Spain: 2019, the year the offices were once again queens of real estate

This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

Investment in tertiary buildings reached 2,610 million euros until September in Spain as a whole, exceeding 2,100 million euros recorded in all of 2018 excluding corporate operations.

Barcelona, ​​with an availability of only 289,000 square meters in September, and Madrid, with revenues that reached 35 euros per square meter at the end of the year, led the market.

The offices are again queens of real estate. The office segment returned to be the one that received the most investment in the Spanish real estate sector during 2019. The total investment in offices in Madrid managed to reach 2.5 billion euros, an increase of 15% year-on-year, according to data from Savills Aguirre Newman. For its part, Barcelona shot up to 1.7 billion euros at year-end, more than double the capital captured by the city capital in the previous five courses.

In the whole of Spain, at the end of the third quarter, the investment had reached 2,765 million euros, more than double the 1,367 million euros allocated to the residential segment, the second with the highest investment, according to CBRE.

The investment made in tertiary assets until September was higher than that made throughout 2018, when it stood at 2,600 million euros if corporate operations are excluded, which added 2,100 million euros more. In this sense, the Spanish office market has managed to fix the gaze of international investors, who concentrated 64% of the total investment made until September.

Specifically, the US fund Starwood Capital led the purchase of office assets, with 10% of the total capital allocated to this type of real estate, after the purchase of the Las Mercedes business park, located in Madrid, for 200 million euros. Cain International and Allianz completed the podium with 8% of the total investment, while Zurich, with 6%; Emperor Group, with 5%; Partners Group, with 5%, and Kanam Grund, with 4%, also played an important role in the evolution of the Spanish market in 2019.

The markets of Barcelona and Madrid continued to lead the office segment, with an exceptionally high square meter absorption until the third quarter of the year. Specifically, the take up in Madrid stood at 535,000 square meters in September, a figure that matched the absorption made throughout 2018, while in the Catalan capital it was 326,000 square meters, a record so far.

Both markets are marked by the shortage, both of product and available land, a phenomenon that is especially relevant in Barcelona. At the end of the third quarter, the Catalan capital and its area of ​​influence only had a total availability of 4.5%, which translated into 289,000 square meters.

In the center of the city, this rate was reduced even more, reaching 1.95%, with only 51,000 square meters without occupants. At the end of the year, the availability rate in 22 @ was 2.5%, while in the area of ​​Fira Barcelona in L'Hospitalet de Llobregat it reached 4% and in peripheral municipalities such as Sant Cugat del Vallès stood at 6%.

To try to alleviate this shortage of offices, in 2019 cranes began to be installed in the area known as 22 @ Nord, between Gran Via, Avenida Diagonal and Rambla Prim. Specifically, three buildings are being built on Selva de Mar street which will add an area of ​​40,000 square meters.

The 22 @ Nord land has an area of ​​almost 100,000 square meters of available land and the first buildings are expected to be available in 2021, while a year later it will already offer more than 100,000 square meters of new offices. In any case, the Barcelona technology district still has the capacity to lift one million square meters of offices.

On the other hand, the Catalan capital also has large bags of tertiary land in the new neighborhood of the Marina del Prat Vermell and in the Sagrera, although in the latter case they will not be available until the completion of the works of the central station of the AVE in the city.

The great lack of new spaces that Barcelona lives in general and 22 @ in particular has caused that 75% of the available land in the natural continuation of the Barcelona technology district are already compromised and even office buildings that are not yet available are pre-leased With the necessary works licenses. This is because the Catalan capital has already become one of the main technology hubs in Europe and many companies in this sector see the city as their first option to establish themselves in Europe.

On the other hand, in Madrid more than 515,000 square meters were contracted in the first three quarters of the year, 40% more than in the same period as in 2018 and exceeding the previous full year. Much of this good behavior is due to the dynamism of the promotion of new assets, which in the first nine months of the year added 150,400 square meters of surface, of which 48,500 square meters were newly built and the rest, rehabilitations.

In this sense, the consultant Cushman & Wakefield estimated in November that the promotion of new office spaces would exceed 130,000 square meters at the end of 2019. In any case, 60% of the new assets under development had already been pre-rented. Availability rate stood at 8.8% in Madrid as a whole in September, 1.9 percentage points below the data recorded a year earlier. In any case, the availability in the prime areas was 5%, which was reduced to 4% in the Azca area. In the financial district of Madrid, the contracting reached 32,000 square meters until September, more than in all of 2018, when the area absorbed about 30,700 square meters.

In July, the Madrid City Council and the Socimi Merlin signed a public-private partnership agreement to rehabilitate and renovate the public areas around this area. Specifically, a staircase will be built that connects the level of Pablo Ruiz Picasso Square with the Vaguada Avenue and another action will be carried out so that this route has an almost direct link with Orense Street and Carlos Trías Beltán Square.

Income, on the rise The shortage of new office floor and the increasing absorption in the two markets has caused that the rents in the two main cities of Spain are the ones that will grow the most in the next three years among the most important cities in Europe. Specifically, profitability will increase around 3% per year in Madrid and 1.6% each year in Barcelona, ​​according to JLL.

Thus, the markets with the greatest growth potential in Madrid are the Madrid Nuevo Norte project and the area near Atocha, which will expand the availability of large and open-plan offices. In addition, the two projects have good connections with public transport and a strong demand from the technology sector.

For its part, the 22 @ district will continue to lead the growth of income in Barcelona, ​​especially thanks to the large number of technology companies it hosts and the limited space available in the city center. The Catalan capital also has one of the most important urban regeneration plans in Europe.

In this sense, the price per square meter continued its recovery in 2019, reaching 35 euros per square meter per month in the prime areas of the Spanish capital, 7.6% more than at the same time in 2018, after touching the barrier refusal of 25 euros per square meter per month in 2014.

Anyway, they are still far from the forty euros per square meter per month that were reached in 2008, just before the explosion of the real estate crisis. On the other hand, the average in the Madrid market as a whole stood at 18.3 euros per square meter per month, representing a growth of 5.5% compared to a year earlier.

Rents in the main business areas of the Catalan capital have grown at the same rate as Madrid and the price per square meter stood at 27.25 euros per month, with a growth of 9% year-on-year, reaching a figure similar to the which was paid in 2008 and well above the negative barrier of twenty euros per square meter that rents exceeded between 2011 and 2015. The average income of Barcelona stood at 16.1 euros per square meter per month, a growth of 11.9% yoy.

The strength of the fundamentals presented by the office markets of both cities and the high growth expectations they have explain why Madrid and Barcelona have been among the favorite markets of international investors.

The returns, while the income has been increasing, the profitability of the office markets of the two main cities of the country have touched minimum.

In this sense, the yields of the first areas of the CBD in Madrid reached 3.25%, while the yields in the prime areas outside the M-30 were 4.75%, of the secondary market within the M- 30, at 4.5% and the secondary market outside the M-30, of 6.5%. In this sense, only the secondary market outside the M-30 had better data at the peak of the previous economic cycle, in 2007. In any case, there are specific assets in which levels below these data were reached. , the yields of the Barcelona market were around 3.5% in the prime areas of the city.

This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

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