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The Spanish Logistics Market Enjoys Strong Momentum From Underlying Trends

Fundamentals for Space in the Sector Are Likely To Remain Positive Despite Short-Term Headwinds
Logistics is standing up to economic headwinds in Spain. (Getty Images)
Logistics is standing up to economic headwinds in Spain. (Getty Images)
CoStar Analytics
October 21, 2022 | 1:22 P.M.

The recovery of the Spanish economy from the pandemic and the upwards trend in online retail sales continue to support the logistics sector despite geopolitical uncertainty in Europe.

The economic outlook for 2022 is still positive with gross domestic product set to grow by 4.3%, 1.2 percentage points above the EU average, according to Oxford Economics.
 
Meanwhile, e-commerce adoption continues to grow. According to the latest data released by the Spanish National Markets and Competition Commission (CNMC), e-commerce turnover grew by 25.3% year on year in the first quarter of 2022, exceeding €15.6 billion euros while transactions increased by 8.2%.

There is potential for online sales to grow as Spain is still behind mature European markets in terms of online shopping. Sixty-seven percent of individuals in Spain had bought or ordered goods or services for private use compared with 76% in Germany, according to the latest data from Eurostat.

While e-commerce continues to grow in Spain, the pandemic has highlighted the importance of supply chain control. Like other countries, Spain could benefit from the reconfiguration of supply chains via near-shoring or re-shoring, which could bolster warehouse demand, especially for high-quality, sustainable properties.

The strong demand-supply imbalance especially for good-quality assets in Spain, has driven investor demand with several pan-European portfolio transactions in 2022 involving assets in the country.

A joint venture between VGPand Allianz Real Estate announced the acquisition of a pan-European portfolio in March with a transaction value of €364 million, comprising 13 assets with seven in Spain.
 
And in May, Crossbay announced the acquisition of a 120,000-square-metre European warehousing portfolio with assets located on the outskirts of major cities such as Madrid, Barcelona, Seville and Vigo.

In September, CoStar News reported Prologis’s acquisition of a portfolio for €1.585 billion which includes properties in Madrid and Barcelona.

 The capital deployed by key international players since September highlights that global interest in the Spanish market remains strong.

Nuveen Real Estate and Engel & Völkers Development have signed a forward funding contract for the development of two logistics projects totalling more than 21,000 square metres in Madrid, the Cinco Días newspaper said.
 
Eurofund Logistics Capital Partners has closed a major deal with Costco Wholesale to develop its first European fulfilment centre in Spain, a 140,000-square-metre grade A logistics facility in Torija, along Madrid’s western A2 corridor.

Investors are not only targeting core locations like Madrid and Barcelona but are tapping into other markets like Green Logistics by Aquila Capital that has bought 130,000 square metres of industrial land across two plots near Sevilla.
 
Other international players continue to be active in October like the German bank Pbb which has financed Hines' Spanish logistics purchase with a €25 million loan as reported by CoStar News.

Looking ahead, the current environment of rising interest rates, inflation and economic slowdown is causing institutional buyers, developers and operators to adopt a "wait and see" stance and to revise their expansion plans.

Logistics firms are facing challenging times as economic monthly indicators show a steady slowdown in momentum. The composite PMI index declined for a fourth consecutive month in September, falling to 48.4, the lowest level since January. Consumer confidence is weakening, pointing to a cut in consumer spending over the coming quarters while fuel and shipping costs are rising.

Amazon has suspended the construction of new warehouses in Spain until 2024, news website El Confidencial reported on19 September, though, this move comes after an accelerated expansion in Spain with over 20 centres opened in 2021 and is part of the retailer's global strategy to revise its logistics network.

On the investment side, Segro in consortium with PSP and Logicor, has withdrawn its proposal to partner with AENA in the 153,000-square-metre development project next to Adolfo Madrid-Barajas airport due to increased financing costs. Segro’s economic proposal was close to €250 million euros, as Expansion reported. AENA finally awarded it to P3 Group with an investment proposal of €168 million.

Despite decisions and expansion plans being delayed, both occupier and investor demand outpace the amount of available quality supply. The Spanish logistics market and especially modern and sustainable warehouses are likely to keep demonstrating their resilience.