Where to invest in 2026: residential vs commercial real estate
Reading time: 4 minutes
Let’s review the key characteristics and differences between residential and commercial real estate from an investment perspective. Understanding these distinctions will help you make an informed decision based on your goals and financial capacity.
1. Residential real estate
Residential property primarily appeals to those planning to relocate to Spain on a permanent basis, as well as investors interested in generating rental income. Maximum profitability is achieved when the property holds a tourist rental license. Without such a license, rental returns tend to be significantly lower.
In practice, residential real estate is particularly popular among Russian-speaking buyers, as this asset class is generally easier for them to understand and manage. However, when compared with commercial real estate, market data and professional analysis often show that commercial assets offer higher overall efficiency as an investment.
Purchase costs — new-build property:
• VAT (IVA) — 10% of the purchase price
• Stamp duty (AJD) — 1.5% (new developments only)
• Notary and land registry fees — approximately 1%
• Agency commission — turnkey transactions typically 3–5%
Purchase costs — resale property:
• Property transfer tax (ITP) — 10% of the purchase price
• Notary and land registry fees — approximately 1%
• Agency commission — turnkey transactions typically 3–5%
Returns and payback period
Residential property yields average 3–3.5% per year. Payback periods are difficult to define precisely, as they depend heavily on the property type and location.
Risks
• Price decline risk is low in major cities such as Barcelona and Madrid. Even during the pandemic, there were no significant price drops.
• Rental default risk is the main concern in residential leasing. When the property is used for personal residence, income risk does not apply.
• Technical and legal risks — it is essential to verify certificates, outstanding debts, and any legal encumbrances prior to purchase.
2. Commercial real estate
The target audience includes investors and business owners seeking passive income and long-term stability. Demand for commercial real estate, particularly in major cities, is extremely high and exceeds residential demand in 90–95% of cases.
Purchase costs:
• Stamp duty (AJD) — 3.5%
• Notary and land registry fees — approximately 1%
• Agency commission — 3–5%
Liquidity and returns
• High liquidity, especially in major cities such as Barcelona and Madrid
• The most liquid assets typically fall within the €500,000–€800,000 price range
• Average yields of 7–10% per year, depending on location — significantly higher than residential property
• Lease agreements are usually signed for 10–15 years, with a mandatory minimum term of 2–3 years
Risks and management
• Non-payment risk is minimal, as eviction rulings for commercial tenants can be obtained within approximately two months in case of contract breach
• Maintenance and utilities are fully covered by the tenant; the owner is generally responsible only for the façade, roof, and common building elements
• Legal due diligence is typically simpler than in residential transactions, making commercial real estate more convenient for investors
Whether you choose residential or commercial real estate, it is essential to align the investment with your objectives and risk tolerance.
Residential property is well suited for relocation purposes or tourist rentals but offers lower returns and higher risks. Commercial real estate, on the other hand, represents a more efficient and stable investment, particularly in major cities such as Barcelona and Madrid, due to higher yields and reduced risk exposure.
If you would like to explore your options in more detail and determine which strategy best suits your goals, contact us.
Our specialists will help you make an optimal investment decision, fully tailored to your needs and opportunities.
