In Spain, ownership has traditionally been the predominant mode of housing tenure. However, there has been a significant increase in the demand for rented accommodation, in line with the trend observed in the rest of Europe. This tendency has given rise to new models of rental property investment, making renting an increasingly popular option among citizens.
Several factors, including the increase in house prices and mortgage interest rates and the influx of students and young workers, both national and international, into major Spanish cities, have contributed to the surge in demand for rental flats in Spain. Furthermore, new tenant profiles, such as digital nomads, who prioritize flexibility and high-end temporary rentals, are emerging in the market.
This article explores a range of concepts derived from the Anglo-Saxon world introduced in response to these new trends in the rental market in Spain, which has seen an uptick in demand following the pandemic.
Build to rent
Build-to-rent is a business model that has emerged in response to the growing demand for rental housing. Build-to-rent projects differ from traditional property developments, as they are specifically designed for rental purposes rather than for sale or occupation. In this model, developers build and retain ownership of the property while renting it out to tenants.
Build-to-rent projects typically target high-net-worth individuals and provide high-quality construction and amenities, including laundry facilities, bars, and restaurants. The objective is to offer tenants a comprehensive living experience.
Real estate investment funds or private individuals’ associations typically participate in these projects, which involve renting homes on long-term leases.
As the demand for rental housing continues to grow in Spain, build-to-rent has become an increasingly popular option for investors and developers looking to capitalize on the trend. Experts predict that this business model will continue to evolve and increasingly impact the Spanish rental market in the coming years.
Rent to rent
Rent to rent is a business model that differs from build to rent in that it focuses on managing second-hand properties, often refurbished to meet the needs of existing tenants and then subletting them.
This model is attractive to rental management companies as it does not require a significant upfront investment.
To utilize this model, tenants must obtain prior consent from their landlord to sublet the property. Additionally, existing rental contracts need adjustments to ensure the representation and protection of all parties involved.
In the rent-to-rent model, framework contracts are typically long-term and encompass the entire property. In contrast, sublease contracts can vary widely in terms of duration and type of use, such as short or long periods or holidays, and can include using the entire property or only part of it.
Players in this market are companies specialized in managing the subletting of holiday homes and flats.
Coliving
Coliving is a shared housing model for two or more people, which originated in Silicon Valley as a response to the housing scarcity for young workers and students.
This type of rental is mainly attractive for a young and active population and focuses on promoting communal living. Coliving projects offer shared housing and common spaces, such as shared living rooms, bathrooms, kitchens, and coworking or entertainment areas.
Coliving leases typically last several months, making them ideal for short-term stays.
Players in the coliving market are real estate investment funds and specialized companies that manage shared housing. These companies take care of the shared space and provide additional services such as cleaning, maintenance, and organization of events to promote coexistence between tenants.
The co-living model is rapidly gaining popularity in Spain, especially in urban areas where housing is in high demand.
Senior living
Senior living is a housing model providing independent individuals aged 65 and older who do not require constant medical attention a space adapted to their needs. While this market is not yet well established in Spain, demand is expected to grow in the coming years due to the ageing population and the rising in life expectancy.
Senior living projects offer services and amenities tailored to the needs of older people, such as accessibility, security, and communal spaces. In addition, they provide activities and services designed to promote physical, emotional, and social well-being, improving the tenants’ quality of life.
The usual players in this type of real estate project are investment funds specialized in the elderly sector and companies that specialize in managing residences for the elder.
The growing demand for rental accommodation in Spain has led to the development of various investment and business models to meet the needs of the public, including build-to-rent, rent-to-rent, coliving, and senior living. Each model has specific characteristics and objectives adapted to different market segments. The proliferation and diversity of actors in these business models have facilitated an expanded and diversified range of services in the rental market in Spain, providing more options for tenants and a more dynamic market for investors.
Lauriane Moreira
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