Real estate investment Trusts in Spain: SOCIMI
Analytical article published by the Bank of Spain in which Víctor García-Vaquero and Irene Roibás from the Directorate General Economics, Statistics and Research, review the evolution, regulation, situation and main characteristics of the real estate investment Trusts in Spain (SOCIMI).
The main conclusions of the analysis are as follows:
- Rapid growth in recent years to reach a relative size higher than the average for this type of company in the euro area as a whole:
- “The number of registered SOCIMIs rose from 2 to 90 between 2013 and 2019, while their stock market capitalization increased from €0.1 billion to €27 billion.”
- Potential positive impact on the residential rental market: Although so far most of their investments have been in the commercial real estate segment, in recent years there has been an increase in the weight of the residential real estate in their portfolios, a trend that should continue "could prompt a rise in the supply of rental housing in the next few years. This could contribute to tempering the growth dynamics of prices observed recently in this market"
- SOCIMIs have increased the offer of investment products among savers, showing some advantages for retail investors compared to direct investment in real estate, in terms of risk diversification, professional management and scalability.
- From the point of view of financial stability, SOCIMIs could also offer some advantages over other types of investment products:
- Reduced direct exposure of Spanish banks (through equity investments and the granting of loans) to SOCIMI, " both in terms of absolute value and its weight in banks’ balance sheets"
- Eventually, during periods of stock market and real estate crisis, The structure of these vehicles is, in principle, sounder as they don´t have to reimburse unit-holders when they demand their contributions, reducing the risk of accelerated portfolio fire sales in crisis periods and the collateral effects that these may cause.