Market Trends of Spain Office Real Estate Industry
This section covers the major market trends shaping the Spain Office Real Estate Market according to our research experts:
Office Take-up Remains Strong in Spain
Office spaces in Madrid have added 384,000 m2 of office space in the first nine months of 2022, and 308 letting contracts were completed, indicating that recent months have seen solid activity in the office sector.
In this way, the surface area and operation levels for the entirety of 2021 were met in the first three quarters of the year. Take-up in the third quarter of 2022 was 135 500 square meters.
Companies continue to place a premium on high-quality structures: A and B+ buildings account for 65% of absorption, similar to recent years when close to 70% of demand was satisfied by high or extremely high-quality structures.
For instance, Omb 4-16, Arapiles 13, and Miguel 23 are three instances of the largest deals inked in the third quarter of 2022 that took place in recently renovated structures.
Rise in investment in office spaces
The office investment market in Madrid performed well in the first half of 2022, returning to normal levels following an abnormally slow 2021. An investment of EUR 541 million (USD 575 Million) has been made in Madrid, which is half the amount spent in Spain.
Although still 12% behind the average volume recorded for the first half of the five years prior, this statistic shows an impressive growth of 280% over the same period last year. A total of EUR 198 million (USD 210 million) was invested during the second quarter of 2021, which was 47% less than the EUR 337 million (USD 358 million) invested during the first quarter.
Even while the city's volume is returning to more typical levels, it is crucial to draw attention to the fact that there have not been many large-volume transactions this year-only 3 have over EUR 50 million (USD 53 million). These transactions will take place in the second half of the year if the macroeconomic environment does not hinder them, as there is a strong pipeline of current projects, some of bigger volumes, which were extremely frequent in the city's office market.
Prime Yield in the Central Business District is still 3.25%, despite recent investments showing that it can even be reduced in some core and core+ properties. In any case, macroeconomic indicators are inevitably moving upward, and we will observe whether rising finance costs will ultimately cause readjustments.
In reality, several markets have already reacted to these changes, as seen in the case of CS, where the Prime Yield has increased by 25 basis points to 4.25%, or for markets outside the M-30, where an adjustment of 25 basis points to 5.00% has also been made.
