Is Málaga the Silicon Valley of the South? Its Offices Generate Yields of 7.25%

7 January 2019 – Eje Prime

Málaga is positioning itself as the possible Silicon Valley of the south of Spain. The second most populated city in Andalucía and the only Spanish city in the Top 10 for the best quality of life in Europe, according to Eurobarómetro, has attracted several technology giants in recent years. The interest from these companies in moving to the area and the lack of available space have driven up prime yields in the office market in Málaga to 7.25%, making it the most profitable place to own an office in Spain, according to data from CBRE.

The international consultancy highlights that Málaga is “consolidating its position as a city of reference in Spain in the development of the technology sector”. Oracle, Accenture, Microsoft, Huawei, Ericsson, Indra, Atos and Cisco, amongst others, have all opened offices in the city. The meeting point for these companies is the Andalucía Technology Park (PTA), recently included in the catalogue of European Digital Innovation Hubs, compiled by the European Commission, and which recorded a turnover of €1.9 billion in 2019, up by 8%.

In addition, the province is home to other smaller clusters, such as Málaga SmartCity and the ‘Polo de Contenidos Digitales de Málaga’, the first hub with those characteristics in Spain and which aims to accelerate projects and companies related to the digital sector.

The increase in demand for offices in the city also comes in response to the future forecasts for growth in the region. In fact, Oxford Economists names Málaga as the city where the economy is going to grow by the most in Spain over the next decade. The good connectivity of the province abroad and tourism are some of the factors driving those predictions.

In recent years, Málaga has enjoyed a facelift in recent years with improvements in its infrastructures, and the airport and port as anchors for tourism and business. In addition, the population has increased to 570,000 inhabitants in recent years and there are now more than 40,000 companies, of which 87.1% specialise in services.

These drivers have reactivated the office market, which has taken advantage of the boost in demand, on the rise since 2015. Rentals cost €17/m2/month in the city’s best buildings and the occupancy rate in the prime area exceeds 90%.

The shortage of competitive products in terms of location, finishes and facilities, has driven the increase in yields. In comparison with Madrid and Barcelona, the variation in prime yields is great, improving the yields of 3.25% and 4% that were being registered in the two major Spanish capitals at the end of the third quarter 2018.

Moreover, the office market in Málaga also generates higher yields than the market in Bilbao, although it is not far behind with average yields of 7%, as well as those in Sevilla and Palma, which do not exceed 6.75%. The yields in Valencia and Zaragoza amounted to 5.25% and 6%, respectively, in September last year (…).

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Málaga Vies to Compete with Madrid & Barcelona in the Office Sector

11 April 2018 – La Opinión de Málaga

The yields for investors (in Málaga) range between 5% and 7.5%, and exceed these reference areas, although the experts agree that more tertiary development is needed. The real estate sector highlights the recovery of its activity and rules out signs of a bubble in the housing sector.

The real estate market in Málaga is on the rise and is in the spotlight of all investors both in the residential sphere as well as in the tertiary and office segments, according to comments made by several experts yesterday at a forum organised by Málaga’s Association of Construction Companies and Property Developers (ACP). They also ruled out that that there is currently a risk of a bubble since the rate of growth is being sustained. In the office sector and from the point of view of investors, Málaga capital, specifically, is positioning itself as a great alternative to the saturated markets of Madrid and Barcelona, which are showing signs of “depletion” with the lowest yields for 20 years (3.2% in the prime areas and 6.25% in the more peripheral districts), according to explanations provided by the Director of Investments at Savills Aguirre Newman, Pablo Méndez. By contrast, yields in Málaga range between 5% and 7.5%, with potential for returns that exceed by 1.5 points the markets that have traditionally monopolised investors’ interest.

“The office market has to look for new destinations to house its money and, after Madrid and Barcelona, Málaga is in an enviable position. We need to take advantage of that. There is office demand that is not being met in Málaga, which means that a great investment opportunity is opening up”, said Méndez. A recent study by his consultancy firm revealed that Málaga capital, with an office stock spanning 600,000 m2, has reached leasing and occupancy levels not seen since before the crisis, with percentages of 90% in the prime areas, the financial district and the area around Vialia, established as the Business Centre.

Rents amount to €12/m2/month on average, with maximum values of €18/m2/month for buildings on the most sought-after streets. This trend will continue in 2018, with the forecast that rental transactions could reach record volumes, boosted by sectors such as real estate, services and technology, which means that properties that have been available for almost a decade may have new tenants.

In light of this scenario of a “shortage” of sites, Méndez warns that the city needs new tertiary developments and office buildings given that the spaces that currently have most availability, on the Andalucía Technology Park (PTA), do not meet the expectations of companies who prefer a more urban environment for their workers. Areas such as Martiricos and La Térmica, in his opinion, represent development enclaves that could be used to alleviate this situation.

“Right now, the decisions as to whether to change headquarters are taken by considering the human resources team, the communications, the flexibility of hours, the services in the vicinity. There has been a substantial change in terms of the demand from tenants. The way of working has changed. Companies want to be more central and in their own environments”, he said (…).

Original story: La Opinión de Málaga (by José Vicente Rodríguez)

Translation: Carmel Drake