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Madrid: 26% More Office Space Was Leased In Q2 2016

7 July 2016 – Expansión

Despite the decrease in investment in the real estate sector and, specifically, in the office segment so far this year, leasing of office space in Madrid is continuing to rise; and it exceeded the threshold of 100,000 sqm in Q2 2016.

Specifically, leasing of office space in the capital rose by 26% during the second quarter of the year, to 110,000 sqm. In half year terms, that figure represents an increase of 14,000 sqm, to 219,500 sqm, according to a report from BNP Paribas Real Estate. For BNP Paribas Real Estate, this leasing trend reflects the “good health” of business activity in Madrid, which is driving further forecast increases in office space leases.

During the second quarter, approximately 110 operations were signed, which means that more than 100 operations have been signed per quarter for the last seven consecutive quarters, compared with the average of 88 contracts per quarter registered between 2009 and 2014.

In terms of average rents, the real estate consultancy firm notes an increase in four sub-areas of Madrid (the financial district, the centre, the decentralised area and the outskirts). Specifically, overall average rents have increased by around 13% in annual terms, to €15/sqm/month.

BNP Paribas Real Estate highlights the behaviour of the decentralised area of Madrid, which accounted for 42% of the new leases during the quarter and recorded the highest increase in rents, with rises of almost 30% YoY. “The trend seen during the crisis, when most lease contracts were signed in areas inside the M-30, is now being reversed”.

The consultancy firm highlights in its report that the amount of available surface area is still decreasing, in light of the shortage of new offices and the flurry of new leasing activity over the last two years. Specifically, at the end of June, the availability rate stood at less than 15%, with further decreases forecast.

In terms of predictions for the rest of the year, BNP Paribas Real Estate expects the leasing figures in the second half of the year to be in line with those seen during H1, and it forecasts that rental prices will increase “slightly”.

“These figures are backed up by a labour market that is continuing to recover, with the most recent employment figures showing positive results. The number of people registered as unemployed is at its lowest level since September 2009 and that figure is expected to fall further still”, say sources at the consultancy.

Original story: Expansión

Translation: Carmel Drake