Spain ranks second in Europe for real estate investment, with a forecasted 15% growth by 2025. Discover the factors driving this remarkable rise.
Spain has ascended to the esteemed position of the second most favored European nation for real estate investment, a remarkable feat underscored by the presence of two of its cities within the top ten rankings. According to projections from CBRE, a notable 15% growth in real estate investment is anticipated by 2025, potentially elevating the total investment volume to an impressive €16 billion.
This year, Spain has once again distinguished itself in the competitive landscape of European investment attractiveness, climbing from fourth place last year and seventh in 2022, now only trailing the United Kingdom. Poland and Germany follow closely behind in third and fourth places, respectively, while Portugal occupies the sixth position, highlighting the allure of the Iberian Peninsula for investors.
The latest European Investor Intentions Survey for 2025, conducted by CBRE, reveals that Spain is uniquely positioned as the only country boasting two cities in the top ten rankings, both of which have improved their standings. This upward trajectory reflects the robust prospects of the national real estate sector. The surge in interest towards the Spanish market and its major urban centers is palpable. Remarkably, Spain transitioned from not being represented in the rankings in 2021 to securing seventh place in 2022, and now proudly holds the second position.
Investors attribute this renewed interest to several factors, including the commendable performance of the Spanish economy, buoyed by a resurgence in tourism, demographic growth, and a steady increase in GDP. Madrid has notably ascended to second place in the rankings of preferred European cities for investment, up from third in 2024, while Barcelona has also made significant strides, moving from seventh to fourth place.
CBRE forecasts a robust growth trajectory for real estate investment this year, estimating an increase of nearly 15%, which would bring the total volume to approximately €16 billion, compared to €14 billion in 2024. This optimistic outlook could be further bolstered by an uptick in corporate transactions, following the positive trends observed in recent months.
Investor sentiment appears to be shifting towards a more optimistic outlook, with the survey indicating that 23% of respondents believe the market is already on the mend. Furthermore, over 70% anticipate a recovery in market activity by the end of 2025. A staggering 92% of respondents plan to either maintain or increase their purchasing activities, while more than 75% expect their selling activities to remain steady or grow, indicating a healthy market liquidity.
However, challenges loom on the horizon for investors in 2025, primarily stemming from a disconnect between buyer and seller expectations, which 50% of respondents identified as a significant concern amidst a backdrop of declining financing costs. Additionally, geopolitical uncertainties have been flagged by over 40% of participants as a source of apprehension.
Sustainability remains a pivotal consideration, with 95% of investors incorporating it into their decision-making processes. A majority favor retrofitting existing properties to align with sustainability standards, a strategy that not only meets environmental goals but also presents opportunities for enhanced performance.
Expectations regarding capital allocation to the real estate sector are decidedly positive, with 50% of investors anticipating increases in 2025, while only 9% foresee declines. The anticipated improvement in returns is a primary driver of this optimism. Investors continue to express a preference for value-add (34%), core plus (25%), and opportunistic (19%) strategies.
The residential sector, or “Living,” has emerged as the preferred investment sector at the European level, favored by 32% of investors, followed closely by logistics (27%) and office spaces (16%). Retail and hotel investments attract 10% and 9% of investors, respectively. Notably, last year, logistics led the pack with 34%, followed by residential (28%) and offices (17%).
Within the residential domain, multifamily/BTR options are favored by two-thirds of investors, with student housing capturing the interest of 20%. In logistics, half of the respondents prefer modern assets located in major urban centers. For office investments, there is a clear inclination towards grade A assets situated in prime locations. In the retail sector, Retail Parks stand out, closely followed by supermarkets and prime assets in shopping centers and high streets. Among hotel investors, 22% are inclined towards the luxury segment.
Lastly, a significant 62% of investors express interest in alternative sectors, with student housing emerging as the top choice for half of those exploring alternatives, followed by data centers and senior living facilities. This diverse array of interests underscores the dynamic nature of the real estate investment landscape in Spain and beyond.
