After the sixth wave of infections, driven by the Omicron variant, Spain is returning to the (new) normal again. Regarding COVID-19 measures, the use of face masks is required in interior spaces, but the rest of the restrictions have been almost eliminated.
82.3% of the population has already been completely vaccinated against COVID-19 (double jab) and almost 51% of the residents in Spain have received a third booster.
In the political sphere, at the end of February, the main opposition party went through one of its worst internal crises since its foundation, but without a significant impact on the climate of confidence in the country. In a matter of days (two weeks to be more precise), the leader of the opposition has been forced to resign over a matter of cross-accusations within the same party that are still being investigated. The new party leader is well known on the political scene in Spain, and he is expected to take control soon.
This internal political issue has been overshadowed by the international conflict between Russia and Ukraine, whose humanitarian and economic consequences are intensifying every day that the war continues.
Regarding the Spanish real estate sector, a high dynamism has been observed in the capital market during 2021. Investors have been very active in the purchase of residential, hotel, logistics and office assets.
The sixth wave of infections did not add debate to the office work model, although working from home was once again the priority. Even before the Omicron variant, companies had migrated to the hybrid work model, but with greater weight in the office, and this trend has returned.
The logistics sector continues to be driven by electronic commerce and has reached record levels of absorption last year, both in Madrid and Barcelona.
Activity in the retail market is beginning to recover with a higher level of footfall in shopping centres.
Now, the war in Europe is the main threat to economic growth in Europe in general, and in Spain in particular.
On 9 May 2021, Spain left behind the state of alarm that the Government decreed at the beginning of the pandemic and with it, the perimeter closure between the different regions of the country ended.
The vaccination campaign continues at pace and there are already 16,000,000 people (34.2% of the population of Spain) who have received at least one COVID-19 vaccine (16.6% of the population are fully vaccinated).
The Government's objective that 70% of the population who are over 16 years old resident in Spain be immunised by 30 September 2021, remains in place. To achieve this objective, the vaccination rate must be 3,000 daily doses per 100,000 inhabitants. The current rate is higher, and 5,100 daily doses per 100,000 inhabitants are being administered.
The rapid advance of the vaccination process, the improvement in epidemiological data and the end of the state alarm are having a positive effect on the climate of confidence and the process of recovery of consumption.
The evolution of the Consumer Confidence: Expectations Index in April 2021 (indicator that reflects the economic situation expected by consumers within six months) has been very positive in year-on-year terms, standing above the values of the months prior to COVID-19.
At the same time, during the second quarter of 2021, business confidence increased in all economic sectors, in all company sizes and in all autonomous communities (according to the Harmonized Business Confidence Indicator prepared by the National Institute of Statistics that has quarterly periodicity and is comparable at European level).
During 2020, households registered a saving rate of 14.8% of their disposable income, the highest since 1999 (starting date of this series) which means a total saving of €109,000 million, 127% more than in 2019. This gives us an idea about the consumption capacity of households as soon as the pandemic is under control.
The first quarter of 2021 ended up leaving the third wave of infections at a certain distance. The vaccination plan at a national and European level helps to dispel concerns over the control of the pandemic, although it is not yet enough to boost the economy to pre-pandemic levels.
In this context, the absorption of office space in Madrid has remained at recent pandemic levels as seen in previous quarters. The take-up for Q1 2020 has been 62,500 sq m and the quarterly average between April-December 2020 was 66,500 sq m. Compared with Q1 2020, the decrease is almost 40%.
52 contracts have been signed in the first quarter of 2021, which represents an increase of +21% compared to the average in quarters April-December 2020. Although the surface by operation has decreased, companies are beginning to unfreeze their movement plans and strategies.
In Barcelona, market activity has been different. The take-up for Q1 2021 has been almost 82,000 sq m, which is double the average absorption of the last 3 quarters of 2020. It should be highlighted that several letting deals started to be negotiated months ago.
