ALLEN & OVERY, International Law Firm in Barcelona


Future trends and challenges in the European Real Estate Market 2022

Santiago de Vicente reflects on the impact of Covid-19 restrictions in Spain and the effect that the possible future lifting of these measures will have on investment levels. He also examines potential future limitations on residential lease rents and discusses the growth of ESG and sustainability initiatives.

“ This trend I’ve seen in the Spanish real estate market, is the very strong appetite for hotels particularly Madrid and Barcelona but also across the Spanish coast. We have seen and we continue to see a large number of logistic transactions and considerable interest from new investors even those who were previously focused on other asset classes.  Logistics have performed very very strongly, as well since the second half of 2020 and we expect there will be a large number of logistics transactions both for operating assets and assets to be developed in the last part of the year. Niche products such as senior living  and also student accommodations have been identified by many investors as “hot” assets in Spain mainly because the current and the supply of quality product. Data centers are also emerging are becoming a more popular choice, even if cities like Madrid or Barcelona are not considered Tier 1 cities for these purposes, the growing interest of e-commerce giants in the Spanish market is also attracting a lot of capital.  Also or equally, in past the residential sector was normally limited to local Spanish “reits” so teams and local developers we are seeing also a lot of interest in foreign investors interested in directly developing attractive residential offerings, including build to rent. Commercial premises and office have struggled a bit more post pandemic but there have been still some transactions and we expect that the good quality product will still have its role".


Future legal changes in Spain

In terms of the biggest legal changes impacting on the Spanish real estate market Spain’s peculiarity first of all is that we have 17 regions with substantial legislative power in relation to very important aspects for the real estate market such as planning and licenses.  Different measures where therefore enacted because of the pandemic both at the national and local level. Such measures were focused on protecting tenants and their financial distress, which have have had an important impact on the ability of the landlords to recover unpaid rents to enforce bank guarantees. It is suspected these measures will be lifted soon as the pandemic retreats, but protection for defaulting tenants is a concern for investors because that certainly limits their ability to make their contracts being fulfilled by the tenants and it has also a component of protection of these quarters that is a big concern, especially in regions such as Catalonia. News explain that the Spanish government will approve a limitation on the rents as that has happened in other markets such as the German market. This has been in the press for many months although it has been delayed due to the pandemic. According to the latest news, the reform will be minor than initially expected and it will be focused on providing tax advantages to the landlords and fostering the possibility that landers accept some caps in relation to updates of rents to be renewed. The final outcome remains to be seen.

Finally the Spanish government is very focused on the 2030 agenda, and the new sustainability conditions for the transition to a low carbon economy. ESG logistic legislative measures and these requirements, and will directly impact upon all kinds of real estate investments and developments”