procedures, waiting for the drop-in interest rates expected for second half of FY24.

During FY23, investor’s less dependent on financing and with higher liquidity gained weight, such as family offices or private investors, who have made some of the most important investments in FY23. Madrid is the Spanish city that has attracted the highest investment volume (31%), followed by Barcelona (14%) and Málaga (6%).

Hospitality sector was the most active, reaching an investment volume of €4.1 billion, its highest volume since FY18, underpinned by some relevant portfolio transactions. Investment in resort hotels stands out, with the islands (Balearic and Canary) being where most investment has been made (52% of total investment).

Living sector reached c. €3.0 billion investment, representing 27.0% of the total real estate investment in FY23. Residential property prices experienced remarkable growth rates, with an increase of 4.5% recorded as of FY23.

The Logistic sectorattracted €1.5 billion in investment (c. -35.0% vs. FY22), largely due to rising financing costs and higher investors’ caution. Demand for logistics space, driven by strategic supply chain improvements and ESG requirements, is set to remain strong, and investors are starting to show interest in other Spanish provinces in addition to Madrid and Barcelona.

The Office sector reached a total investment volume of c. €1.2 billion (-57.1% vs. FY22). Madrid was the city with the highest investment, with c. €873 million. Take-up volumes decreased compared to FY22 figures (c. -14.0% vs. FY22 in Madrid and c. -20.0% vs. FY22 in Barcelona).

Retail achieved an investment amount of €1.2 billion (-28% vs. FY22). Retail parks led the investment, c. 36.0% of total invested in the sector with a total investment of c. €432 million.