“Rental Costs of Some Offices Will Go Up 50% Over the Next 4 Years”

25/06/2014 – Expansion

Andrés Escarpenter joined JLL (former Jones Lang LaSalle) in 1988. Since then, he has been responsible for the management and the strategy fields in the advisory firm.

Having learnt from the crisis in the 90s, the company took measures before the worst recession loomed and achieved restructuring 70% of JLL as early as in 2007. “We have gained market share and transparency thanks to quick action. Our people see the directors can adapt to the circumstances”, assures Escarpenter.

He also remarks that the property advisory sector lacks innovation. However, “at the moment, Spain is the hottest market in the world, therefore office rental prices will shoot up by even 50% in the forthcoming four years. This will not be a bubble, but the Spanish real estate industry is going to recover much sooner than many think”. Further, he explains: “over the past few years, realtors did nothing but to shrink and consolidate, leading to a situation where we are squeezed. The growth will come, companies will have to hire more employees and will have no space – and the supply is short (as it has always been), and that will trigger rise in prices”.

Ironically he adds that even though Spain is the land of opportunities, it is also a drag. “The enormous interest in the country´s real estate will also put a pressure on realtors to grow. They will have to expand their budgets”. For growth in the next 2 year, JLL España intended 20% more.

The perfect business model for JLL would rest exactly on two halves: “50% users and 50% investors or developers; 50% transactional and 50% non-transactional business”. At present, the utopian numbers are far from reality because “customers and market still need education. We have a lot of value to add but we want our efford to be perceived”. When it comes to the non-transactional market, “we turn over 50% which brings the best security level but less margin”.

In the majority of the transactions, the main role play foreign buyers “but national investors are on their way. We already notice a small private investment. In any case, national purchasers will not be able to compete with the international money in short term”.

The executive cheers up saying that Madrid and Barcelona will see an increase in transactions involving land, as well as the provincial capitals. He says the people will seek financing and luckily banks start to lend again, on yesteryear conditions though.

 

Original article: Expansión (by L. Junco)

Translation: AURA REE

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