The Spanish and Italian commercial property markets are now close to collapse. The number of transactions in both countries have fallen more than 90 per cent in the three months ending in July of 2012. Investor worries about the future of the Eurozone are at the root of the issue.
The second quarter was very quiet in Spain, with only three properties registered during this time. The previous quarter was much more active, with 58 properties being registered during the three-month period. The drop in transactions was even more noticeable in Italy, where only two buildings were bought during the period, down from 56 earlier in the year according to data released by Real Capital Analytics.
The severe decline in the market only serves to highlight the investors’ concerns about the risk of owning these types of assets in the two countries, given the uncertain direction of the economy at the present time.
The total number of transactions for shops, offices, and industrial property in Spain was €67m in the second quarter of 2012. This figure was down 74 per cent from the first quarter’s numbers. The low Spanish property transactions meant that the numbers were below those of Portugal for the first time.
Joseph Kelly, director of market analysis at RCA, made the following comment: “Heightened risk aversion, particularly among cross-border institutional investors, has led to an almost complete collapse in southern European acquisitions.”
A few Italian property sectors, such as the retail space market in Milan, have held up well during the downturn. Concern about the country’s economy and its future in the Eurozone has affected investor confidence across the Eurozone, however.
The decline in the Spanish market has been more gradual. In the early part of the 21st century, the country’s commercial property sector was very active, driven by low interest rates. The global financial crisis eroded confidence in the market, effectively reducing the base value of Spanish property by hundreds of billions of euros. In many instances, Spanish banks were left with large inventories of commercial properties which could only be sold at discount prices.
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