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Knight Frank: Demand For Offices Soared By 30% In 2015

11 January 2016 – Cinco Días

The city of Madrid exceeded the real estate sector’s expectations with respect to the leasing of office space in 2015, as the volume of office space rented by companies grew by almost 30%, representing the best figure since 2008. In Barcelona, on the basis of data as at Q3, the increase was even greater, at 91%.

The real estate market is recovering at the same time as companies are starting to forecast their own growth. Unlike in recent years, during which time many companies have been delaying the decision to move offices or lease more space – because many of them have been involved in processes to reduce their workforces – last year there was a recovery, showing confidence in the future.

In Madrid, office rental agreements were signed for a total surface area of 480,000 m2 in 2015, the highest figure since the start of the crisis in 2007. The data was published last week by the real estate consultancy Knight Frank, which compiles industry information. The most optimistic forecasts predicted that the year would close with a figure of around 420,000 m2. The actual volume represents an increase of 27% with respect to the previous year. In 2014, 358,000 m2 of office space was leased out.

The minimum in the historic series was recorded in 2012, when 261,000 m2 of office space was leased out, at the height of the storm over sovereign debt in the countries in Southern Europe and when doubts over the economy were at their peak. By contrast, the best year was recorded in 2007, when 828,000 m2 of office space was leased.

This shows the positive behaviour of the market in recent months, which, in turn, has resulted from the strong macroeconomic outlook. At the end of the year, BNP Paribas Real Estate forecast that the volume of office rental operations would increase by 100,000 m2 in 2015 and by a further 84,000 m2 in the case of Barcelona.

In the Catalan capital, where full year data for 2015 is still pending, the volume of office space leased almost doubled during the first three quarters. During the 9 months to September, operations relating to 297,000 m2 of office space were closed, an increase of 91% according to the data provided by the consultancy firm CBRE.

The second half of the year has performed even more strongly in terms of new demand in Madrid. During the six months to June, office space measuring 198,000 m2 was leased; and from June to December, that figure amounted to 282,000 m2, i.e. 42% higher.

The most sought-after areas in Madrid are located inside the M-30, where there is a shortage of high quality buildings. In the case of Barcelona, demand is highest on Avenida Diagonal, el Paseo Gracia, the 22@ district and Plaza Europa. (…).

Moreover, the lack of high quality space, combined with the greater volume of demand, drove rental prices up by 6% in the best buildings in Madrid in 2015, to reach €27/m2/month. Even so, that rental figure is still one of the lowest in the historic series, well below the figure of €45/m2/month that tenants paid in 2008.

The main operations

One of the most important office rental operations in the capital involved the agency WPP, which took over a 36,000 m2 building on Calle Ríos Rosas. Another highlight was KPMG’s expected move to the 20,000 m2 Torre de Cristal, owned by Mutua Madrileña. Meanwhile, the bank BNP Paribas leased offices measuring 19,100 m2 in a building owned by Torre Rioja. Also, the consultancy EY signed an agreement to move into Torre Titania, owned by El Corte Inglés.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake