Spanish economy is outperforming the eurozone with gross domestic product growth forecast at 2.4% for 2023 compared with just 0.5% for the eurozone. The main drivers for this healthy growth are a resilient labour market and a strong recovery in tourism. Even though Spain’s economy is set to moderate in 2024 down to 1.25%, it is still expected to outpace the EU average by 0.61 percentage points.
The robust economic growth and the imbalance between real estate supply and demand is attracting investors despite the current environment of uncertainty and high interest rates.
The living and hotel sectors are attracting most of the investment so far this year.
Among the most notable hotel transactions, the acquisition in July of the Mandarin Oriental in Barcelona by the Saudi company Olayan, stands out.
More recently, in September, the Abu Dhabi Investment Authority completed a deal on 17-hotel Spanish Portfolio.
In October, Singapore's sovereign wealth fund GIC reported it has invested in a 35% stake in Hotel Investment Partners, part of the Blackstone Group, which boasts a portfolio of 72 hotels across Spain, Italy and Portugal.
Sovereign wealth funds, especially those from the Middle East, are particularly active reflecting the confidence of international investors in the Spanish market.
In 2023, Spain was the fourth largest European market in terms of commercial real estate investment volume after the UK, Germany and France with international investors accounting for more than 50% of total investment in Spain.
The year 2024 is set to be another challenging year for real estate investors, but Spain is likely to continue to provide opportunities to investors especially in the hotel, living and logistics sector.
Prices in Spain haven’t adjusted as fast as most dynamic and liquid markets such as London, but a reduction in bid ask prices is expected for the next 12 months, which could boost real estate investment.
In the hotel sector, investors are expected to continue betting on luxury hotels in the main tourist destinations such as Madrid, Barcelona, the Balearic Islands, Costa del Sol and the Canary Islands. Spain has consolidated as a global tourism destination with strong tourism numbers in 2023, despite the European economic slowdown which could imply that people are prioritising leisure and travel.
In the living and logistics sector, the continued imbalance between supply and demand in Spain's main cities should generate further opportunities for investors, especially in products such as coliving, student housing, senior living, and urban logistics. Alternative sectors such as data centres are also set to attract additional investment.
However, the recovery of the real estate market is likely to be uneven, depending on the type of product and locations.
Within Spain, Madrid clearly stands out. The capital of Spain is considered the third most attractive place to invest in Europe according to the ULI Europe and PwC Emerging Trends 2024 Report. This report reflects the views of 1,089 property professionals who completed surveys, were interviewed or took part in a series of roundtable meetings across Europe.
Madrid is considered a city open to tourism, students and immigrants. It offers a stable environment and benefits from good infrastructure. As a result, it has risen through the rankings over the past years from rank 6 in 2022 to its current third place.
Barcelona, ranked at number 10, also keeps a good position among the most attractive cities to invest in Europe. More and more investors are also looking beyond Madrid and Barcelona with, for example, the city of Malaga seen as a rising star.