In terms of rents, downward adjustments continue in both markets, accompanied by additional incentive measures and ‘free months’ periods.
The plan to immunize the resident population in Spain continues to advance and as of 8 April 2021, 14.3% of the population has received at least one dose of the vaccine.
On the other hand, vaccination with the AstraZeneca immunogen has been suspended for those people under 60 years of age. That means that more than 2 million people who have received the first dose of this vaccine are now waiting for a solution. The deadline to decide whether to give a second dose of the AstraZeneca vaccine, or another vaccine such as Pfizer-BioNTech is at the beginning of May, which means that there is some time to find the best solution. The possibility of leaving this part of population with a single dose of the vaccine is also being considered. The safest option should be agreed soon.
There is now more artillery to fight against COVID-19 with the U.S. Food and Drug Alimentation (FDA) approving the Johnson&Johnson vaccine at the end of February. Furthermore the European Medicines Agency (EMA), has also received the request for approval and that is expected to be achieved in mid-March. It will be the fourth vaccine to be approved for the European community, with the highlight that just a single dose is needed for immunity and that it will be produced in Spain (Barcelona).
As of 9 March Spain has vaccinated 7.35% of the population with at least one dose. With more vaccine deliveries expected in the coming weeks (including Johnson&Johnson), it is feasible that by mid-summer 70% of the Spanish population will be immunised. April will be the month that gives us clarity on that goal.
The third wave of infection continues to decline, and restrictions are beginning to relax across the country. The Barcelona region reopened shopping centres and retail shops over 400 sq m 10 days ago, after being closed for almost 2 months.
For the commercial real estate market, there is still liquidity in the investment market. Logistics assets are the ones that prompt most interest among investors. Changes in consumer habits have impacted logistics through e-commerce. With the latest data on e-commerce, the value of goods sold online increased by 90% in the second quarter of 2020, compared with the same period of 2019. Once the pandemic is under control some retail will return to the bricks and mortar stores, though much will remain online due to new habits formed by consumers during the pandemic.
Spain is still immersed in the vaccination process against COVID-19. At 23 February, there were 1,208,000 people who had already received the double dose (Pfizer vaccine). At the same time, the number of infected is decreasing. As a result, for many regions of the country the measures of restriction on mobility and capacity have been eased. Immunising the population continues to be the priority in order to lift restrictions and allow tourism.
On the other hand, companies face the threat of insolvencies once the support measures end. This could lead to an increase in unemployment and result in a reduction in production capacity. To provide protection against this situation, the Government announced on Wednesday, 23 February, a new fund of €11,000 million to help tourism, hospitality and small businesses.
The Bank of Spain has improved its economic growth forecasts for 2021, with a baseline GDP growth scenario of 6.8%. At the same time, it is envisaged that new outbreaks of the disease will emerge in the coming months, which will entail restriction measures like the previous ones, but with a ‘relatively limited’ impact on activity.
Spain is waiting to receive positive authorisation from the European Medicines Agency (EMA) for the Johnson & Johnson vaccine, which is expected to be 8-12 March, although it must first be approved by U.S. Food and Drug Administration (FDA).
The importance of this vaccine is that it will be produced in Spain. This will benefit the country by virtue of simpler logistics, it will greatly accelerate the vaccination rate. In addition, it is administered in a single dose (unlike Pfizer, AstraZeneca and Moderna) and its conservation does not require such low temperatures, being in a range between 2 and 8 degrees Celsius.
Spain started 2021 with a new wave of infections. This third wave has brought back an increase in mobility restrictions and a limitation the number of people allowed in retail stores across the country. In some regions, bars and restaurants have been closed, and in other areas opening is allowed, but with reduced hours. In offices, working from home is still the norm.
The outcome for 2020 was a contraction of 11% of GDP, largely explained by the decline in tourism: a 77% reduction of international tourists compared to 2019.
The COVID-19 vaccination process started at the end of December 2020. For the moment, the allocation for the whole country is 4.5 million Pfizer and BioNTech vaccines. The goal is to immunize 2.3 million people by the beginning of March 2021 (2 doses per person required). As of 9 February 2021, 2.2 million vaccines had already been administered in Spain and there are 839,000 people who have received the double dose (immune).
The Government's forecast is that before the summer of 2021 more than 70% of the population will be vaccinated against COVID-19 in Spain.
Revenge spending (rebound in consumption) will probably occur from the summer of 2021 onwards, due to the pent-up expenditure of recent quarters and hefty household savings levels. The household saving rate in Q3 2020 stood at + 4.8% of their disposable income compared to -1.7% in the same quarter of 2019. This framework will drive consumption and GDP to substantial increases during 2021, supporting the forecast of +6% expansion in GDP by year-end.
Quarterly GDP growth in Q3 was 16.7%, a partial offset to the decrease of 18% in Q2 and 5% of Q1 2020. However, compared to productivity in Q3 2019, productivity shrank by 8.7%. This will add up to an output reduction in Spain of around 11% for the full year.
Within the services business sector, the most affected cohorts have been transport, hospitality and retail. Meanwhile, financial and insurance sectors saw their value-add increase by 6% in Q3 and 0.8% during Q2 YoY. The IT sector was less resilient, reducing its turnover by 7% in Q3. Real estate services shrank 3% in Q3 YoY but may move into a positive position in Q4.
Through controlling the pandemic, Spain prepares for an expansion of GDP in 2021 of around 5% and 7% in 2022. In this scenario, most sectors will experience rapid growth and higher space demand.
On the occupier side, during Q3 and Q4 2020, space demand remained subdued, implying that absorption figures will remain low by year end. However, vacant space across different asset classes and Spanish cities has not spiked meaning tenants expect a short-lived crisis, not deserving of a new lease structure. In this context, rental values have not plummeted, but the distance between headline rents and effective rents has increased due to higher lease incentives such as staggered rents and rent-free periods.
Capital markets remains stable and the total investment volume for Q3 2020 (€6.3 billion) is in line with our expectation of ending the year close to €8 billion, some €3 billion short of our forecast in Q1. It is worth mentioning that retail investment has already overtaken the volume of Full Year 2019 given some large deals and good momentum in supermarket sales.
With the second wave of the pandemic gathering momentum in Spain, several new measures have been taken by the national and local governments to curb the infection rate. These include partial lockdowns and a curfew between 23.00 and 6.00. This new package of restrictions may affect the swift bounce of the expected GDP to Q2 2021 and defer the recovery for the second half of 2021 and 2022.
Commercial real estate markets are not immune and absorption levels in Q2 and Q3 are comparable to those of the global financial crisis. As a result, prime office rents have slightly decreased in Q3 in Madrid and Barcelona by 1%.
On the capital markets side, the total Q1-Q3 investment volume has recoiled by 29%. Nonetheless, some assets are displaying resilience with logistics sheds leading. Logistics prime yields moved in by 25 bps in Q3 acknowledging investors' appetite. PRS and some retail assets are also drawing institutional investors' attention. In particular, build-to-lease schemes are of great interest in Madrid and Barcelona, while, in retail, hyper and supermarket premises are a clear target for investment, given the strength of the food sector during the pandemic.
With the pandemic far from abating in Spain, state-backed furloughs have been extended to January 2021. This means that the unemployment rate will remain subdued until year-end and that the business sectors most vulnerable to the economic impact of the pandemic will be hedged, to a certain extent, until better conditions appear.
Notwithstanding, consumption is losing steam due to both redundancies and pent-up demand. The latter has driven private savings aggregates to 10-year maximums.
Regarding property markets, we are seeing wining sectors across different asset classes:
- Space demand comes mainly from corporates of the technology, media and finance business sectors.
- On the retail side, we are witnessing health & beauty, sports and certain fashion brands to seek space in high street locations, shopping centres and retail parks.
- Logistics warehouses retain their strength as 3PLs, and logistics operators are in search of modern space given the accelerated development of e-commerce in Spain.
Capital markets have performed relatively well during the pandemic. Year to Q3 figures add up to €5.5 billion in property investment, €3 billion less than one year ago. Yet, 2019 and 2018 registered the highest volumes on record and we forecast in January 2020 a reduction of 25% in investment given the lesser availability of product and some loss of momentum expected in occupier fundamentals. As a result, the 36% contraction in investment volume may be split in: 20% to 25% as expected reduction and 10% to 15% as an impact from the pandemic. All in all, we trace core, value add and opportunistic capital awaiting to reach the Spanish market once the pandemic starts to recede.
While the pandemic is yet to be fully controlled, office workers and consumers are progressively returning. This has driven retail sales in August up +41% over May this year. However, most economic activities are still depressed compared to 2019. The most recent forecasts from Oxford Economics point that, under a central scenario of controlling the pandemic during mid-2021, this year’s GDP will be 90% of 2019, 2021 will be 95% and 2022 will be 99% of 2019’s GDP.
On the property side, investment activity has maintained its momentum and the volumes recorded until August (€5.1 million) are slightly higher than the figure of the same period of 2019. This reveals a resilient investors’ appetite for Spanish property and a perspective of space demand recovery. Investors’ demand is met with core product in offices, logistics while value add product comes mainly from retail, hotels, PRS and student housing.
Regarding logistics assets, we are witnessing strong interest in Madrid, Barcelona, Valencia, Zaragoza and other key cities. This is a response to ecommerce and logistics operators’ need for a good product.
The holiday season is ending, and the economic activity remains subdued by the pandemic in Spain. This is still visible in hotel occupation, construction activities and shopping centres footfall that are well behind levels of 2019. Nevertheless, hotel investment was ahead of the records of H1 of 2019 signalling a positive long-term view on the performance of the sector in Spain.
Logistics assets and PRS are the most sought-after by institutional investors. Yet, prime offices in Madrid and Barcelona are within the radar of funds, REITs and private equity.
Office occupier markets are driven by some sectors such as IT, financial and health services. In the case of retail occupation, we detect space demand from sports goods retailers, sports clubs and health and beauty.
The second half of 2020 will be a trying one for the Spanish economy and we will see an uneven recovery across different business sectors. Spanish and European institutions will back-up such recovery with a strong fiscal and monetary policy. Measures such as state-payed furloughs, to avoid mass redundancies may linger longer than initially planned.
The first half of the year ended with the economy already in the ‘New Normality’ but it is expected a sharp contraction in production and employment figures in response to the containment measures imposed by the Government to control the pandemic. Employees on furlough (ERTE) do not count as unemployment so the unemployment rate just moved from 13% to 14% during Q1-2020.
Yet, we anticipate the unemployment rate to surge in Q3 or Q4 to 20% and start declining during 2021. Most of the output reduction comes from activities connected to the tourist sector but others are also heavily impacted such as private consumption. The resilient ones are connected to the IT sector, insurance and financial services and space demand is unsurprisingly connected to these.
In this context, our forecast for GDP variation in 2020 ranges between 10% and 12% for the country with the central scenario of 10.6%. The recovery will be progressive with growth expected for 2021 of 6% to 7% and for 2022 of 3% to 4%.
Investors are again active in the Spanish market and in search of opportunities, especially in logistics and PRS assets. The first is witnessing resilient space demand driven by ecommerce while the latter is seeing added demand with more proportion of households renting their homes. Prime office locations are also sought after together with sale and leaseback deals on super/hyper markets premises. Highstreet assets demand is coming mainly from local players.
Spain has entered the 'new normal'. This means total internal mobility and no restrictions on opening times in retail, hostelry and workplace commuting. International borders have reopened most of the EU member states.
As our consumer survey predicted, the public are visiting restaurants and proximity retailers. At the same time the tourist industry is reactivating with European tourists ready to travel to Spain for the summer season. This will progressively improve hospitality sector performance.
The backdrop is, nevertheless, an economy, that will shrink around 9% to 10% in terms of GDP in 2020 to return to positive values in 2021 around 7% as per the consensus of the main forecast sources.
Space search is reactivating but the ‘speed’ of the demand is still slow. This means a good part of corporates, retailers and logistics operators are still in wait and see mode. We are seeing understanding between landlords and tenants assisting them with rent deferrals and, in some cases, rent bonifications.
Capital markets are active for logistics assets, especially those connected to ecommerce and food and supermarkets. One effective transaction mode is currently sale & leaseback. All in all, investors are active in Spain ready to emit LOIs and keen to find opportunities in the market. 30% of them think the investment market will return to normality in 2021 and the other 30% think it will be in 2022.
Half of Spain is now in the 4th and final stage of the so-called de-escalation process, while the rest of the country stays at stage 3. Spain will face its ‘new normality’ by 21 June when the final extension of the emergency measures will conclude and restrictions to mobility will ease. At this point COVID-19 related issues and guidelines will be addressed by the autonomous local governments.
Spain meets the summer with a clearer panorama as inter regional movements will be allowed in 2 weeks’ time with better prospects for the domestic tourist sector. Furthermore, it is likely that by the beginning of July international borders will reopen for EU citizens, improving the conditions for the tourist industry in Spain for the rest of the summer.
For the moment, less severe restrictions allow all types of retailers to open their stores, but with capacity restrictions. This means there will be a steady increase in footfall from now on in high streets, shopping centres and retail parks.
With economic activity taking off again, some letting transactions that have been on hold since March are being completed. At the same time, the capital markets are also progressively reactivating, and we are seeing all types of capital costs willing to explore opportunities.
With a clear date of when the State of Emergency will finish in Spain (21 June), businesses and people are planning their return to activities after the lockdown. For the moment, the main cities of the country remain in the second stage (out of four) of the reopening process. As such, Madrid and Barcelona will have to limit capacity in retail premises as well as social gatherings up to 10 people. Nevertheless, 70% of the territory is already in stage 3 and, most likely, during the second week of June all these regions will hop to stage 4.
In the real estate field, during lockdown we surveyed the investment market and the expected new consumption habits of the Spanish public. Results show 90% of investors surveyed remain active in Spain and some 60% are ready to submit letters of intent to acquire property assets. Using the data of the survey, we estimate that the size of the ‘dry powder’ to deploy capital amounts to €40 billion, a solid figure given the long-term average investment volume of €10-12 billion.
Our consumer habits poll reveals a clear intent to return to physical stores, mainly convenience and high street. The poll also revealed an acceleration of omni-channel retail, meaning that convergence of online purchases, click-and-collect and store visits has more momentum.
For more information about our Investors’ Survey and Consumer Poll please contact Ramiro Rodriguez, Head of Research & Insight in Spain.
The lockdown measures keep on easing in Spain thanks to positive results of the past weeks in terms of contagions and diseases. This means that more social and economic activities are operational again, although at low levels. For instance, retailers are able to open regardless their size (if in Phase 3 out of 4) but limiting the capacity to 40% and if smaller than 400 sq m and limiting the capacity up to 30% (if in Phase 2 out of 4).
Good news also arrives for the hospitality industry, which is now able to open hotels to 100% of the capacity but with limitations for common areas.
As the economy progresses to more activity, occupancy and investment respond. Investors are in a wait-and-see phase, mainly for retail and hotels, but sale and leaseback transactions may be seen during the year ahead. Capital markets are more interested in offices and PRS while investors are keen to study logistics warehouses, as activity has been less impacted by the COVID-19 crisis.
In a positive trend, 70% of the Spanish population have entered phase 2 (of 4) as part of the plan to reopen the economy. Madrid and Barcelona remain in the first phase (named Phase 0) but with lesser restrictions on mobility and economic activity than a week ago. This translates into more retail activity and stores of up to 400 sq m can be opened, but are not to allow over 30% of their capacity. Regions in the second stage are now able to open stores larger than 400 sq m but must limit agglomerations.
As office occupiers and retailers return to, or plan to return to activities, managers contrive new layouts, circulation flows and hygiene rules that allow employees and customers to visit their premises safely. In the new context, digital technologies will be the norm: thermal cameras, contactless cards and building management apps will be part of business as usual.
In this context, most landlords are actively helping tenants with lease payments deferrals and in some limited cases with retailers, rent waivers are granted. The food sector, where it is seeing good performance on its properties, will most likely see sale and leaseback transactions. Logistics warehouses are also performing well and capital markets in those sectors will recover quickly. Private investors are also in search of trophy assets taking advantage of local presence and market knowledge.
New estimates show GDP volume in 2020 will be between 10% and 7% less than in 2019. Much of the COVID-19 blow will land on the service sector, particularly on the retail and tourist business sectors. This will drive the unemployment rate near 20% so the toll on occupancy rate in the property sector will be visible.
Until April 2020 consumer confidence plunged to half of what was seen one year ago bringing strong reductions in retail sales that for March 2020 showed a reduction of 14%.
The last week was the lowest in terms of new contagions since the outbreak. This is driving economy reopening policies that combine central government guidelines with province-level decisions. As such, several provinces are moving from Phase 0 to Phase 1 in the so-called de-escalation; a 4-stage process. Being the most affected, Madrid and Catalonia will remain in Phase 0 but will most likely move to phase 1 next week.
Against this backdrop occupier markets have reduced activity but office logistics space is still sought after by some corporates that are actually thriving in this crisis, such as those linked to e-commerce, IT and media, health services, food sector and insurances.
The ‘de-escalation’ process is taking place and is divided into four milestones, each one a minimum of two weeks long. It is being applied at the province level and the whole country is already at phase 0. The relaxation of the lockdown measures includes strong parameters of social distancing, compulsory face mask use on public transportation, re-opening of small retailers who may attend one client per employee in-store and under prior appointment. Restaurants may also re-open for deliveries and take-away.
This is the scenario in which private economic activity is slowly returning while public direct liquidity injections will roughly amount to 1.1% of GDP.
We have searched for evidence of investors’ interest in Spanish assets and found that of those investors with ongoing acquisition processes during March, 32% kept on, while 52% put the process on-hold and 16% of the processes were withdrawn. On the office agency side, in Madrid and Barcelona, we are seeing 50% of the letting deals started in March coming through, while 40% were put on-hold and only 12% of the processes were withdrawn.
It is worth a mention that some of our close contact with investors and landlords signals several strategies that range mainly from core plus to value added capital, but the wait-and-see mode is currently a dominant approach.
The heavy measures taken to contain the COVID-19 outbreak in Spain are finally yielding good results and some lockdown conditions are effectively easing. After 45 days of confinement, children can now make one-hour strolls with their parents each day.
With some improving conditions at the public health level, businesses are planning their return to operations. Some of them are planning to do so with COVID-19-free certifications that could work well for retailers and hotel operators.
Some leasing activity is continuing during the confinement and new contracts include rent revisions within the next 6-12 months. The lease contracts to be extended during this period are devising strategies to negotiate rents with landlords. The latter are deploying strategies ranging from keeping contract conditions as they currently are, to devising a particular contract renegotiation strategy with each tenant.
Investors are adopting different approaches to undertake acquisitions in Spain taking advantage of liquidity pre-existent to lockdown measures. There is considerable demand for prime logistics assets while some investors are only active within their discretionary money pockets and value add and opportunistic funds.
