Aguirre Newman: Almost 1 million m2 of Logistics Space Leased in Madrid & Barcelona YTD

21 November 2017 – El Inmobiliario Mes a Mes

In total, 929,698 m2 of logistics space was leased in Madrid and Barcelona during the first three quarters of 2017, up by 22.6% compared to the same period in 2016, whilst the volume of investment in logistics assets reached €600 million. That figure represents 76% of the total recorded last year, which marked a historical maximum investment volume in Spain, according to Aguirre Newman.

During the third quarter of 2017, the high level of investor interest in logistics assets, which started four years ago, continued to flourish. It was boosted by factors such as the consolidation of economic growth, the gradual improvement in household consumption, rising rental prices in the main markets and improvements in financing conditions.

The initial rate of return for the most prime assets in the best locations amounted to around 6%, and rates of around 5.5% were seen for certain one-off operations. According to the report from Aguirre Newman, the scarce supply in the main logistics markets in Madrid and Barcelona is affecting the market in two ways. On the one hand, interest in secondary markets is continuing to rise, most notably in Zaragoza, Valencia and Sevilla. On the other hand, there is a high degree of interest in buying land, either to develop speculative projects or to build turnkey projects, under forward funding or forward purchasing formats.

Demand for logistics space in Madrid during the third quarter of the year reached 226,757 m2, compared to the total cumulative space leased in 2017 of 614,070 m2. That figure represents an increase of 52% with respect to the same period last year. Both the activity recorded during the third quarter – which is closely related to e-commerce – as well as that registered during the year to date represent record levels never seen before, and so the report forecasts that the end of 2017 will also be very positive in light of the operations currently underway.

The most significant operation in terms of the volume of surface area leased in the third quarter was completed in Illescas (Toledo), where an operation involving a turnkey project with a surface area of 103,000 m2 was signed. That was followed by another operation closed by Leroy Merlin in Meco with a surface area of 59,914 m2. In terms of rental income, the maximum recorded was €4.85/m2/month, as a result of an operation closed in the Corredor del Henares, specifically in San Fernando de Henares.

According to Aguirre Newman’s research, activity in the market for land dedicated to logistics/industrial use has grown considerably with respect to previous quarters, with the completion of seven operations spanning a combined surface area of 379,096 m2, destined for both turnkey and at-risk projects. The most significant land operation was the purchase of a plot measuring 242,000 m2 in Illescas (Toledo) for the development of the aforementioned logistics platform (103,000 m2).

On the other hand, the leasing of logistics space in Barcelona amounted to 91,406 m2 during the third quarter, which represents a slight decrease of 9% compared to the same period in 2016. Meanwhile, the total surface area leased during the first nine months of 2017 amounted to 315,628 m2.

Vallès Oriental and Barcelonès were the most active regions in terms of the number of operations, where three and two operations were closed, respectively. In terms of the largest operations closed, a contract was signed in Alt Penedès for a space spanning 20,000 m2 and in Vallès Oriental, another contract was signed for a space measuring 14,000 m2. Prime rents continued at their levels of between €5.75/m2/month and €6.75/m2/month. Nevertheless, the report from Aguirre Newman highlights that one operation was closed in the Zona Franca Consortium with a rental price above the prime rate indicated.

Leasing of logistics space soars in Valencia

Moreover, during the first nine months of the year in the Valencia metropolitan area, 135,250 m2 of logistics space was leased. That figure represents an increase of 35% with respect to the same period a year earlier, according to BNP Paribas Real Estate.

In that region, demand focused primarily on the town of Ribarroja, which accounts for 80% of the surface area leased (…).

Original story: El Inmobiliario Mes a Mes

Translation: Carmel Drake