MADRID-Real estate activity in Spain and Portugal is picking up now as confidence begins to return in the aftermath of the global crisis, says Wynn Williamson, head of Aguirre Newman’ International Investments division.

In 2010, more than half the commercial property investment volume has been from foreign investors, with major demand coming through for core office assets where a combination of falling rents and yield widening brought a 40%-50% decline in capital values since the crisis struck. "Although some investors believe that initial yields - around 5.0%-5.5% - do not offer the expected spread over London and Paris, relative pricing compared to 2006-2007 is compelling," Williamson says. "Furthermore, since office stock in Madrid and Barcelona is so limited, the next 12-18 months could offer a unique opportunity for institutional investors to acquire assets while the market is still soft."

Most competition from private investors is concentrated in deal sizes below $70 million and in the central urban locations. Net lease investors are also finding good sale and leaseback opportunities with yields of 8%-9% and 15-25 year leases, he added. "This is quite interesting given that market standards are three-to-five years term certain,” Williamson says.