November 2025 proved extremely challenging for two mainstays of Spain’s real estate market, Merlin and Colonial. Their shares suffered significant declines of 8.4% and 7.2%, respectively, standing in stark contrast to the minor correction in the benchmark Ibex index, which lost just 1.3%. This large-scale sell-off was triggered by third-quarter financial reports that seemingly failed to meet the market’s high expectations.
At first glance, Merlin’s financial results for the nine-month period looked more than convincing. The company doubled its profit to 583 million euros and revenue rose by 7.7% to reach 413 million. Asset occupancy held steady at a high 95.5%. Nonetheless, the publication of these results led to a drop in the company’s stock price of more than 5%. The main reason for the negative investor reaction was news of delays in obtaining permits to build data centers in the Madrid suburbs of Tres Cantos and Getafe. Despite this, the expert community is in no rush to write the company off. The average target price for Merlin shares hovers around 15 euros, suggesting a potential upside of 20%. Over 90% of analyst firms recommend buying the stock, and some see the potential for prices to climb as high as 15.80 euros — 28% above current levels.
The situation with Colonial appears even more dramatic, yet also more promising. After a heavy hit on the stock market, the theoretical growth potential for its shares exceeds 40%. While analyst consensus is less unified here than with Merlin, over 60% of experts still recommend buying the stock. Colonial shares plummeted by 5.56% immediately following the results presentation on November 14 and have not recovered since. Investors seeking quick speculative gains started selling off shares due to the lack of exceptionally positive surprises in the report. Nevertheless, most firms maintain their confidence in Colonial, which shows stable occupancy rates and a remarkable 16% growth in rental prices across its Madrid portfolio—a strong indicator. Experts agree that the current price dip offers an excellent entry point for long-term investors, though they caution that short-term weakness may persist until speculative sell orders clear from the market.
For reference, Merlin Properties SOCIMI, S.A. is one of the leading and most highly capitalized companies in the real estate sector on the Iberian Peninsula. The company is included in the prestigious Spanish stock index IBEX 35, confirming its status as a ‘blue chip’. Its portfolio is primarily composed of high-quality commercial assets, including office buildings in prime business districts of Madrid and Barcelona, modern shopping centers, and logistics warehouses. The company’s operations span Spain and Portugal. Merlin’s business model focuses on acquiring, actively managing, and increasing the value of real estate assets. In recent years, the company has been actively diversifying its business, targeting new and promising sectors. One of these new areas is the development of a network of data processing centers (DPCs). This strategic move explains the keen market reaction to any news about permits and the progress of these high-tech projects. Investors are closely watching Merlin’s success in this new niche, seeing considerable potential for future growth.
