Unlike Portugal, where refurbishment of historical buildings is now a high-margin, mainstream business, this sector has not taken off in the same way in Spain. Partly, this is because the sheer volume of construction. As many of the areas on which we concentrate are also top tourist destinations, the demand is mainly for comfortable and more contemporary builds. Anything associated with refurbishment of older properties is shunned by most buyers and developers. Refurbishment is also largely incompatible with large-scale development, which is where most Spanish developers want to position their business. The refurbishment of traditional properties is therefore largely left to the passionate buyer who is captivated by the possibility of injecting new life into a traditional property.
For the canny investor, opportunities in traditional neighbourhoods of larger cities and that are prime for gentrification, represent both capital appreciation and 5-8% yield opportunities. Some neighbourhoods of Valencia are prime examples.
On the other hand, Spanish lenders are open to negotiating discounts or quantity breaks for serial investors. In other markets balance sheet weakness prevents discounting. Spanish banks tend to accept that writing off some part of debt is a method of getting weaker inventory off their balance sheets. In this sense, it is the polar opposite of Portugal, where banks deals are generally unattractive. In Spain, negotiating with a bank is often commercially attractive but due to the sheer size of the projects, investors need to have deep pockets.
Crucial to finding and analysing opportunities will be to work with a partner, knowledgeable in the region’s potential growth areas. Talk to us about finding those opportunities which might be just below the radar. With so many real estate developments spread across the country, picking the right location and matching it to a target audience, is more important in Spain than in many other markets.