Spain: Special Focus 2015: Real Estate

Last Updated: 24 November 2015
Article by Iberian Lawyer

Foreign investor interest in the Iberian real estate market has led to a 'hotel boom', while deals are becoming bigger and more complex – however, the good news is tempered by a shortage of good assets and fears that supply could outstrip demand. Is a real estate bubble being created?

The Iberian real estate market is back with a bang, according to lawyers, with the recent glut of transactions – which are becoming larger and more intricate in nature – demonstrating that confidence has returned. Indeed, some lawyers argue that the current levels of activity show that the real estate sector is now as buoyant as it was before the crisis.

One of the most notable transactions of late was Merlin Properties Socimi's €1.79 billion purchase of Testa Inmuebles en Renta. Meanwhile, Lone Star Funds' €1 billion residential golf resort project in Vilamoura on the Algarve demonstrates that there is hot property to be found in Portugal.

"The market is now back to normal and it is expected that the share of real estate-related work in the coming years will keep increasing," says Orson Alcocer, partner at DLA Piper in Madrid. Optimism abounds in Portugal, meanwhile, where the surge in foreign capital targeting assets in the country is picking up increasing momentum. Ricardo Reigada Pereira, a managing associate in Linklaters' Lisbon office, says: "The share of speculative investors chasing big-ticket deals remains high, but it has been recently decreasing by virtue of the arrival of the more core and traditional-type investors – in any event, distressed and opportunistic investments still represent a significant portion of the total volume."

Hotel boom

Pedro Ferreirinha, partner at Vieira de Almeida, points out that developers are, in the main, looking for buildings in Lisbon and Oporto that can refurbished and quickly reintroduced into the residential and retail markets: "They are clearly more focused on investments with a shorter time to market that can benefit from the competitive incentives scheme that Portugal has in place for property rehabilitation."

ABBC partner Luis Filipe Carvalho, who cites a "hotel boom" in Lisbon, adds: "This conjuncture led to an increase of the average square metre price which impacted the national market creating a greater demand for leases instead of acquisitions, due to the lack of access to credit for housing purposes."

Madrid and Barcelona have been the hubs for investors in Spain, according to lawyers. José Luis García-Manso, partner at Pérez-Llorca, says: "Buildings in the city centre of Madrid and Barcelona are highly sought after for refurbishment, while residential development is growing again in specific areas. In addition, the hotel sector in Barcelona and Madrid is booming. Last but not least, we are seeing growth in logistics developments." However, García-Manso points out that the core assets in these cities are becoming harder to come by, leaving investors looking for opportunities in different regions.

Diego Armero, partner at Uría Menéndez, concurs: "Most investment funds are looking for yielding assets, not only prime assets in Madrid and Barcelona, but also assets in secondary locations. Some are even focusing on buying land and investing in the development of new properties, this being very recent and promising news."

It has largely been private equity funds, REITs and international investors snapping up assets but lawyers say many different types of players are moving into the market. "US opportunity and hedge funds, European fund managers and investment banks should remain active in the sector whereas core investors are expected to increase their appetite for Portuguese real estate assets," Reigada Pereira claims. "It remains to be seen whether players most affected by Portuguese turmoil recover their mojo – the recent legal changes introduced in the tax framework applicable to Undertakings for Collective Investment may prove to be pivotal in that regard, as well as the Portuguese REITs which are expected to take off and enhance the ability to attract new investors."

More innovative deals

The emergence of a more sophisticated client base is resulting in ever-more intricate transactions too. Emilio Gómez, head of real estate at Hogan Lovells in Madrid, observes that lawyers are "facing more complex and innovative deals now compared to those 10 years ago". Bernat Mullerat, partner at Cuatrecasas Gonçalves Pereira, adds: "The current real estate market has brought larger and more complex deals. This allows law firms to increase the size of teams involved in the deals and to bring together expertise from a range of practice areas related to real estate, such as private equity, contract, financing, planning, litigation and restructuring. More complex deals require in-depth knowledge of legal requirements and of market practice."

Gómez argues that this complexity extends to investment and financing structures, which is the "driver that real estate lawyers have to play with". Other lawyers in Spain say that the financing market, especially the alternative financing market, is driving investments. "The leading traditional credit institutions are financing real estate projects again and new market participants have entered the Spanish lending market, for example, direct lenders such as hedge funds," García-Manso comments. "We have also seen certain projects financed by insurance companies – the pricing of loans, in terms of margin, is relatively low if compared to other financings such as project and acquisition financings."

Fernando Azofra, partner at Uría Menéndez, agrees that most Spanish and international banks, and also some investment funds, are "back on track to finance transactions", adding that this includes development finance. Meanwhile, Ferreirinha cites the availability of significant funds in the Portuguese market as an influence: "We have witnessed some major international players entering the market with the acquisitions of significant retail portfolios, stand-alone retail and hospitality projects and sale and lease back transactions."

High office vacancy rate

Despite the positive messages, there is a degree of caution about the future. Many observers believe it will be a challenge to maintain the current momentum, especially in Portugal, if the market does not develop in a sustainable and balanced way. "Low inflation is a risk for the economy and therefore for the real estate market," warns Filipa Arantes Pedroso, a partner at Morais Leitão, Galvão Teles, Soares da Silva & Associados in Lisbon. "The vacancy rate in offices is still high, the higher demand last year and this year has not increased the rents – the increase of hotels in Lisbon and Oporto is enormous and there is a risk of the offer being higher than the demand."

Ferreirinha expands on this point, claiming the biggest concern for investors in the retail and office sectors is the performance of the economy and the capacity of tenants to pay their rent. Meanwhile, the main challenge for developers is the optimisation of the "time to market" of their products.

In Spain, uncertainty regarding the result of this year's parliamentary general elections has not helped investor confidence. In addition, anxiety over the shortage of good assets and the rising prices of assets is expected to limit opportunities in the market. "I believe that competition has become tougher in the last two years, and clients must now find their own niche to be able to still find true opportunities," Alcocer adds.

Gómez has further concerns: "Office occupiers, for instance, demand more efficient spaces since many workers work remotely, but in turn require some new common areas for leisure and teamwork. Online sellers demand new high-tech logistics spaces. Finally, shopping centres must be "repackaged" in terms of tenants and uses."

The real estate market may now have reached pre-recession levels but – after the painful crash in 2008 and the effects on commercial and residential property – lawyers know not to take anything for granted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions