Investment Boom in Hotels and Luxury Apartments in Spain

Investment Boom in Hotels and Luxury Apartments in Spain

Investors will invest more than 2 billion euros in Spanish premium real estate and the hotel sector, considering the country one of the most promising destinations for capital investment. Belgian developer Immobel, Andorran fund Emin Capital, management company Terralpa and KKH Capital are just some of the players launching promotion and construction of premium-class properties in Spain.

Investors are betting on hotel assets and luxury housing, while Spain is strengthening its position among countries favorable for international investment, thanks to growing demand and prices that remain lower than in other European capitals. Currently, projects totaling around 2,000 million euros are in the implementation or commissioning stage.

Four Seasons Marbella Resort

One of the largest projects in Spain currently being launched is the Four Seasons Marbella Resort (near Marbella’s old town). This resort will serve as the entry point into the Spanish market for Belgian developer Immobel and American group Fort Partners.

The companies are investing 740 million euros in the construction of an exclusive resort that will include a 120-room hotel managed by the Canadian chain and a residential complex of 55 villas, 75 apartments and 32 townhouses and private residences.

Four Seasons de Formentor

Also under the brand of the Canadian hotel giant, Four Seasons de Formentor is scheduled to open in summer 2023. Behind this project is Andorran fund Emin Capital, which on behalf of several investors, including Mexican family office Rodina — the investment vehicle of the Chico Hernandez family — acquired the asset from Barcelo company a year ago for 165 million euros.

The fund plans to renovate the hotel to bring it up to Four Seasons standards with additional investments of around 70 million euros. “The entire process requires extensive restoration taking into account environmental protection. It is estimated that the work will take about two years, with opening expected in summer 2023,” Emin Capital reported.

These two Four Seasons-managed complexes complement the hotel that opened last year on Plaza de Canalejas in the heart of Madrid. The Canalejas Center brought the concept of branded residences to Spain — luxury residential properties with service from leading hotel operators. This formula has long been established in other countries, but in Spain it is only gaining momentum.

Terralpa and Madrid’s Elite Residential Real Estate

In the luxury housing segment, one of the most active investors in Madrid in recent years has been Terralpa — a management company investing capital from Mexican and Spanish family offices and institutional investors.

Having invested more than 250 million euros through its first fund in exclusive residential projects in the capital, the company intends to expand its focus and is completing the launch of a second fund, through which it plans to invest 600 million in purchasing and renovating premium properties in Madrid and other Spanish cities.

Mandarin Oriental in Barcelona

The greatest excitement in Spain was generated by the project launched by KKH Property Investors — an alliance between KKH Capital (founded by former Renta Corporacion CEO Josep Maria Farre) and American fund Perella Weinberg Real Estate II — with Mandarin Oriental residences in Barcelona.

The company acquired the former Deutsche Bank headquarters, located at the intersection of Paseo de Gracia and Diagonal, five years ago from the Andorran families Reig, Ribas and Cerceda and spent three years transforming it. Abandoning the initial idea of converting the building into a luxury hotel, the developers carried out a complete reconstruction to house elite apartments, which are now selling for an average price of 30,000 euros per square meter. The residences will receive exclusive branding from the Mandarin Oriental group.

Luis Valdes, head of residential real estate sales at Colliers, notes that more and more projects in Spain are choosing partnerships with luxury hotel chains. “We expect growth in the number of such projects, fueled by growing demand and the ability to generate cash flow for investors in advance,” he says.

Spain’s Attractiveness to Investors

Luxury residences in Spain experienced a renaissance starting in 2010 — with the Millennium project on Madrid’s Plaza de la Independencia. Since then, other exclusive projects have been launched in the capital, such as Lagasca 99, implemented by Pimco and Grupo Lar.

Spain has established itself as one of the preferred destinations for Latin American investors, who find familiar culture, language and mentality here.

According to Carlos Zamora, Knight Frank partner and head of residential real estate, Spain is a pole of attraction for real estate investors, and this effect has intensified after the pandemic. Elite and well-located assets have become safe-haven investments. One of Spain’s key advantages, particularly Madrid’s, compared to other European capitals is yield: average prices in the luxury segment are around 8,000-9,000 euros per square meter, which is significantly more affordable than in London or Paris, where average costs in the same segment reach 20,000-30,000 euros per square meter.

Both experts, however, warn about the counterproductive effect of the future housing law, which creates uncertainty in the sector. In their opinion, if the law comes into force in its current form, it could affect similar projects and deter potential investors.