Real estate investment is expected to rise through 2024 as asset prices correct from 2023 levels, with Spain emerging as a leading market within the European Union. This key finding comes from the 2024 Emerging Trends in Real Estate report, prepared in partnership with PwC and the Urban Land Institute, which analyzes the European market each year.
Experts say the prior year felt like a storm, but there is now a bit more clarity. Still, the outlook remains cautious. Investment declines of 50 to 60 percent were noted, reflecting a harsh adjustment. Inflation and high interest rates continue to create uncertainty, though there is a cautiously more optimistic tone about the year ahead, according to Rafael Pérez Guerra during the report presentation, where PwC partners and other industry leaders participated.
Looking ahead, forecasts for 2024 are more positive despite weak current investment data. Antonio Sánchez Recio, head of PwC’s Construction, Real Estate and Services cluster, notes that 2024 will be challenging, yet the market is likely to stabilize as the year progresses. He emphasizes that the crisis affects asset classes differently and that the sector is navigating a real estate cycle rather than a uniform downturn.
Spain’s position in the EU market remains notably strong. Market consensus points to better fundamentals in Spain compared with many peers: healthier average debt, more moderate price growth in recent years, and stronger economic momentum. A partner of the Accords, Richard Garey, argues that Spain benefits from a favorable mix of consumption, employment, tourism, and economic activity that supports higher relative value. A senior partner at Azora, Cristina García-Peri, adds that investors view Spain as less exposed to distress signals than some Northern European markets where leverage is higher.
Alternative assets attract investor attention
The PwC-ULI report highlights a growing appetite for alternative assets that still register limited transaction volumes. Data centers, coliving, healthcare facilities, elder care, and student accommodations stand out as favored categories, yet they see relatively few deals. Traditional prime office spaces in central or suburban locations remain the most traded assets but are not the top growth drivers for investment demand.
Cristina García-Peri points to a shift toward specialization within real estate. Historically, investors bought a single asset and held it for a decade or more. That model still works in some cases, but demand now leans toward diversified portfolios and income streams. Alternative assets are becoming central to strategic plans, including housing models and data centers, especially in Spain, where the supply mix is evolving to meet new needs.
David Martinez, chief executive of a major Spanish developer, supports a robust role for new-construction housing in Europe. He notes that any investor considering Europe should include Spain, underscoring the country’s growing appeal despite recent sales slowdowns. He also cautions that the supply-demand imbalance will likely persist in the coming years, sustaining activity in the market for newly built homes.
Miguel Casas, Stoneweg’s managing director, comments on the hotel sector, where buyers and sellers still have divergent price expectations. He observes more price adjustments in Spain than in neighboring Portugal or Italy, with a continued need for price corrections to align market values with demand. Cristina García-Peri adds that price expectations differ across buying and selling sides, signaling ongoing negotiation dynamics.
Other assets, including logistics, retail, and office spaces, are experiencing value corrections. The Azora analysis indicates a noticeable downturn in logistics values, with offices and some retail assets facing further declines. Some properties appear unattractive due to limited future liquidity, while logistics remains relatively resilient. The takeaway is that certain office and retail segments may struggle to regain previous highs while logistics holds greater potential for value stabilization.
Madrid stands out in Europe
In the annual PwC-ULI rankings, Madrid emerges as Europe’s third most favored city by investors, trailing only London and Paris. London is valued for liquidity and market depth, with rapid price adjustments already evident. Paris shares a similar appeal, boosted by tourism and the upcoming Olympic Games. German markets currently show less dynamism as macroeconomic conditions weigh on valuations, a factor cited by Richard Garey.
Madrid’s ascent is attributed to open tourism, strong infrastructure, and stable political conditions that support steady growth. However, Barcelona faces headwinds related to political developments and rental-market regulations, which could hinder its attractiveness to capital. Cristina García-Peri notes that cities like Málaga, Valencia, Alicante, and Bilbao are becoming appealing targets for niche or alternative assets, expanding the investment map beyond the traditional capitals.
Overall, the report underscores a nuanced recovery path for Europe: Spain benefits from competitive fundamentals and a diversified asset mix, while investors increasingly seek specialized, asset-class driven opportunities. The momentum in 2024 will depend on how inflation, interest rates, and policy responses unfold, but the outlook remains cautiously affirmative for a broader recovery and continued interest in Spain as a strategic market in Europe.