Build-to-Rent Gains Traction in Spanish Real Estate. The Spanish real estate market is going through a new paradigm with the growth of the build-to-rent model. This trend is fast turning out to be one of the most tempting strategies for investors and developers due to growth in demand related to rental housing. But precisely, what is Build-to-Rent, and why is this strategy gaining traction in the Spanish market?
What is Build-to-Rent?
Build-to-rent mainly refers to the real estate business model, wherein there is construction of residential with a view to long-term renting rather than selling. In this method, in contrast to traditional ways where developers build homes in order for sale, properties are managed and let by companies or specialized funds, which make returns through ongoing leasing. This approach answers two of the biggest challenges in the market nowadays: the increase in demand for housing rentals, due to the fact that homeownership is increasingly difficult, and the scarcity of quality rental homes. This model offers investors an opportunity to enjoy stable and long-term earnings in this growing market.
Why is it Booming in Spain?
In the last few years, build-to-rent has grown extraordinarily in Spain. As explained in a recent study by Activum Real Estate Consulting, by 2024, more than 11,000 properties will have been built through this model, a 27% increase in comparison with 2022. It reflects not only the interest of investors but also the trend in the preferences of tenants, who increasingly choose to rent over buying a house. By geographical distribution, Madrid is leading the build-to-rent segment, with 46% of the total units-a number that reaches 5,859 homes. That figure represents a growth of 115% in comparison with the last year, 2022, which makes the dynamism explicit in the Capital Market. The ranking continues with Andalucía with 2,484, mainly concentrating its properties in Málaga and Seville. It follows in the ranking: the Valencian Community and Catalonia, with 1,861 and 1,123 units, respectively.
Benefits for Investors
This is especially attractive to investors in view of a number of advantages seen in the build-to-rent model, including:
Stable, predictable income: Long-term rentals provide very stable income, normally less susceptible to ups and downs compared to those from traditional buy-sell cycles.
Growing demand: The rental market in Spain keeps growing, powered by increasingly unaffordable home prices and changing attitudes among younger generations toward freedom from ownership.
The vacancy-related risks are lower, as professional management with additional services usually allows these developments to enjoy high occupancy and reduces the risks associated with long vacancies.
Operational Efficiency: With large-scale developments, internal management is more efficient on aspects like maintenance, services, and administration, adding up to the profitability for the property owner.
Price Trends
By rental prices, the market will vary depending on the region. For example, in Madrid, rents have continued higher, moving from an average of €1,100 per month for a one-bedroom apartment, up 34% since 2022. The average price of a three-bedroom property in Andalucía has seen an 8% increase, while the Valencian Community has increased prices across all property types. In contrast, build-to-rent in Catalonia has been trending downwards: a 30% decline in the number of properties and more or less stable or even falling rental prices, with Barcelona being one of the main destinations.
Key Market Players
Another reason that drew in the large players in real estate was the new build-to-rent model. According to Activum, the sector is headed by Vivenio with about 25% of the available units, followed by Be Casa Essentials from Greystar with 10%, while Vivia Homes and Stay Homes weigh in with 7% each. Neinor Homes participated with 5% through its brands Bialto and Rental Homes.
Opportunities and Challenges
Build-to-rent in Spain is on the increase and could be a very exciting scenario for the investors and the tenants. Long-term renting due to economic and social reasons keeps growing in demand. However, there are still regulatory and legal challenges, especially in cities like Barcelona, given that housing policies set change the way one would develop such projects.
The Build-to-rent is turning out to be one of the pillars for the future of the Spanish real estate market. With rental demand on the rise and investors looking for stability with profitability, the solution rapidly takes hold. If you are one of those interested in this market, work with a specialized real estate consultancy, which is fundamental for identifying the best opportunities and managing such projects effectively. Contact BizNexus Consulting and we will advise you.
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