Some easing of the lock-down measures is expected by the end of April, as the Spanish Government announced last Saturday. This translates in certain mobility for minors, which will be able to go to public parks accompanied by one adult. The Government announced it is designing a plan for return to activity which will progressively allow people and business to return to work but so far timing and specifics have not been announced. Meanwhile, the State of Alarm declared in March will be extended by a further 15 days this week until 6 May.
At the same time, some mobility has been seen in the job market where former workers of the retail and hospitality sectors are entering the food and health value chains. The outbreak has already impacted the office space take-up that yielded reductions both in Madrid and Barcelona. The first registered an absorption of 85,000 sqm (-40% YoY) and the latter 50,000 sqm (-50% YoY). The number of deals in both cities during March was reduced to less than 10 while the average number of letting deals for this month lays around 30 to 40.
Investment activity in Q1 2020 overtook that of one year ago. The total investment volume in Q1 has been €2.3 billion, an annual growth of 22%.
Spain has finished Easter with slightly less restrictions for some industry and constructions workers. This is in response to a lesser rate of contagion and fatalities during the last week. Yet, all workers able to work from home and those from non-essential business sectors must stay at home.
In this context the Spanish Government is adding taxes deferrals for SMEs and self-employees to its already enlarged expenditure ceiling that seeks to protect the economy from the impact of the COVID-19 crisis, production and employment are being hard hit.
At the real estate sector level on-going lease contracts and sale processes are progressively being closed while lease extensions are also being negotiated, most of them agreeing on rent revisions in the mid-term. Q1-2020 office space take-up has decreased both in Madrid and Barcelona mainly due to the impact of the COVID-19 crisis.
Investors in business space assets keep optimistic on deploying capital in Spain after the crisis and repricing so far is being related to added uncertainty.
If the COVID-19 crisis lasts for less than 1 or 2 quarters, there may be a swift recovery period by the second half of 2020 and early 2021 with strong activity in both occupier and capital markets.
Spain is amongst the heaviest hit countries by the COVID-19 outbreak. The Government has effected control measures in some markets (public and private health and food supply chain) as well as closing retail shops and confining most of the population to home.
The lockdown measures have been extended until 25 April. By early April these measures seem to have yielded some positive results with the contagion figures starting to decrease and there are plans to make staggered returns to activity during May.
As the economy has been driven to minimal activity the impact on 2020 production and employment will be significant. Spain is expected to witness a bounce back effect driven by pent-up consumption by year end, and in 2021, resulting in shifts in GDP growth in 2021 from 1.5% expected before the outbreak to 4%.
Since March there has been no significant activity in the occupier markets nor in capital markets. Yet, investors are signalling their readiness to deploy capital in Spain once the COVID-19 situation has been controlled. In this context, it is important for Spain, and the rest of the EU countries, to ensure strong international cooperation around the crisis at the European level.
If the COVID-19 crisis lasts for less than 1 or 2 quarters, there may be a swift recovery period by the second half of 2020 and early 2021 with strong activity in both occupier markets and capital markets.
COVID-19 has had a deep impact on Spanish society. Currently Spain is second only to Italy in fatalities as a result of the deadly virus. There have been over 100,000 cases so far confirmed in the country, but some hope is being felt as the rate of infection continues to decline.
Spain has been in lockdown for more than two weeks and stricter restrictions have been in place for the past 72 hours. The areas of Catalonia and Madrid have been the worst hit and medical resources in both locations are stretched with healthcare professionals doing everything possible to mitigate the impact of the virus.
There have been a series of Royal Decrees passed in the last two weeks. Each focused on safeguarding contracts, avoiding collective terminations enacted in order to sustain business activity and the exemption of social security contributions. There has also, in line with many other European countries, the suspension of all but a very restricted list of retail activity.
The property market is, of course, quiet and people and business are taking a wait and see approach to the current situation. The fundamentals of the real estate market remain strong and the availability of desirable assets in key locations remains limited.