The real estate investment in Southern Europe has shown signs of resilience and recovery in the first half of 2024, with a 5% increase in investment volumes compared to the same period in 2023. According to the real estate consultancy Cushman & Wakefield, a total of €8.3 billion was invested in the region during this period, highlighting the markets of Spain, Italy, and Portugal.
Despite varying dynamics among these countries, the hospitality sector has been the most sought-after in each, followed by a growing interest in the retail sector. On the other hand, sectors such as logistics and living have continued to attract investors, though their growth is limited by the lack of supply meeting institutional standards and a gap in buyer and seller expectations.
Spain: boost in hospitality and retail
In Spain, real estate investment in the first half of 2024 reached a volume of over €4 billion. Although this figure represents a slight 15% decrease compared to the same period last year, it is important to note that the macroeconomic context has significantly changed. The first quarter of 2023 was characterized by lower interest rates, making it easier to invest in the country. However, as interest rates rose throughout 2024, investment activity has been more cautious.
The hospitality sector has been the main driver of investment in Spain, with a volume of €1.7 billion. This increase is due to strong tourism demand and the stability of the sector’s revenues. Retail, meanwhile, attracted €1.1 billion, driven by the resurgence of physical retail and the recovery of domestic consumption, strengthening its fundamentals.
The residential sector has also maintained a good pace, especially in housing projects in major cities like Madrid and Barcelona. Additionally, the country has seen increased capital movements aimed at transforming obsolete office buildings into hotels or residences. In Madrid, €300 million has been recorded in such change-of-use operations, reflecting a clear trend toward urban revitalization.
However, sectors such as logistics and offices have struggled due to a lack of quality asset supply and pricing expectation gaps between buyers and sellers, despite both sectors having solid fundamentals. The shortage of products aligned with institutional investor expectations has slowed growth in these markets.
Italy: moderate recovery and diversification
Italy experienced a moderate recovery in the real estate market in the first half of 2024, with an investment volume of €3.5 billion. This represents a 50% increase compared to the same period in 2023, which was one of the lowest of the past decade. Diversification has been key to this growth, with investors seeking opportunities across various asset classes.
The hospitality sector has led investments, followed by the office sector, which attracted over €800 million. Despite a slight decrease compared to the previous quarter, the office sector continues to draw investor interest due to the stability of its fundamentals.
As in Spain, the logistics and living sectors in Italy have shown strong interest from investors. However, the lack of quality supply and pricing expectation gaps between buyers and sellers have limited transaction volumes. Despite these challenges, interest in alternative assets and value-added opportunities is expected to continue driving investment in the second half of 2024 and into 2025.
Portugal: moderate activity and recovery expectations
The real estate market in Portugal saw a 9% decrease in investment volume during the first half of 2024, reaching a total of €670 million. Despite this decline, interest in the hospitality sector has been notable, consolidating as one of the most attractive sectors for investors.
Retail has also shown dynamism, being the sector with the highest number of transactions in the first half, with several negotiations still ongoing. Additionally, there has been growing interest in the Purpose-Built Student Accommodation (PBSA) segment, which has increased its share within the “other” asset category.
As in Spain and Italy, the logistics sector in Portugal faces a shortage of quality assets, limiting transaction volumes in this segment. However, the second half of 2024 is expected to bring a recovery driven by strong economic fundamentals and increased activity in the occupational market.
Outlook for the second half of 2024
As we move into the second half of 2024, real estate investment in Southern Europe faces both challenges and opportunities. The hospitality and retail sectors will continue to attract investors, while the logistics and residential sectors will continue to seek to overcome supply constraints.
Although rising interest rates have cooled the market compared to previous years, the appeal of real estate assets as a safe haven remains strong. With expectations that the gap between buyers and sellers will narrow, the market is expected to continue offering attractive investment opportunities across the region.
