The CEOSA property developer is setting its sights on new business areas, making the most of its solvent situation, in the face of a drop in property sales.
The economic outlook of increased inflation, a rise in unemployment, unstable Euribor and, consequently, a possible increase in late credit payments are not the best indicators for the construction sector. The ONCE Business Corporation (CEOSA), through its property developer ONCISA, has been operating in this sector with satisfactory results in recent years, but it must now face up to this new outlook with new ideas. The general manager of ONCISA, Luis Prados, explains to our magazine that “recent months (now over a year) …have not been good. A set of elements which are unfavourable to the property sector have come together and, for about the last year and a half some big companies have been experiencing problems. There is a downturn in the sector and particularly in the residential area, we are experiencing a bad period that is not going to change in the short term, at least for another two years”.
In this regard, Prados explains that the investors that occupied a significant percentage - of between twenty and thirty per cent- of residential sales, have disappeared in the last year, resulting in the consequent drop in demand. As such, he continues, “in the last year, we have gone from building 700,000 to 800,000 properties a year, to the 350,000 or 400,000 we are managing now”. The sudden halt naturally affects promotion and contributes to slowing down the sector, “which leads to increased unemployment, since this is a very important sector in Spain’s economy”.

Nuances
However, the general manager of ONCISA points out that the property sector and its situation cannot only be evaluated in relation to how the residential area is doing. “There are”, he explains, “other products, such as offices, hotels, shopping centres, protected housing and the industrial sector… 2007 closed with the lowest unoccupied office rate in the last eight to ten years and there continues to be a significant latent demand being a business with a solid future. The hotel sector is also progressing at a healthy rate; many developers have started building hotels in order to rent them out to hotel companies. In the shopping centre sector, despite the minor recession of recent months, there is still significant occupation”.
Question: Would you say that real estate is a cyclical market and that we are in a “bad” phase for the residential area and not so bad in others?
Answer: I would even say “good”, if the economy in general remains stable, then the other areas have a very encouraging future.
Q: On 11 January, the cabinet approved a series of measures to promote the rental market amongst property owners and developers. Is that the way to ensure that the sector remains afloat whilst we await better times?
A: I am not very optimistic in that sense. I think that they are measures that obviously help, but they are not sufficiently significant to change a situation such as that of the current market. Currently the rental market is down, there is greater demand than supply, but the fact is that in Spain the percentage of people who live in rented accommodation is small, and as such these measures affect a small part of the market. Furthermore, I believe that the subsidies are going to lead to an increase in rental prices, with the result that rental costs will not be much less than investing in buying…
Q: In this scenario, what role does ONCISA seek to play?
A: As a company and in this context, for the last year and a half we have been focussing more on the rental property sector. Furthermore, since the beginning of 2007, our Strategic Plan has led us to position ourselves in the area of offices and hotel rental projects; that is where we want to make inroads. In fact, in Madrid alone, we are currently building an office building in C/ Emilio Vargas, another in Isla de Chamartín and a hotel that will be run by Confortel (the CEOSA-owned hotel chain)… We have been moving in this direction for two years now, to the detriment of housing projects, and particularly second homes, a segment in which ONCISA currently barely has a single promotion. In terms of primary residences, our idea is to confine ourselves to good, established areas and be very careful for the next two or three years.
Q: In your opinion, what would the ideal proportion of open market rental properties and properties subsidised by the state on the market be in order to ensure adequate progress in the sector? 
A: Depending on each region, currently between thirty and fifty per cent of new construction projects involve protected housing, figures which seem reasonable. All developers would have liked to build protected housing wherever it was possible to find land at a price which fell between the limits defined by previously set sale prices. However, most protected land is currently ‘in planning’, which implies that it will be another three or four years before it can be used. Planning must be speeded up so that this land can be used for construction.
Our own experience in this area is extensive and has produced interesting results. It offers a small but highly secure business margin, so any developer can feel comfortable in the field of protected housing, but only if there is land available at a suitable price to ensure that the numbers make sense.

ONCISA, safe
There is speculation that the sudden halt in the construction sector could threaten up to a million jobs in our country and there is even a fear that it could extend to the tourism sector, which is directly linked to the property sector and which represents the other main branch of our economy, but the CEOSA property developer is convinced that it can weather the storm, thanks to its investment structure. “We are going through a phase of significantly reduced sales, because the residential sector represents almost eighty per cent of the property business, but ONCISA specifically will not experience any financial problems in its operating account”, Luis Prados points out in a reassuring tone.