Savills: Investment in Offices in Madrid Will Amount to €2bn in H2 2018

19 July 2018 – La Vanguardia

Madrid is accumulating investment projects in the office market worth almost €2 billion, which will materialise during the second half of this year, according to the consultancy firm Savills Aguirre Newman, which estimates that the figure for Barcelona amounts to around €700 million.

In Madrid, there was an 11% reduction in the volume of office space leased during the first six months of the year, and absorption in the office segment of the capital amounted to 273,000 m2.

In Barcelona, the transacted volume amounted to 207,447 m2, and the peripheral area was where operations grew by the most during the six months to June, up by 78% YoY, to 56,030 m2.

In terms of average rents, in Madrid, the figure reached €17.70/m2/month, up by 12% compared to the first half of last year, whilst the theoretical “prime” rent in the central business district amounted to €32/m2/month, up by 10% YoY.

The report indicates that in Barcelona, the evolution of rental prices is continuing to rise, with growth of 6.2% on average over the last year.

The average price in “prime” areas in the central business district of the Catalan capital amounted to €19.35/m2/month, compared with the new business areas, which saw prices of €15.70/m2/month.

Of the operations planned for Madrid this year, the consultancy firm highlighted new developments and renovations in Vía de los Poblados (33,000 m2), Puerto de Somport (14,000 m2), Avenida de Bruselas (14,500 m2) and Príncipe de Vergara (11,400 m2), amongst others.

In terms of the main projects in the Catalan capital this year, Savills Aguirre Newman highlights the Luxa building, with a surface area of 17,000 m2, Tánger 66 (8,000 m2) and Parc Glòries (24,000 m2). In 2019, the Can Batlló project in Plaza Cerdà will be completed, with a surface area of 17,000 m2, as well the Hexagon in 22@, spanning 10,800 m2.

Original story: La Vanguardia

Translation: Carmel Drake

Ryanair Opens its Digital Hub in Madrid’s Eurobuilding II

30 November 2017 – Expansión

Ryanair has arrived in Azca. The Irish low-cost airline has leased 2,000 m2  of space in the Eurobuilding II, located in the heart of the Spanish capital’s financial district for its largest technological hub.

“It is an ideal location in one of the largest technological cities, with highly qualified people; plus, it is home to some of the greatest technological innovators in Europe”, said sources at the airline.

Ryanair, which avoided specifying the amount that it will spend on the new offices, chose Spain for the launch of its third digital innovation centre – it has two others in Dublin and Wroclaw – back in May.

The project will result in the creation of 250 jobs – 50 people have already started – with the aim of streamlining the low-cost airline’s web and the app. Travel Labs Spain is looking for all kinds of profiles, from data engineers to developers to experts in social media.

In the new offices, Ryanair’s employees have rest areas with pool tables, table football and a Star Wars game.

Prime area

The building, located at number 69 Calle Orense, is located in the capital’s Central Business District.

According to data from the consultancy firm JLL, the average rent in the CBD of Madrid amounted to €30.75/m2/month at the end of the third quarter of the year. The owner of the Eurobuilding II is the Mutualidad General de la Abogacía, the pension fund of Madrid’s lawyers’ association, which had more than 194,000 members at the end of 2016 and more than €5.9 billion of resources under management.

The other tenant of the building, which is very close to Paseo de la Castellana, is the Vaughan Language School, which leases more than 4,500 m2 of space for teaching, with more than 95 classrooms.

The Eurobuilding II was acquired by the Mutualidad General de la Abogacía in 2003 for €30.9 million. According to the latest available appraisal report, the value of the property amounts to €43.8 million.

Original story: Expansión (by Y. Blanco and R. Arroyo)

Translation: Carmel Drake

Operación Chamartín Negotiations: First Agreements Reached

26 January 2017 – Expansión

The Town Hall of Madrid and the Ministry of Development have reached their first agreements regarding the re-development of the north of the city, which will be divided into three different areas. There will be a dedicated financial district and the residential buildings will be six-storeys tall on average.

The first advances have been made in the negotiations between the new Minister for Development, Íñigo de la Serna, the mayoress of Madrid, Manuela Carmena and her councillor for Sustainable Urban Planning, José Manuel Calvo. (…). The points agreed include the division of the area into three sections: south of Calle 30, north of Calle 30 and Chamartín station, which the Town Hall insists must be renovated.

Each one of the developments will “be approached and managed independently”, according to the agreements reached. In the southern section, most of the space will be allocated to economic activities involving tertiary services, in other words, the new financial district, which will be called the Central Business District. It will be located in the Chamartín area and its construction will have to take into account the renovation of the train station.

In the northern section, most of the space will be used for residential purposes, with the presence of “mixed economic activity” as well. The general idea is that the buildings in this area will be six-storeys tall on average (…) although there may be exceptions. (…).

