On the opening day of the first The District real estate conference in Barcelona a group of about 50 protesters managed to enter the hall and engaged in a sit-down protest, shouting slogans against "speculators" that they held responsible for evictions and unaffordable rent increases.
To the frustration of the organisers and participants, the opening was postponed by two hours while the police slowly removed the protesters from the premises. Unfazed by the events unfolding, one local shrugged his shoulders and said: “Don’t worry, it is just politics”.
And he was right: politics and regulations play an increasing role in real estate markets and therefore activist groups target real estate events for political gain. This is not an exclusively European phenomenon. Last September protesters gatecrashed the National Multifamily Housing Council Meeting in Washington DC demanding governments interfere in housing markets.
Typically, interference comes in three forms:
- Expropriation or bans, which are rare, but for example Amsterdam’s city council imposed a ban on new hotel initiatives within the city’s inner rim in 2017.
- Cumbersome and extensive planning permit systems causing many governments to miss new housing targets as a result.
- Rent controls, which for example are enshrined in law in Germany where authorities set the Mietspiegel (rent index) by which rents can be increased year on year.
In general, the result of this interference is a lack of supply which then leads to higher rents creating more political pressure.
In Barcelona, like in many European cities, affordable housing is a major political issue exemplified by the city council's efforts since 2021 to ban Airbnb to protect long-term housing. The District protests should be seen as more pressure on the local government to limit rents and increase housing availability. Paradoxically, the protesters may be arguing against the people which can alleviate their grievances: institutional investors.
In defence of the protesters, there is a historic precedent in Spain. The housing market there was scarred by the global financial crisis which almost wiped out the sector after two decades of unbridled construction. The banks were left with large non-performing loans portfolios which were sold to private equity firms whose workout programmes saw Spanish families being evicted leaving a bitter taste with activists who now seem to blame “vulture funds” for every housing crisis.
While home ownership is high in Spain at circa 75%, the renter’s market share increased significantly during the last decade and is expected to grow even further, particularly in the big cities. Ultra-tight rental accommodation markets in both Barcelona and Madrid are pushing up rents with many of the available rental properties owned by capital-constrained smaller operators.
This growing demand and lack of supply is attracting institutional investors with experience in other European countries where institutional multifamily markets are more advanced.
Earlier this month, Spanish developer Culmia delivered the second phase of Vila Bonaplata comprising 210 built-to-rent apartments in La Marina del Prat Vermell in Barcelona to German fund manager DWS which paid a total of €80 million for the project.
On 3 October, Aviva Investors and Layetana Living, a leading Spanish developer, announced the creation of a new partnership to develop a portfolio of more than €500 million of sustainable build-to-rent homes in Spain. The partnership already secured its first development project under the advice of global property consultancy Knight Frank, acquiring a 71-unit scheme in the Sants district of Barcelona and expected to be delivered in 2023.
US investors are also active. In April, Ares Management, via its subsidiary Avalon Properties, acquired five built-to-rent complexes in Madrid for €60 million, while in June fellow US investor Greystar forward purchased a substantial flexible accommodation portfolio of 2,500 units in Madrid, which according to Greystar, is characterised by a significant und-r supply of all types of rental accommodation, including flexible and attainable solutions.
Despite disturbing The District conference for the wrong reasons, the protesters unknowingly delivered two important messages to multifamily investors in Spain. Firstly, the hardship following the global financial crisis has not been forgotten, but more importantly the cry for more and better affordable rental accommodation underlines the strong fundamentals for a growing institutional multifamily real estate market in Spain for years to come.