Discover the reasons behind the preference for direct real estate investments among high net worth individuals in Spain. Explore insights and trends.

In the realm of high net worth individuals in Spain, real estate assets emerge as the quintessential protagonists within their investment portfolios. A proclivity for direct investment in domestic real estate prevails, bolstered by the enticing tax advantages associated with Real Estate Investment Trusts (REITs). When queried about the investment preferences of Spanish family offices, the consensus is unequivocal: the real estate sector reigns supreme. However, the nuances of investment strategies reveal a tapestry of individual preferences regarding exposure to these assets.

Investment approaches typically manifest in two primary forms: direct acquisition of properties and investment through funds or REITs. Notably, residential and office properties dominate the landscape, each category commanding a substantial 30% of the investment pie, while commercial properties account for 17%. The logistics sector, although on an upward trajectory, still lags behind with a modest 12%. This investment allure stems from a desire for tangible ownership, a sentiment that resonates deeply with many investors.

The subsector preferences often hinge on the sophistication of the family office in question. Nevertheless, a broad generalization indicates that the majority of portfolios gravitate towards residential properties, commercial spaces, and the office market. Recently, the emergence of innovative residential models—such as flexible rentals and co-living arrangements—has captured the attention of astute investors, signaling a shift in market dynamics.

The direct purchase of physical properties remains a favored strategy, granting investors unparalleled control over their investments, management, and asset valuation. This approach is particularly enticing when it involves landmark properties or strategic assets that promise not only financial returns but also sentimental or brand value for the family. Conversely, some investors opt for the convenience of exchange-traded funds (REITs), which afford exposure to a diversified portfolio of real estate assets without the burdensome task of direct property management. While these funds offer liquidity, they often come with a trade-off: a potentially lower return compared to direct acquisitions.

In the Spanish context, REITs—listed on the stock market and designed to facilitate real estate investment through a favorable tax structure—have gained traction since their inception in 2011. The number of registered companies has surged to 123 this year, reflecting a growing appetite for this investment vehicle. However, it is worth noting that the universe of opportunities within REITs is not as expansive as that of direct investments. Additionally, the tax benefits may not be as pronounced unless one is dealing with substantial amounts, and the inherent volatility of these funds can be a cause for concern.

Another avenue available to affluent investors is private real estate funds, which provide access to larger-scale projects or niche markets without the necessity of direct property management. These vehicles present distinct advantages for those seeking specialized market niches, value-added strategies, or smaller allocations. Furthermore, they facilitate entry into international markets, where accessing lucrative opportunities from Spain can prove challenging, often leading to proposals that local investors may have previously overlooked.

The landscape of real estate investment among Spain’s high net worth individuals is characterized by a rich interplay of strategies, preferences, and market dynamics, underscoring the complexity and allure of this asset class.