Real estate investment is not rebounding simply because interest rates have fallen. In the first half of the year, capital allocated 4.456 billion euros to asset purchases, a 13.4% drop from the same period in 2023, according to BNP Paribas Real Estate. The sector remains modest compared with the peak levels reached in 2022, when central banks shifted policy and investment hit a record high.
Although the European Central Bank began easing rates last June, moving from 4.5% to 4.25%, the central bank led by Christine Lagarde has stayed cautious about the pace of further cuts. The result, even with a dip in Spain’s 10-year bond yield to around 3.2%, remains above 3%. Real estate investors typically demand a risk premium for this financial instrument, which is considered a risk-free asset.
Consulting firms like CBRE already detect a change in market momentum that could lift figures in 2024 versus 2023, when investment fell nearly 40%. “Investment in property gains traction gradually as deals close in the first half of the year. This, coupled with the start of a normalization path for rates, supports an early-2024 forecast of 5% to 10% growth, leaning toward the higher end,” notes the firm in its latest report.
Hotels lead the investment
Hotels, once again, top the investment table. From January to June, investments reached 1.387 billion euros, accounting for 46% of total real estate investment. This is 26% below the first half of 2023, a period that saw two mega-operations by Abu Dhabi’s sovereign wealth fund. In 2024, the two major transactions involved the purchase of the Six Senses Ibiza hotel group by around 200 million euros and the acquisition of a 38% stake in the Gran Meliá Palacio de Isora and Meliá Cala Galdana complexes via a vehicle of Banco Santander, Moon GC&P Investments, for 216 million euros, a deal that also included a property in London.
Reasons behind this investor fervor in hotels lie in strong tourism figures in Spain, projected to exceed 100 million visitors this year. The sector is highly granular, with opportunities to improve existing assets, prompting many funds to position themselves in the country.
Shopping centers regain traction
Another sector showing solid performance is retail, particularly shopping centers: first-half investment rose 262% to reach 1.295 billion euros, according to BNP Paribas Real Estate. The period included notable transactions, including portfolios of assets such as the sale of ASG’s three assets in Barcelona, Bilbao, and Cáceres to entrepreneur Felipe Peraire Palos for more than 130 million euros. In standalone deals, Nuveen RE transferred Islazul Mall in Madrid to Henderson Park and Eurofund for 240 million euros, Lighthouse Properties and Resilient REIT acquired Salera in Castellón from DWS for 170 million, while Lighthouse Properties also bought H2O in Madrid from CBRE IM, and Kennedy Wilson sold Moraleja Green to Alpha Trust for over 63 million euros.
Beyond shopping centers, notable moves included Realty Income’s acquisition of 30 Decathlon stores in Spain for more than 200 million euros, the Israeli MDSR fund’s 22 supermarkets purchase by AEW, and the sale of 300 BBVA offices for 100 million euros. Gregorio Jiménez, owner of Burger King Iberia, sold the Gran Vía Madrid building to CBRE IM and IBA Capital for 70 million euros.
“Investment figures for the first half confirmed strong retail interest seen by late 2023, driven by solid asset fundamentals and positive macro indicators that influence消费,” CBRE notes. “Even in Q1, around 72% of total 2023 investment volume was recorded, and this trend is expected to continue through the year.”
Remainder of assets
The office sector accounted for only 8% of total investment, though it has traditionally been a focal point for funds and major portfolios. Total deals reached 373 million euros. BNP Paribas Real Estate describes this asset type as the one most affected by rate changes. Nonetheless, CBRE’s estimates point to a return of large-scale office transactions in the second half of the year. The competition for high-quality spaces is reflected in prime rent growth in major cities.
Logistics, the post-pandemic winner, has seen investment volumes shrink after the policy shift. Between January and June, deals totaled 446 million euros, largely due to the absence of large multi-asset portfolios. CBRE does not see signs of a rebound yet, though confidence in the sector is rising.
Lastly, the residential segment, including new-build housing and Build-To-Rent, plus properties under conversion to housing, accounted for 563 million euros, about half of 2023’s first-half total. Madrid dominated the activity, holding 75% of the transactions, while Barcelona receded and Valencia and Bilbao gained momentum. The sector also includes offices being converted into residential use, a major trend in central city locations.
In summary, the first half of 2024 showcased a diversified real estate market where hotels and retail led the pace, while offices and logistics faced tighter liquidity. Analysts expect ongoing normalization of interest rates to support steady, though cautious, growth patterns for the remainder of the year, with Spain continuing to attract international capital and a broader mix of asset classes contributing to overall market resilience.