06 June 2011

Spain's property market hard to crack

Spain's property market is at times too expensive and offers only occasional access opportunities for foreign investors. According to research experts at Henderson Global Investors in the retail sector relatively more opportunities to identify. "Only those with their prejudices against Spain on board raises and object-based going on, can locate attractive real estate. However, a prerequisite for engagement and risk taking a long breath, "says Stefan Wundrak, director of research at Henderson Global Investors. "The very high prices for core objects and the risks can contribute to many investors still daunting. We therefore expect continued low investment sales from the Iberian Peninsula. "

Occasional opportunities for retail properties
Top-dominant shopping centers and regional retail centers are the least affected by the crisis. Rents in this sector have fallen in part by only about 3 percent. The biggest opportunities are therefore, according to Henderson in good to very well-positioned objects. Here, the net initial yields are at 6.25 percent to 6.5 percent, significantly higher than in Northern Europe, where comparable shopping centers are currently trading at around 5 percent. For objects from the second row in Spain recorded markdowns 100-200 basis points compared to core objects.

"The rental market is strongly polarized between good objects and the rest retailers struggle to get into the best objects, and show interest in return null weaker centers. Foreign investors are therefore advised to use local experts in asset management expertise, and to examine every property carefully. Only then can the undoubted risks dominate, "said Wundrak. For the retail market was saturated in some regions clearly. "Only local market experts to identify the really attractive objects and estimate of why some centers and some do not."

Office market: low of rental development reached in central downtown locations
On the Spanish office market expected before 2012 Henderson attractive rental rates. The relatively low rents and the low volume of new construction of high-quality office space should then take care of rising rents. In the crisis, the rents for prime properties in prime locations in some cases by over 30 percent have dropped. Only London and Dublin Europe were more affected by the recession. "The low point for the rental development in central city locations in Madrid and Barcelona is reached. In the medium to long term, we expect slowly rising rents. Investors will need a long time, and must take into account setbacks, until the economy recovers, "said Wundrak. Unlike the situation for objects in locations outside the center are: Due to the high vacancy rates, Henderson can expect further rent declines.

The office market in Spain is very volatile and essentially focuses on Madrid and Barcelona. The net initial yields for prime properties in prime locations with long-term leases have leveled off in Madrid at 5.25 percent. Transactions are currently limited almost exclusively to the core segment. At peak objects in prime locations in the price range below 50 million € to draw a strong competition from local players. "There are only few opportunities in the core and core-plus range. International investors have made it very difficult to get, compared to the aggressive local investors offered to the train. Often they therefore differ on a few central locations, in which one should be due to the high vacancy rates selectively and dare with a strong local asset management in the back, "says Wundrak. In established office locations outside the city stands to net initial yields are at 6.25 to 6.75 percent.

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