Student accomodation

Countercyclical sector, with stable behavior even in times of economic crisis.

Sector in Spain is undergoing a radical process of transformation around two vectors:

Demand

In Spain the number of university students grows annually and will continue to do so until 2031.

Spain is the largest destination country in Europe for students from the European Erasmus program, and a highly attractive destination for international students (annual growth of 5%) There are currently around 105,000 places available in student residences in Spain – of which 60% correspond to colleges, and most of them are obsolete -, while the demand is around 500,000 beds.

Thus; there is an unsatisfied demand that is estimated at around 390,000 beds.

Likewise, Spain is below European standards in the number of students per bed: (14.0 vs. France 8.0 or Germany 10.5).

Process of institutionalization of the sector

Starting in 2017 with the sale of RESA by Azora and Artá Capital, the sector has aroused the interest of large institutional investors with L/P investment strategies.

Leisure sector

Spain is one of the main tourist destinations in the world, with more than 80 million annual visitors.

The important weight of the tourism sector in the Spanish economy means that private initiative seeks new ways to modernize its offer and incorporate new experiences to attract visitors.

On the other hand, the Covid pandemic has accelerated the transformation process of shopping centers to modify their offer in the face of the rise of online commerce. This process of adaptation and generation of a "new customer experience" is causing leisure to gain weight in the mix of shopping malls.

As a result of an in-depth analysis of the sector and her knowledge of the hotel sector, Merkel is developing leisure projects within the most innovative alternative sectors, such as wave parks.

Hotel sector

Spain is one of the main tourist destinations in the world, with more than 80 million annual visitors.

The hotel sector is one of the mainstays of the Spanish economy, and has undergone a notable process of modernization and improvement of facilities from 2015-16 with the end of the global economic crisis of 2008.

The modernization process has been led by the landing of international institutional investors with value-added strategies - hotel repositioning via Capex and new hotel operators -, and by the strategic change of the large hotel chains, where priority has been given to managing versus real estate investment.

The activity data for the summer of 2022 show that the sector has managed to overcome the Covid pandemic, surpassing the reference indicators for 2019.

Despite these changes, 45% of Spanish hotels are in the hands of small owners.

The current macroeconomic scenario – inflation at a maximum of the last 40 years -, may cause an acceleration in the process of concentration in the sector.

Merkel has a relevant track record in the sector, the result of the professional career of its CEO and founder, having participated in operations of notable relevance – Hotel Arts-, advising on more than 30 operations and having extensive contacts among the leading operators in the sector. .

Senior living area

Population aging is a palpable reality in developed European countries

Today, 19% of the Spanish population is over 65 years old. In 2050 this percentage will rise to 31.4%, being one of the countries with the oldest population in the world

Spain currently has a deficit of 75,700 places in residences for the 3rd age, of which 62,000 are on the dependency waiting list

By 2050 it will be necessary to double the number of places currently existing (381,000) to reach the 785,000 necessary for which more than 100 residences should be built per year

Despite the corporate operations of recent years, which have led to the entry of large international operators, the top 10 operators barely represent 19% of the market, but 50% of the pipeline

It is expected that the degree of concentration of the sector will continue to increase in the coming years, while the supply of residences increases to cover the latent demand and new types of residences are incorporated.

BTR

The economic crisis of 2008 and recent demographic changes (increased labor mobility, salary deflation, etc.) in Spain have caused a significant increase in the propensity to rent a home compared to buying.

In Spain, 1m rental homes are missing to reach the European average, and almost 1.9m to reach the level of supply, from countries such as Germany and France.

Today; there is very strong competition with the entry of large international funds and sovereign wealth funds despite the scarcity of product.

The large real estate companies are capitalizing part of their developments, and are also seeking the development of joint ventures with institutional funds to continue fulfilling their ambitious business plans.

Despite the aggressive landing of institutional investors; the market is highly fragmented and continues to be dominated by individuals, since the large holders only represent 4.5% of the total market.

The entry of large international investors is oriented towards large developments (>100 flats) to generate cost synergies in management; therefore, its expansion will tend to be concentrated in the suburbs and new urban developments of the main cities.