A little over a year ago, an illegal referendum took place in the Spanish region of Catalonia in which voters opted to break away from the country. The height of the crisis came when the Catalan government declared independence unilaterally, swiftly followed by Madrid suspending the region’s autonomy.
It is clear today that the separatist push has failed, with Catalonia’s leaders in jail and the former Catalan president, Carles Puigdemont, in a self-imposed exile in Belgium. While the crisis shook investor confidence – including that of real estate buyers and financiers – interest in the region, particularly Barcelona, has revived; investment in Catalan commercial property went up in the third quarter of 2018 by 38 percent, year-on-year, to €808 million, figures from CBRE show.
Although the investment figures captured between July and September reveal a rebound in investors’ faith in the region, the aggregate total for the first nine months of the year amounted to €1.3 billion, down 29 percent over the same period a year ago. In contrast, overall Spanish volumes increased 34 percent during the period to €13.38 billion. It is difficult not to conclude that political uncertainty during the first half of the year impacted capital flows into Catalonia.
The third quarter of 2018, however, brought winds of change. Spain’s socialist leader Pedro Sánchez became prime minister, following a vote of no confidence sparked by anger over corruption within Mariano Rajoy’s conservative People’s Party. Sanchez has shown willingness to engage in dialogue with Joaquim Torra, the current Catalan regional president, to solve the crisis.
During Q3, it appears investors’ positive sentiment towards Barcelona trumped any lingering concerns about the political crisis. Catalan office investment more than doubled in Q3 to €445 million year-on-year. That is a positive signal, considering the crisis did present a genuine threat to the segment; in December last year, more than 3,000 companies moved their registered offices out of Catalonia to other regions of Spain. Take up for offices in Catalonia, however, hit record levels between July and September; more than 100,000 square metres were rented in the third quarter of the year, with demand dominated by firms offering flexible space services, such as Regus, WeWork or Utopicus, CBRE said.
Barcelona ranks high on investors’ wish lists. Office rents have risen continuously since 2013, although many see room for growth compared with other major European cities. Barcelona’s prime office rent, at €22 per square metre per month, compares with peak office rents in Paris and London at €70.80 and €117 per square metre per month, respectively, according to BNP Paribas Real Estate.
Sources suggest debt is available from several sources for Catalan property, although when tensions over Catalonia’s quest for independence started a year ago, some debt providers expressed concern. Starwood Capital, which is present in the market through a €46 million loan backing a hotel in Barcelona, said at the time the firm would prioritise opportunities relatively insulated from the uncertainty of the Catalan crisis.
The lesson to draw from Catalan property market data since the crisis is that investors and lenders do pull back from markets when political uncertainty rears its head. However, attitudes to a market – especially one as highly regarded as Barcelona – change quickly once such tensions ease. If Catalonia had split from Spain, the story could be entirely different, but, for now, it seems property players have prioritised positive market fundamentals over political worries.
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