The real estate sector has assumed that the number of tenants in Spain will increase in the coming years and has started to invest in rental-oriented products. This segment – called multifamily and within which are the residences for students or the elderly— was the one that led real estate investment in Spain in 2020, with 2,600 million euros, 28% of the total.
According to the latest report on the residential market from the consulting firm CBRE, last year 1,404 million were invested in projects build to rent (build to rent), 904 million in student residences and 309 in other operations destined for leasing (which in the jargon of the sector are grouped under the label private rented sector, private rental sector).
2021 has started at a good pace: total investment in projects of this type was 771 million euros in the first quarter. “This highlights the boom in rental housing and the attractive returns it offers to investors,” notes CBRE. Investment funds, promoters and institutional funds concentrate most of the operations. And the capital is mostly foreign: American and German.
The consulting firm foresees an increase of 15% of the homes for rent until 2024, to the detriment of the number of homes mortgaged or with the house paid. According to the latest data from the INE, that we analyze in detail in elDiario.es, there are 14.5 million households that live in a house owned (paid, inherited or mortgaged) and 4.3 million that live in a house rented, transferred or in another scheme. CBRE’s estimate is that by 2024 there will be 5.2 million homes for rent (or other schemes). And that there will be almost 400,000 fewer homeowners.
To understand what the so-called build-to-rent Y private rented sector we can look at some of the most outstanding operations of the last few months.
In Madrid, which concentrates 67% of total residential investment in all of Spain, there is the example of Edgard Neville Street, the former General Moscardó, near Nuevos Ministerios station and high-income area. LaSalle’s investment arm bought a 40-apartment building from Socimi Optimum III Value Aded for 20 million. As it was already built, it does not enter the segment build-to-rent. But since he intends to lease them, he enters the private rental sector.
“It is located in a robust submarket in Madrid where we forecast continued high demand for rental housing, particularly among middle and upper income occupants,” he pointed the company when closing the deal. “We see that the rent-to-build sector is poorly supplied.”
Another recent and important operation is that of AEDAS Homes and Grupo Lar to promote 655 homes for rent throughout Spain (Valdemoro, Mislata, Alicante, Patraix and Hospitalet de Llobregat). AEDAS builds – “a project designed for the rental market” – and the Lar group buys and manages.
According to CBRE, this change in trend has also led to changes in bank financing. “Historically, banks financed the entire development cycle, from the acquisition of land to construction works. Currently, they only finance the work subject to high pre-sales and without commercial risk, in the case of rent.” Banks have a “very high interest” in financing rental operations in which the building is already built and has demonstrated a “high” occupancy.
Investors, continues the consultancy, look favorably on “public-private collaboration” as an alternative to regulating the rental price, a government commitment that is currently being debated in the face of the future Housing Law. Examples of this collaboration are the Plan Vive in Madrid (the Community is putting out to tender a concession of public land for developers to build rental housing at a protected price) and the Habitatge Metròpolis in Barcelona (a similar model but in which a society of mixed economy between administration and private partners). The Government, for its part, intends to build 24,000 public rental housing before the term ends.
Its forecasts are in the same line, according to its report Spain 2050. This document, non-binding and for which it has had academic experts in housing, suggests that if the difficulties in access to housing are not reduced, our country could move towards a “rich landlord and poor tenant” model. Of households with one or more dwellings owned and people living for rent or sharing. The objective of the Executive is to progressively reduce “the proportion of the population that suffers overexertion for the payment of the house, with special focus on the one that lives for rent.”