Merlin Properties: A High-Yield Play on Spain's Data Center and Logistics Boom

In an era where digital infrastructure and supply chain resilience define economic competitiveness, Merlin Properties has emerged as a standout player in Spain's real estate sector. With a strategic focus on capital allocation, sector-specific growth, and geographic positioning, the company is leveraging the twin tailwinds of the data center revolution and logistics demand to build a compelling long-term investment case.

Strategic Capital Allocation: Fueling High-Growth Sectors

Merlin Properties' 2025 performance underscores its disciplined approach to capital deployment. The company's gross asset value (GAV) of €12.12 billion reflects a 3.2% valuation uplift, driven largely by its data center segment, which saw a staggering 38.2% growth year-over-year. This surge is no accident—it's the result of a calculated shift toward sectors with structural demand.

The data center pipeline, for instance, is a masterclass in forward-looking strategy. Phase I of its data center developments in Madrid is already 70% leased, with Phase II projects in Alava and Lisbon advancing rapidly. Two new locations in Madrid—Tres Cantos and Getafe II—are slated for 2026, with potential for 130 MW of IT capacity. These projects are not just about scale; they're about securing long-term partnerships with hyperscalers like Microsoft, which recently signed an 18 MW block in the Bilbao area.

Meanwhile, logistics remains a cash-flow engine. Merlin's 96.2% occupancy rate and 2.2% like-for-like rental growth highlight its ability to capitalize on e-commerce tailwinds. The company's 480,000 sqm landbank, with 60% earmarked for short- to mid-term development, ensures a steady pipeline of high-margin assets.

Sector-Specific Growth Drivers: Data Centers and Logistics

The data center boom is not just a trend—it's a structural shift. With AI adoption accelerating and cloud demand surging, Spain's strategic location (bridging Europe, Africa, and the Americas) makes it an ideal hub. Merlin's partnerships with hyperscalers and its focus on energy-efficient designs position it to capture this growth. The company's 28.6% leverage ratio and €1.65 billion liquidity buffer further insulate it from volatility, allowing it to fund expansions without overleveraging.

Logistics, meanwhile, benefits from a more immediate tailwind: global supply chain reconfiguration. Merlin's recent warehouse deliveries in Lisbon and Vitoria Júndiz—targeting tenants like Mercedes Benz and Worten—demonstrate its ability to secure premium leases. The sector's low occupancy cost ratio (11.0%) and 5.8% sales growth in shopping centers (another segment) underscore the company's diversified risk profile.

A Strong Balance Sheet and Long-Term Vision

Merlin's financial discipline is a cornerstone of its strategy. With a BBB+ credit rating and no debt maturities until 2026, the company has the flexibility to reinvest in high-growth assets. Its recent €183.3 million in non-core asset sales—executed at a premium to GAV—further highlight its commitment to capital recycling.

The CEO's assertion that “the party starts in 2028 and 2029” isn't hyperbole. By 2027, Merlin's Phase II data centers in Lisbon and Alava will begin generating scale, while logistics modules in Lisbon will add to its rental income. The company's raised FFO guidance to €0.56 per share for 2025 signals confidence in this trajectory.

Investment Thesis: Why Merlin Stands Out

For investors seeking exposure to Europe's digital and industrial transformation, Merlin Properties offers a rare combination of:
1. High-yield potential: A €0.22 per share dividend (implying a ~1.5% yield) and growing FFO.
2. Diversified risk: A portfolio split across offices (58% by value), logistics, and data centers.
3. Structural growth: Positioning in sectors (data centers, logistics) with multi-year tailwinds.
4. Financial resilience: A low-leverage balance sheet and liquidity to fund expansion.

While the company's 2026 outlook is relatively flat, the 2027–2029 period is where the value creation accelerates. With Spain's real estate market stabilizing and global demand for infrastructure assets rising, Merlin is poised to outperform.

Conclusion: A Compelling Long-Term Bet

Merlin Properties is more than a real estate company—it's a strategic capital allocator in a world where infrastructure is the new currency. By targeting sectors with inelastic demand and leveraging Spain's geographic advantages, the company has built a platform for sustained growth. For investors with a 5–7 year horizon, Merlin represents a high-conviction play on the digital and industrial future of Europe.