New Cycle on the Office Market Begins?

24/01/2014 – Expansión

The real estate market, (…) seems to show certain signs of improvement basically thanks to the capital injections it received in the last quarter of 2013 by significant operations. The square meters rented reach 371.000 m2 according to CBRE, that is 49% more than in 2012, pushed in great number by the transactions by Cepsa, Vodafone, Iberia and the Efe Agency. Cepsa only has rented more than  50.000 m2 in Torre Foster. Barcelona closed the year with 184.000 absorbed square meters, 9% less.

As Patricio Palomar, the director of Research and Investment Strategy of CBRE, says: “if both Madrid and Barcelona have improved considerably their primary zones´rents since the real estate bubble burst – setting the prices at 24.5 €/m2 in Madrid and 17.7 €/m2 in Barcelona – in case of the Catalonian capital it seems clear that the prices had hit the bottom (…) and the new cycle began. If it comes to Madrid, the prices are far from doing so and we will have to wait a couple of quarters for it to happen.”

The CEO of Jones Lang LaSalle in Barcelona, Jordi Toboso, assures that rock bottom level has been reached in the Paseo de Gràcia and Avenida Diagonal areas (…). “By now, the office renting served as rental improvement or space reduction; now, for the first time we observe many new delegation openings and enlargement of the existing ones (…)”.

José Miguel Setién, the Office Director in the said company adds that “in 2013 the supply of the quality products and of great space volume in the capital has stopped creeping up, that allows prediction of a small improvement and the future upsurge in the prices within primary areas. (…) In Madrid the availability is very high and is also distributed among many properties which makes it difficult to offer options of quality office of more than 5.000 square meters.” (…) In case of Barcelona, it is almost impossible to find them in the above mentioned areas (…).

In the capital the office rent signing rate grew by 40% in accordance to the previous year. One third of them has been a result of a large transaction. (…).

“The office market is driven by the big and medium size companies. They demand more than 1.000 square meters and their number is limited” – says Setién. The Spanish business network is sustained by SMEs and they demand 200 square meters on average, “a product that is difficult to find on the office market”. Nevertheless, the beginning of 2014 is not faring badly, as 150.000 square meters has been rented just in the two first weeks of the month.

The weakness is more evident in the peripheral and nearby areas that are still adjusting the prices to the demand. According to Setién, “out of the M-30 ring road, the market spins at two speeds. There are new products for the less demanding profile that permits finding the opportunities. But in the municipalities like the ones in the south of Madrid (…) the situation worsenes.”

Talking about the investment on the market within the sector, there are more optimistic voices. Palomar claims that “the market is at the edge of raising prices, both in sales and rent, that in turn will call attention of the national and international investors in the forthcoming quarters”. (…) According to the last report published by Aguirre Newman, in 2013 Barcelona completed the year with the real estate investment record score. The office segment registered investment amounting to 284 million Euros. The sale of the 13 buildings by the Regional Government of Catalonia (Generalitat) to the French group Axa Real Estate to highlight.

Source: Expansión