Construction recovery leads to birth of new companies

An apartment block under  construction in the Teatinos district of Malaga city.
An apartment block under construction in the Teatinos district of Malaga city. / ÑITO SALAS
  • Ten years after the property bubble burst, the Costa del Sol is seeing a new boom in construction and real estate companies. A third of all new businesses in the province are involved in property development, building or sales

Ten years after the property bubble burst, the Malaga economy is back on track. Construction, property development and sales have once again become the leading sectors in which to set up in business in the province, according to the report 'Statistics regarding companies in Andalucía' from the Institute of Statistics and Cartography of Andalucía (Ieca).

One in every three companies created in Malaga last year was linked in some way to property; more than 1,700 new competitors joined the sector, encouraged by signs that Malaga is the Spanish province with the most sales in relation to its size.

Of the companies created in the province last year, 789 were in real estate and 785 were in construction. In addition there were 155 new companies dedicated to “specialised construction”, which is also in the top ten of the most dynamic sectors. Altogether in these three segments there were 1,729 new companies, which is about 33.8 per cent of the total of 5,111.

This increase is evident from a walk down any main shopping street, where estate agencies once again proliferate. Not only are franchises such as Tecnocasa, Redpiso, Look & Find, Unicasa and RE/Max speeding up their expansion plans in Malaga province, but new local or regional chains are also growing, as are new independent agencies.

The number of self-employed professionals in the property business is also increasing, and they do not need an office because they take advantage of the potential of the internet and social media.

When the construction industry in Malaga began to pick up again in 2014, most new companies were in this sector. In that year 1,103 construction companies were set up in the province. Estate agencies also increased, but at a slower rate: 699 were created in 2014. The proportion in 2015 and 2016 was similar, but last year more new businesses were involved in real estate. Judging by the figures for January this year, the trend is intensifying. In that month alone, 115 new estate agencies were set up, compared with 54 in the construction industry.

An obvious question arises: is there a risk of another property bubble? To answer that, it is best to look at different sectors.

In terms of construction, the general secretary of the Association of Constructors and Developers of Malaga (ACP), Violeta Aragón, is clear: “Bearing in mind the huge numbers of construction companies that have disappeared in the past ten years, there is still a long way to go for the sector to get back to where it was,” she says.

The statistics support that: according to the 'Directory of economically active establishments and companies in Andalucía', in 2007 there were 17,512 active construction companies in Malaga. That figure dropped from 2009 onwards, and reached rock bottom in 2012 when there were just 11,475, a reduction of 34.5 per cent. In 2016, the last year for which figures are available, there were 12,268, still far lower than pre-crisis levels.

“We are starting from levels that are so low that the growth seems exorbitant, but we aren't worried at all about a possible saturation, at least for the moment,” says Violeta Aragón.

A good time

She is convinced that this is a good time to open a business in the property sector and points out that new niches have arisen in the market: share management, residential and commercial letting and restoring properties for holiday rentals, for example. “Properties are being restored because of the increased demand for holiday apartments, not only in Malaga city, but in other municipalities such as Marbella,” she says.

In terms of construction, the focus has been mainly on small specialist companies which offer their services to the big construction firms. “Obviously we are talking about residential building, because there are still very few infrastructure contracts on offer,” says Violeta. “Until there is investment in public works again we will see very little development in inland areas or on the east coast of Malaga. The construction sector is still nowhere near the size it should be in a province like this.”

Fewer new businesses have been set up in the property development sector, partly because of the difficulties that still exist in obtaining bank finance. Residential development in the province these days is still dominated by major international and Spanish companies and financial institutions, apart from some Andalusian companies such as Myramar or Insur.

With regard to estate agencies, opinions differ about the risk of saturation. For Lázaro Cubero, the head of the analysis and reports department of Grupo Tecnocasa, the sector is “returning to normal” after the crisis which resulted in many agencies closing down.

“The number of estate agencies has to correspond to the level of sales and demand,” he says, although he admits that “the risk of saturation does exist, mainly in the big cities, which is where most new businesses open”.

At present Tecnocasa has 24 offices in Malaga province; it opened three last year and plans to open a further six this year. “In Malaga city alone we have 14,300 clients who want to buy an apartment to live in, another 1,500 who are looking for a house and 3,500 clients who want somewhere to rent,” says Lázaro.

José Antonio Pérez, director of the Real Estate Chair of the Institute of Business Practice, confirms that numerous new businesses have opened now that the market has picked up, but he also warns: “If the trends in growth are not maintained, the current cannibalism with regard to resale properties will increase, because the more companies open up the less business there is to go round. The same thing will apply to legal and technical studios, and construction companies”.

Among the estate agencies, one type is proving particularly successful: companies which specialise in foreign buyers. One of these is Azul Real Estate, an agency founded in 2013, the worst year of the crisis.

“We knew that was the time to do it because if you start when things have already begun to improve you miss out on an opportunity,” says Paco Sánchez, one of the partners in the company. It was a risky commitment at the time, but worked out well. The company now has three offices, two in Malaga city and one in Marbella, and 26 staff.

“About 70 per cent of our sales are to foreign clients. The market is growing thanks to foreign demand, but not everybody can access it. This is a highly professional business and you need to be a certain size, have international contacts, financing ability and technology,” he says.

Azul Real Estate has an alliance with the multinational Coldwell Banker. “Local estate agencies work in a smaller market, but in times of growth everyone gets their share of the cake,” he says.

Where there is a risk of saturation, in his opinion, is in property development. “Prices are going up too quickly and there could be an excess of property on the market in the short term. Many of the projects planned at the moment are not going to succeed because they don't meet clients' demands with regard to location or facilities,” he says.