Asian investors in Spain

National Director - Foreign Investments Capital Markets | National Director - China Desk

«The growing interest of Asian investors in Spain is already a reality»

Who would have guessed a few years ago that Asian investors were going to be one of the largest players in the Spanish Real Estate sector today? No one thought that large companies from Asia were going to have such high investment targets outside their own borders. And we are not only referring to investments in Real Estate assets, but also to the fact that Chinese and, in general, Asian macro-companies are also interested in purchasing Spanish companies or shareholdings therein, as we have seen in several transactions closed for this purpose.

Paloma Relinque and Isabel Benéitez, the heads of foreign investment at CBRE, have explained the key aspects of Asian capital entering Spain.

 

At the international level, how has Asian investment recently changed? Is there a “favourite region”?

P.R:

According to a recent study carried out by CBRE at the international level, in 2014 Asian investors allocated 24% more than the previous year, almost $40 billion, to the global Real Estate sector. This represents a considerable change and we believe this trend will continue or even increase in the short-medium term. In fact, $19 billion were invested at the global level in the first half of 2015, which represents a 13% increase on the same period of 2014.

«In the first half of 2015, most capital originating from Asia came from China»

I.B:

With regard to Asian investment in 2014, $13.7 billion went to the EMEA region, which puts this area in first place, followed by $12 billion invested in Asia, $8.9 billion in the United States, $5.2 billion in the Pacific region and the remaining investment in other areas of the world.

If we look at the first half of 2015, the EMEA region continued to hold first place with a total of $6.6 billion invested, a 26% increase on the same period of 2014. There were also significant increases in investment in the American continent (up 20%) and nothing less than a 63% increase in the Pacific region. However, investment in Asia experienced a significant drop of 40% with regard to 2014. This drop in investment reflects a market situation characterised by the shortage of assets and less liquidity.

 

What are Asian investors like? Where do they come from?

P.R:

Our recent experience tells us that there are various types of Asian investors. Chinese and Asian Real Estate companies engaging in business activities in the sector as well as large and highly diversified Asian business groups, whose main activity is not Real Estate, played an especially significant role over the last year. Insurance companies and banks are also very active.

I.B:

With regard to the origin of these investors, in the first half of 2015 China held the leading position as the largest source of Asian capital, with $6.1 billion invested, followed by Singapore with $4.4 billion in Hong Kong with $2.2 billion. Chinese investment also held first place in 2014, and was likewise followed by Singapore and Hong Kong.

«With regard to Asian investment in 2014, $13.7 billion went to the EMEA region, which puts this area and first place»

What forecasts are you considering with regard to the trend of Asian investment in Spain?

P.R:

We believe that the trend will be positive. On one hand, the “Golden Visa” –already in operation since the end of 2013– is without a doubt favouring the presence of a large number of investors in our market, by facilitating their unrestricted entry into the country. If we look at the case of Portugal, where we have seen that the number of transactions has significantly increased since launching this initiative, it is clear that Spain will follow this same path.

I.B:

The trend is indeed for Asian investment in Spain to develop favourably. The projections for Europe are very positive, with clear increases in the number of transactions, and, therefore, we can be fairly certain that the same thing will happen in Spain, taking into account that it is one of the European countries that is expected to cover the greatest distance.

 

What sectors in Spain have Asian investors shown the greatest interest in?

P.R:

Investors from China, and Asia in general, that are interested in investing in Spain until now have shown special interest in the offices, hotels, residential and retail segments. These preferences have become evident in various well-known transactions, such as the ‘Edificio España’ transaction, which combines residential, hotel and commercial premises in a single property, the shareholding of the Singapore government in GMP, the purchase of ‘Torre Espacio’ by Philippine Emperador Group or the purchase of the Ritz Hotel by Olayan-Mandarin Group, with Arab-Chinese capital. The purchase of the building at Paseo de Recoletos 12, in Madrid, which the Chinese bank ICBC purchased for its own use from the Madrid Municipal Council in 2012 to open its offices, is also noteworthy of mention.

I.B:

Based on recent international experience of the transactions closed, Asian investors prefer offices (54%), over hotels (16%), retail (11%), industrial (7%) and residential (5%). It is true that in Spain, as a result the weight of the tourism and leisure sector, the hotel segment is especially important for Asian investors and numerous acquisitions have recently been carried out. In addition to the purchase in 2015 of the Ritz Hotel in Madrid, other noteworthy acquisitions include the Porta Marina Hotel in Barcelona by Frasers Centerpoint Limited (from Singapore), the Valparaíso Palace Hotel in Palma de Mallorca by GPRO (from China), and the Asturias Hotel by Platinum Estates or the InterContinental Hotel purchased by Katara.

With regard to the residential market, interest in acquiring properties in Spain has increased. One interesting fact is that Chinese buyers are in 8th place in the ranking of residential property buyers (according to data from the 2nd quarter of the Association of Property Registrars).

«Offices, hotels and retail premises are the three types of assets preferred by Asian investors»

Does Asian investment enter at the beginning of the Real Estate cycle by investing in land?

P.R:

Another asset that Asian investors have their eye on is in fact land and they show a strong preference for large developments that have a variety of uses. It can even be said that they have no qualms about acquiring land that requires some type of action regarding town planning to be carried out for development.

I.B:

Yes, there are several Asian investors with a developer’s profile that show significant interest mainly in commercial and industrial developments. In addition, it should also be noted that these types of investors are willing to take steps, not only with regard to land but also assets built in cities, to renovate and remodel their surfaces, change their use, etc. for the residential, office and retail segments.

 

Are Asian investors more interested in cities or the coast?

P.R:

In both Europe and in Spain, Asian investors have focused on large cities such as Madrid and Barcelona. However, they are also showing interest in coastal areas, due to the attractiveness of the tourism and leisure sector.

I.B:

There are many examples in this regard, with numerous hotel transactions on the coast, the Balearic Islands and the Canary Islands. There are Asian investors that focus on these types of assets and not only on the properties themselves. We are familiar with Asian business groups that purchased shareholdings in hotel chains, such as HNA, the main shareholder of NH Hotels, with 29.5% of its shares.

 

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National Director - Foreign Investments Capital Markets | National Director - China Desk