Credit: ChatGPTCross-Border Real Estate Investments in Southern Europe: Spain, Italy, Portugal
High-level insights revealed from the most prominent real estate investors active in Southern Europe at exclusive GRI Club Meeting
December 9, 2024Real Estate
Written by Helen Richards
Southern Europe is increasingly seen as an attractive destination for real estate investments, offering strong economic positioning and a range of opportunities for diversification and returns, as the most prominent real estate investors active in the region revealed at the recent GRI Online Club Meeting, ‘Cross Border Investments in Southern Europe’.
The region presents a favourable environment for bargain hunting, where investors can find valuable assets at competitive prices. Particularly in Italy, investors are reporting interesting potential in the value-add and opportunistic space for 2025, and more specifically in the PBSA space, where demand is rapidly growing.
However, challenges facing investors were revealed to be surrounding obtaining permissions for real estate investments, a process which varies significantly between countries. In Italy and Portugal, the process is notoriously difficult, with long delays that hinder the scalability of investments.
In contrast, Spain is reported to offer a more investor-friendly environment, where the government's alignment with the investment sector makes it much easier to obtain necessary permits, streamlining the investment process.
During discussions, sector preferences among investors in the country varied from retail, to hospitality, to residential, to PBSA, showing the abundance of opportunities across sectors.
Discussions also suggested that the capital, Madrid, is particularly standing out, and currently experiencing its “golden age” for real estate investments. This is partly driven by the city’s substantial housing shortage, pushing demand for residential properties, and increasingly more in the rental sector, creating a favourable environment for investment in the booming Build-to-Rent (BTR) sector.
Given the scarcity of high-quality logistics properties, it often makes more sense to develop new spaces tailored to the needs of top-tier tenants, following a built-to-suit (BTS) strategy to ensure modern, efficient facilities.
In cities like Madrid, the rise of super-luxury hotels has further boosted the value of the hospitality market, while across the Southern European region, energy efficiency has become an important consideration for hotels, with sustainability increasingly influencing investment decisions.
ESG considerations are essential for transforming office assets into premium offerings, though achieving energy efficiency presents a challenge, requiring higher investments without guaranteed returns.
The conversation among Southern Europe’s real estate leaders will continue at the upcoming Ibero-American GRI 2025, on 8-9th April in Madrid.
Southern Europe is increasingly seen as an attractive destination for real estate investments, offering strong economic positioning and a range of opportunities for diversification and returns, as the most prominent real estate investors active in the region revealed at the recent GRI Online Club Meeting, ‘Cross Border Investments in Southern Europe’.
The region presents a favourable environment for bargain hunting, where investors can find valuable assets at competitive prices. Particularly in Italy, investors are reporting interesting potential in the value-add and opportunistic space for 2025, and more specifically in the PBSA space, where demand is rapidly growing.
However, challenges facing investors were revealed to be surrounding obtaining permissions for real estate investments, a process which varies significantly between countries. In Italy and Portugal, the process is notoriously difficult, with long delays that hinder the scalability of investments.
In contrast, Spain is reported to offer a more investor-friendly environment, where the government's alignment with the investment sector makes it much easier to obtain necessary permits, streamlining the investment process.
During discussions, sector preferences among investors in the country varied from retail, to hospitality, to residential, to PBSA, showing the abundance of opportunities across sectors.
Madrid is currently experiencing its “golden age” for real estate investments. (Credit: bearfotos | Freepik)
Discussions also suggested that the capital, Madrid, is particularly standing out, and currently experiencing its “golden age” for real estate investments. This is partly driven by the city’s substantial housing shortage, pushing demand for residential properties, and increasingly more in the rental sector, creating a favourable environment for investment in the booming Build-to-Rent (BTR) sector.
Logistics
Logistics real estate investments in Southern Europe are influenced by several key factors, including concerns over location and supply chain operations. The growth of e-commerce has emerged as a significant market driver, creating strong demand for logistics spaces. However, there is a lack of qualified assets in the region, prompting investors to partner with local developers who have better access to land and local expertise.Given the scarcity of high-quality logistics properties, it often makes more sense to develop new spaces tailored to the needs of top-tier tenants, following a built-to-suit (BTS) strategy to ensure modern, efficient facilities.
Hospitality
The hospitality sector in Southern Europe offers strong potential, particularly in value-add opportunities, where refurbishing and repositioning outdated hotels can yield good returns due to their exposure to risk. The sector presents challenges in terms of operations, but in spite of this, maintains excellent cap rates, making it attractive for investors.In cities like Madrid, the rise of super-luxury hotels has further boosted the value of the hospitality market, while across the Southern European region, energy efficiency has become an important consideration for hotels, with sustainability increasingly influencing investment decisions.
Offices
Southern Europe’s office market is tackling low occupancy rates and growing vacancy numbers across the region, except for prime office assets which continue to see strong rental performance. It was strongly suggested that success in this market largely depends on aligning office spaces with tenant expectations, and location remains a critical factor in this.ESG considerations are essential for transforming office assets into premium offerings, though achieving energy efficiency presents a challenge, requiring higher investments without guaranteed returns.
The conversation among Southern Europe’s real estate leaders will continue at the upcoming Ibero-American GRI 2025, on 8-9th April in Madrid.
