Commercial properties in Mallorca

Buying a commercial property in Mallorca

What are the typical commercial properties in Mallorca?

Areas and buildings used for commercial purposes are referred to as commercial properties. These can be shops, hotels, restaurants, sports and wellness facilities, workshops, offices, administration buildings, medical practices or warehouses. But also artist studios, touristic used Finca real estates and galleries belong to it.

Commercial real estate in Mallorca is part of the real estate industry. This area deals with the management, development and marketing of commercial real estate. The market for buyers or investors in this segment is more manageable than for residential real estate. Compared to the residential property market, commercial properties are often associated with higher investment costs. This is why real estate companies in Mallorca need commercial properties in their portfolios to have more complex financial measures in order to secure the return expectations of investors or buyers.

Where is the Mallorcan commercial property market heading?

Overall, global economic development is moving away from a production company and towards a service society. As a result, commercial real estate is also becoming increasingly important internationally. The demand for commercial space is also increasing in Mallorca. The market for commercial real estate is subject to fluctuations in the world market to the same extent as the economy and, of course, directly to EURIBOR in Spain. The lower price level of the economic crisis in recent years has already created rising demand on an international scale. On the other hand, high vacancy rates and a large number of commercial properties newly built in Mallorca in the last two decades of this century are still generating weak demand on average.

In addition, the commercial real estate market has undergone a strategic realignment since the 1990s. Real estate companies are now increasingly trying to sell their existing properties at a profit. To this end, they are focusing on commercial sites that are still under development. The further economic optimisation of these commercial properties forms the basis for higher earnings and has thus become the real lucrative business branch of the real estate industry on the island.

Foreign investors in particular regard Mallorcan commercial real estate as a worthwhile investment. Catering properties are still a sought-after commercial object. High-quality shops, hotels, restaurants and cafes/bars in top locations are in great demand. Particularly popular are the locations Palma de Mallorca, the tourist resorts on the Cala Major in the southwest as far as Puerto Andratx and tourist centres such as Alcudia or Can Picafort. 

What types of commercial property are there in Mallorca?

There are five different types of commercial property. First of all, there are the production facilities such as production and storage halls or refrigerated warehouses. They are characterized by a high degree of flexibility for expansion and third-party exploitation. A traffic-technically favourable location can be used to transform these commercial areas into office and administrative properties. In addition, they often offer sufficient space for the expansion of the respective companies.

In the retail real estate sector, you will find shops, supermarkets and even entire shopping centres. The turnover of the dealers in this segment significantly determines a high or less high return. New sales and service areas are being created above all in peripheral locations, such as the Carefour shopping centre near Coll de'N Rebassa, planned for 2015.

Logistics real estate and offices form the third part of commercial real estate. Here too, the focus is on good transport connections. More and more logistic tasks are being outsourced and centered from the companies. The classic location for this is of course Palma de Mallorca.

This is followed by leisure properties such as hotels, entire holiday parks, holiday apartments, fitness clubs or solariums, whose turnover is associated with a certain risk. A wide variety of offers and fluctuating interests as well as the still serious seasonal differences on Mallorca are responsible for often short-lived trends in the sports and tourism market. Flexible operator concepts and offers, especially for the older generation of tourists, can also make lucrative investments possible in the leisure and health sector of the future and help to equalize the seasonality.

The group of special properties offers a wide variety of uses for commercial space. Large discotheques, car parks and many other concepts have to be developed specifically. Marketing also appeals only to a small group of interested parties, which can bring advantages but also disadvantages.

How does commercial property differ from residential property in Mallorca?

The boundaries between commercial and residential real estate or special real estate on Mallorca are clearly found in the depreciation possibilities, in the sales tax, in the financing possibilities of the respective real estate and in the building law. In between there are properties that are suitable for both residential and commercial purposes.

A further distinction between the two large real estate segments is the valuation. For example, residential properties used by the owner himself are estimated using the real value method. This means that the costs for a new building are determined for this property. Value-reducing factors such as wear and tear of the building or structural defects are to be deducted. By contrast, the capitalized earnings value method is applied to commercial properties and rented residential properties. The net profit that can be generated with a commercial property is the decisive factor here.

Real estate tax is based on the type of use and therefore distinguishes between commercial real estate and residential real estate or special real estate in Mallorca.

A commercial property, for example acquired before the development of a location, can provide a high return in the future.

What has to be considered when renting Mallorcan commercial properties?

If a commercial property is rented on Mallorca, there is extensive contractual freedom. However, this also means that there is no legal tenant protection for commercial leases. It is precisely this freedom of design that ensures dynamic real estate trading, depending on supply or demand. The attractiveness of a commercial property, both for investors and tenants, is therefore correspondingly high both nationally and internationally.

A commercial property, for example acquired before the development of a location, can provide a high return in the future.

The financing of commercial real estate, with all the fiscal background, the switching to interested investors or buyers, the competent evaluation of the real estate, the market analysis and market observation as well as a suitable conception for the development of a commercial real estate require founded specialized knowledge of the real estate enterprises busy with it. This is why specially trained brokers often work in the large commercial property market. Specialisation is also continuing within the commercial real estate sector in order to place more emphasis on the advisory function of a real estate agent in Mallorca for investors and buyers.

If you are interested in a business takeover or traspaso in Mallorca, you will find detailed information in this article: Business takeover / Traspaso.