Special focus : Real Estate
Investors in Spanish real estate need to find ways to enhance the value of assets
With ‘ tier one ’ property assets being sold at very high prices , investors need to find good local contacts who can identify the best market opportunities
With high-end real estate assets in such short supply , international investors hoping to identify new opportunities in Spain need to rely on contacts with a good knowledge of the local market , says Juan Gómez-Acebo , head of Real Estate at BDO Abogados .
“ Right now , it ’ s a challenge to bid for ‘ tier one ’ assets with a view to making money ,” he explains . “ There is not only huge competition from lots of potential investors , but these assets are already being sold at a very high price .” Given such prices , investors need to move away from standard ‘ plain vanilla ’ transactions and find creative ways of identifying opportunities to enhance the value of assets , Gómez-Acebo adds . “ But this is only possible with an in-depth understanding of the real estate market .”
“ Investors are in a much better position when there ’ s not a competitive process ,” says Gómez-Acebo . “ That ’ s why when the market is hot , they need someone local acting on their behalf to help them identify opportunities , find ways to enhance value and assess the legal risks involved – then they can then go back to the seller with a structured and reasonable offer .”
Local knowledge Furthermore , with the substantial reduction in available assets forcing investors to take more risks , having the right local knowledge is becoming an essential component of rigorous risk assessments . “ The market is very much based on contacts , people who are well placed within it ,” Gómez-Acebo says . “ International investors can ’ t just sit in London hoping to find opportunities by waiting to see what comes up – they need to talk to local people and know which sellers have properties or land with potential in a good location .” He adds : “ Only then can they see how they can add more value to their portfolio and confidently establish the level of risk they are willing to take .”
Foreign investors targeting student homes and housing for the elderly in Spain
Spain ’ s commercial property sector is returning to pre-crisis levels of activity , with € 8.8bn invested in the country in 2015 . According to a recent report by the global real estate consultant Knight Frank , this represented the highest level of investment since 2008 . Though the majority of the activity is taking place in key sectors such as retail , office space and tourism , there is also expected to be growth in more niche areas such as student accommodation and elderly care .
“ I see a particular interest from foreign investors in student residencies and also residencies for old people ,” says Xavier Serramalera Cercós , a Barcelona-based real estate partner at Roca Junyent . “ In Spain , it ’ s a market that exists , but there is a huge opportunity to grow in the future .”
The demand for student accommodation is largely dominated by German , British and Dutch investors , who see Spain as an increasingly attractive market thanks to its large number of students – over 1.4 million enrolled in 2013-2014 – and the high numbers of foreigners who come to study in the country .
With regard to the elderly care sector , while there is strong interest from foreign investors , Serramalera Cercós acknowledges that one problem investors ’ face is that the high cost of care means that it remains out of reach for many Spaniards still suffering from the economic crisis .
Serramalera Cercós adds that despite the fact that deal activity is , in general , picking up in the commercial property sector , this has yet to translate into higher rates for lawyers . “ Our challenge is always the same ” he says . “ Despite the fact that the market is increasing in terms of the number of operations and deals , it is still very difficult to increase our fees .”
Xavier Serramalera Cercós
www . iberianlawyer . com September / October 2016 • IBERIAN LAWYER • 55