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Current scenario and future prospects in the Spanish real estate sector – Interview with Salvador Grau from Azora

An interview with Salvador Grau, Investment Associate Director of Azora, an asset management company. Written by María Mañoso, Marketing Specialist at ISEO

How has Azora grown and what is your current role in the company?

Azora was founded more than two decades ago, and its co-founders, Fernando Gumuzio and Concha Osácar, brought with them a wealth of experience from their previous work in banking. They embarked on this journey with an unusual perspective in the field, right in the middle of the Spanish real estate boom. They detected a nascent trend: the increase in demand for rental housing, aimed particularly at middle- and low-income sectors, thus focusing on the provision of affordable rental options. The project started with a capital base, mainly Spanish, which allowed us to build a solid portfolio of rental properties at reasonable prices. In the face of the 2008 real estate crisis, which hit the traditional sector hard, Azora managed to stand out thanks to its highly resilient product offering, maintaining a steady pace of growth.

Today, Azora manages assets worth €9.7 bn, with a team of more than 300 specialists and has achieved a net IRR of more than 19% on its investments, covering all stages of the investment cycle. Within this framework, and maintaining the innovative spirit characteristic of the large operations and value-added funds that he has led since the creation of the Hispania fund, a new vertical called Multi Strategy was launched in 2021, of which I am a part. At that time, Azora had well-defined lines of specialization, such as housing, hotels, elderly care, energy and logistics, and decided to launch a fund that would offer greater diversity, capable of capturing opportunities with greater flexibility and scope, which is why the Multi Strategy segment was introduced.

What is the current situation of the real estate market in Spain?

In real estate investment, various terms are used to categorize the strategies and associated risk profiles. These include the Core, Core Plus, Value Add and Opportunistic categories from the English-speaking world. These terms are used to delineate the degree of risk and expected returns of a real estate investment. The Core strategy is characterized as the most conservative strategy, while the Opportunistic strategy represents a more aggressive approach and, therefore, a higher return requirement.

I think we have experienced a disruptive moment, we have experienced the largest interest rate hike in the last 40 years in the last 24 months. This brutal expansion has caused us to go from a record number of transactions, with historical records in the yields at which assets were transacted to a market that has come to a standstill. At the beginning of the year, between 3 and 6 interest rate cuts were expected this year and currently it seems that there will be 3; this means that until there is no certainty, asset transactions will not be reactivated.

In the Spanish context, we were experiencing a boom in the transaction of Core and Core Plus assets, driven by the negative interest rates that motivated the shift of investments from bonds to these assets. In the current rate scenario, Opportunistic and Value-Added investors, in search of higher returns, are willing to invest at an early stage, despite persistent uncertainty. For this to happen, there must be a match between supply and demand. In Spain, this adjustment has been more gradual, as sellers are not under pressure to sell due to lower indebtedness.

As a short-term forecast for this 2024, we anticipate that not many transactions will materialize until the summer in those assets where leverage has a negative effect. A reduction in interest rates in Europe is expected from June onwards, by which time the market should have stabilized, leading to an increase in transaction activity.

Which sectors of the real estate market are going to stand out in Spain this year?

During the expansionary period we have had in Spain, companies could finance themselves below the interest rate or the price at which they were buying, which caused yields to fall. Currently, the only assets that make sense to finance are hotels and the retail sector, which can be acquired at entry yields higher than the cost of debt.

On the other hand, the field of flex living or living in general, stands out for its solid foundations. We can take as an example the city of Madrid, which annually receives a net migratory flow of 80,000 people, compared to a supply of only 15,000 new homes. This disparity is causing an increase in rental prices within the area bounded by the M-30, pushing the middle class to peripheral areas. New development projects in southeastern Madrid are positioned for notable success, responding to the growing demand for affordable housing.

The logistics sector experienced a significant contraction last year, with almost zero transactional activity. However, a recent upturn in the number of transactions has been observed , signaling a possible return to the dynamism that prevailed prior to the slowdown.

As for the office market, this segment is facing uncertainty due to teleworking developments. The future demand for office space and its configuration is under review, which could lead to a reconversion of uses for those assets that are not in central locations.

Specifically, the vacation hotel sector continues to show very positive dynamics. Last year, this sector posted record figures in terms of performance, benefiting considerably from the influx of tourists, especially visitors from northern and central Europe. This upward trend is expected to continue, supported by strong demand and the sector’s ability to attract a diversified international audience.

Finally, the data center niche is emerging as a key growth area. Driven by the growing demand for digital content and the development of artificial intelligence, this year is expected to mark a turning point for the sector. The need to minimize latency will drive the creation of smaller, distributed data centers, strategically located within large cities to optimize performance and delivery of digital services.

If you are interested in learning more about the evolution of the Spanish real estate market or about the role of digitalization in this context, please contact us at, our experts will be happy to provide you with more information.