How is the Spanish real estate market developing? A market commentary by Maite Linares, Managing Director Deutsche Hypo – Real Estate Finance Madrid.
The Spanish commercial real estate market continues to demonstrate resilience and a clear growth path. Spain appears to benefit from the current global uncertainty and its relatively low export dependency on the US. Compared to other European countries, it presents itself as more resilient and attractive to international investors.
Capital inflows from the US, France, the UK, and increasingly from Latin America underscore the international relevance of the Spanish market. Investment momentum is supported by strong population growth, which is driving demand across nearly all asset classes. Migration plays a key role, with net migration estimated at around 500,000 to 600,000 people annually since 2020.
Asset Class Overview
Office: Madrid as a growth engine
Madrid remains the clear growth driver in the office segment. Rising rents and investment volumes reflect strong demand. In contrast, Barcelona is facing the effects of a construction boom in recent years. Oversupply, combined with slightly declining demand, has led to a vacancy rate of around 15% in the New Business Areas – though in the city center, it remains below 5%.
Retail: The renaissance of interest for shopping malls
The retail sector is experiencing a revival. Despite global digitalization, online shopping remains comparatively less popular in Spain. Demand for physical retail space is particularly strong in Madrid and Barcelona but also in the rest of the country. Booming tourism and demographic growth are driving economic development and consumption. The sector’s attractiveness is reflected in the renaissance of the shopping center market and in the expected transaction volume of over EUR 3 billion in this year.
Logistics: Ongoing growth with strong future potential
The logistics sector is gaining ground. Increased consumption and the need to modernize existing properties are driving demand for high quality logistic space and pushing rents upward. Locations near urban centers are especially sought after, enabling fast delivery chains and proximity to end customers. Investors are showing growing interest in ESG-compliant and future-proof logistics solutions.
Living & Hotel: Strong growth with potential risks
Residential and hotel properties dominate the market, accounting for around 50% of total investments. The residential sector is growing dynamically, driven by demographic trends. At the same time, rents and purchase prices are rising significantly – with an average price increase of above 10%. Madrid and Barcelona are experiencing an acute housing shortage, comparable to other major European cities. Market overheating cannot be ruled out.
The hotel sector is benefiting from record tourism numbers and strong returns. Investor interest remains high. Alternative living concepts such as student housing and senior residences are also gaining importance – a sign of increasing market differentiation and professionalization.
Conclusion: Promising, yet selective
The Spanish commercial real estate market continues to be in an active growth cycle, offering investors an attractive but selective environment. Fundamentals are strong, and demand is broadly diversified. Nevertheless, vigilance remains required: geopolitical developments and macroeconomic risks can quickly change dynamics.