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Bargain-hunters drive Spanish property returns

Source: Reuters - Tue 5th Apr 2011

Opportunistic investors chasing cut-price prime commercial property in recession-hit Spain have helped push the sector's total returns into positive territory for the first time in two years, a survey found.

Investment Property Databank research showed commercial real estate total returns for 2010 hit 4.9%, from 2009's negative return of 9.3%. It comprised a 1.2% fall in capital values and a 6.2% gain in income returns, IPD said late on Monday.

Retail property was the strongest performer, producing total returns of 7.7% in 2010, from minus 7.2% in 2009, with gains in both capital values and income returns. It was followed by offices at 1.9% and industrial at minus 0.6%.

In February, Reuters reported retail property investors were scouting around for distressed assets, betting that rising Spanish GDP would boost total returns by 2013.

F&C REIT, Henderson Global investors, Cerberus Capital, and BlackRock were all looking for deals, as was Europe's biggest listed property group, Unibail-Rodamco, sources said at the time.

Spain's economy is seen growing by 0.7% in 2011 and by 1.4% in 2012, a Reuters poll showed.

"Spanish GDP growth in 2010 remained negative, at minus 0.1%, but this was nevertheless a substantial improvement on 2009's minus 3.7%," said Elsa Galindo, IPD's country manager for Spain.

"This recovery is reflected in the Spanish commercial real estate market - while capital depreciation remains, it has slowed considerably, allowing returns back to positive territory," she said.

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