The District Barcelona

Last week The District Real Estate Investors, the international real estate show organised by El Consorci, was held in Barcelona, reviving what was in previous years the Barcelona Meeting Point, but with a more international focus if possible.

In the different presentations that took place with the main actors of the Spanish real estate market, they talked in general terms about the worrying current situation of the sector caused by the pandemic and the war in Ukraine, which has led to a rise in construction costs due to the lack of raw materials, an increase in energy costs, which has caused inflation to soar, with the consequent rise in interest rates, which is causing demand to slow down, and although we cannot speak of a crisis in the sector like the one that occurred in 2008, it is true that the agents have a WAIT & SEE approach.

The star product of the show was undoubtedly the residential sector, as was to be expected. The main property developers have already sold 60% of their developments and it seems that the sector will hold up well until 2024, although new projects to be developed by 2025-2026 may stagnate.

The lack of new rental housing in Spain and the difficulty for young people to access affordable housing means that new opportunities are developing for investors, developers and managers in the Build to Rent market with products such as Coliving and Senior Living, and in Public-Private Partnerships with the participation of local councils in the transfer of land in surface rights, although for the latter, a stable legal framework is needed, a homogenisation of housing taxation, and for the banking sector to present new financing models.

On the other hand, there is a very old housing stock; it is said that 60% of homes were built before the 1980s. Next Generation funds associated with energy refurbishment in Europe may be the option to refurbish buildings, reducing energy consumption, improving comfort and the value of the properties.

It seems that the rest of the sectors may suffer stagnation, or even a decrease if jobs are destroyed.

The one that seems to be most affected could be the office market depending on its location. They will have to be reformed by creating more flexible spaces, and incorporating common areas with services for users.

Shopping centres may also go down if consumption slows down. They should be reformed by offering a product mix that combines Retail, F&B, Leasure, Gym.

The logistics sector may slow down its growth, although in the long run it will grow due to e-commerce.

All the speakers agreed on the need to apply ESG criteria to real estate assets. It is already a requirement of investors, administrations, banks, insurers, and also users, although to a lesser extent.

On the one hand, the carbon footprint must be reduced if we do not want to burden the planet and commit to a sustainable territory. It is currently estimated that the construction sector is responsible for 40% of CO2 emissions, and that, in relative terms, the construction process accounts for 60-70% of this percentage. Therefore, the process of industrialisation using low CO2 emitting materials will have to be considered as a key factor.

On the other hand, buildings will need environmental certifications such as BREEAM, LEED. WELL, if they want to be more sustainable, although this will have a higher cost, but it will undoubtedly mean a higher value for the assets.

At VMT & Associates we guarantee Investment Funds, Asset Managers, Real Estate Developers, control and security over all risks associated with the processes of purchase and transformation of their real estate assets, whether plots or real estate.

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