17 October 2018 – Real Estate Press
The office market in Madrid recorded its best quarter of the year between July and September with almost 142,000 m2 of office space leased. That figure makes it the sector’s best third quarter for a decade, according to the latest data published by the real estate consultancy CBRE.
“Leasing figures during the third quarter are traditionally characterised by less activity due to the holiday period, so this latest data highlights the strength of the office market in Madrid”, says José Mittelbrum, National Director of A&T Investor Leasing Offices at CBRE España. “Looking ahead to the end of the year, it is very likely that, if some of the large deals currently active in the market are closed, then 2018 will see office leasing figures in Madrid very similar to those of 2017, which amounted to more than 600,000 m2, figures that have not been seen since 2007”, added Mittelbrum. Since January, almost 400,000 m2 of office space has been leased, the best figure since 2008.
Increase in rents
The increase in demand, boosted by demanding occupants with respect to the quality of the properties, and the reduction of the available supply, especially in renovated buildings and new properties in the central business district (CBD), led to a YoY increase of 9% in prime rents during the third quarter of the year to around €33/m2/month.
Empty space in high-quality Grade A buildings has decreased by 26% over the last year, which has led to situations of competition between several candidates for the same building.
Since the lowest point of the previous cycle, prime rents have grown by 35%. Other submarkets are also rising: average rents, calculated on the basis of actual operations, between July and September, increased in all submarkets with increases of more than 30% in the CBD and Secondary Centre (inside the M-30) and of between 15-20% on the Northern (A-1) and Eastern (A-2) axes of Madrid. Rising rents and the prospect that this trend will continue is one of the reasons why the office market in Madrid is the priority objective for a large number of domestic and international investors.
Madrid Norte saw significant activity in the last quarter, with two high-profile operations: the rental of the Oxxeo building in Las Tablas to Cap Gemini (9,300 m) and the rental of 7,000 m2 in Torre Chamartín by Deloitte; both new build properties.
The Public Sector reaffirmed its return to the Madrilenian office market, by closing two of the ten largest operations in the third quarter, namely, the rental of 4,200 m2 in the Agustín de Foxá, 25 building by the Ministry of Finance and of 2,400 m2 in Fray Luis de León, 11 by the Community of Madrid.
Finally, the flexible space operators continued their expansion: WeWork moved into Castellana, 77 to occupy more than 4,600 m2 in that building, the first to obtain the WELL Qualification in Spain. It is worth highlighting that so far this year, 10% of the office space leased in Madrid was taken up by flex-space companies, compared with 4% in the third quarter last year.
At the end of September, the available surface area in the Madrilenian office market amounted to around 1.22 million m2, equivalent to 9.7% of the total stock of offices in the capital, compared to 11.7% a year earlier.
Over the coming months, investors’ commitment to reposition existing offices means that iconic buildings are going to come onto the market such as the Los Cubos building in Plaza de España and the Axis building in the heart of Plaza de Colón (…).
Original story: Real Estate Press
Translation: Carmel Drake