What has not been agreed yet is whether the new Operación Chamartín will include the construction of the tallest skyscraper in the European Union, with 70 floors and another five towers of a similar height to those already at the top of the Castellana, per the plans presented by BBVA and the real estate company San José. (…).

A priori, it seems that the criteria put forward by the Town Hall of Madrid will prevail in terms of the reduction in the number of homes compared the number initially planned. In the version prepared by Manuela Carmena’s government, the figure decreased from 17,700 homes to 4,600. The fact that according to the agreement reached, the residential blocks will be six storeys tall on average, appears to be in line with the height of five and six-storeys proposed by the Sustainable Urban Planning Department for this area. (…)

The parties will hold their next meeting on Friday, when they plan to address “the definition of the basic criteria” for the development of the new financial district, such as the distribution of urban charges and the connection with Calle Agustín de Foxá and Avenida de San Luis. (…).

The aim of the Sustainable Urban Planning Department is to have “a project that has been agreed between all the players” ready by between March and June. Then, the planning instruments will be processed to allow construction to begin”.

Original plan

17,700 homes, of which 1,700 would be subsidised (VPO).

Five office skyscrapers, including the tallest tower in the European Union, with 70 floors.

80% of the land would be dedicated to public spaces. The remaining 20% would be reserved for residential developments, the financial district and businesses.

Carmena’s proposal

4,600 homes. The alternative proposed by Carmena’s Government proposed 1,000 VPO homes and another 3,600 private properties.

Two unique buildings. They would be located in the business district, would be 40-storeys tall and would be accompanied by another two 20-storey towers.

274,000 m2 of green space and plans to increase the surface area dedicated to public services to 254,000 m2.

Original story: Expansión (by R. Bécares and M. Belver)

Translation: Carmel Drake

What Does The Future Hold For Azca?

16 March 2015 – El Confidencial

In Madrid, the ‘City’ is called Azca. It is the capital’s financial centre par excellence and, yet, a third of the office space in the area is empty. (According to sector experts), the time for change in upon us.

In Madrid, the ‘City’ is called Azca. It is the capital’s financial centre par excellence, home to iconic buildings such as Torre Picasso and many of the world’s leading companies own the properties, including Pontegadea (the real estate company owned by Amancio Ortega), GMP, Mutua Madrileña, El Corte Inglés, Metrovacesa, Testa and Infinorsa. The prime location, in the heart of the Paseo de la Castellana and next to one of the capital’s major transport hubs, Nuevos Ministerios, meant that until a few years ago, this area accounted for the majority of the capital’s prime office space. However, the opening of the Cuatro Torres, the arrival of the economic crisis, the departure of large companies to peripheral areas (of the city) and the lack of investment, both in the properties themselves as well as in the surrounding area, have dampened Azca’s appeal.

The combination of these elements has also had a significant affect on prices. Between 2008 and 2014, prime rents in the capital fell from €39/m2 to €25/m2 (per month), whilst in Barcelona, rents decreased from €22/m2 to almost €14/m2 (per month), according to a report called “Understanding the Office Market in 2014”, prepared by Deloitte Real Estate. The final nail in the coffin in terms of the pressure on the area came with the departure of KPMG, which (last month) decided to leave its headquarters in Torre Europa to move to the Torre de Cristal, at Real Madrid’s former Sports City (Ciudad Deportiva).

Furthermore, BBVA is set to leave its traditional black skyscraper to relocate to the suburb of Las Tablas, and the tenants of the Torre Saint Gobain and Torre Titania are planning to fully vacate; the latter was built by El Corte Inglés on the foundations of the former Windsor. In total, around 67,000 square metres of the 272,000 square metres of above-ground office space in the area is (currently) available to let, which gives rise to the question: is Azca doomed to reduce its prices further?

The answer is no, according to all of the experts, although they admit that the area is at a turning point. In their view, Azca is living through its own catharsis, which may be summarised by the classic phrase – adapt or die. And the widespread belief is that the former will happen. “Right now, Azca has an opportunity to reinvent itself as the ‘City’ of Madrid once more, but it must know how to seize it. In terms of its location, it has the right ingredients and moreover, the higher the vacancy rate, the easier it will be”, say the experts at Deloitte.

In Madrid, barely 2% of the office space in the high quality buildings inside the M-30 is vacant.

In this sense, a public-private initiative, known as the Azca Master Plan (Plan Director de Azca), is underway, which seeks to open up the area and facilitate access from El Coste Inglés in Nuevos Ministerios to the Bernabeu, through three targeted efforts: construction work to improve (the area in general), environmental initiatives and planning. This would mean, amongst other aspects, modifying some of the uses (of the area); the main challenge is to convert the area that is the capital’s business district during the week, into an area for families, shopping and leisure on the weekends, rather than leaving it half empty when the office lights are turned off (on Friday night), which is what happens at the moment.

“Azca must become a digital icon that adapts to incorporate technological developments, that uses the facades of the buildings (creatively), that puts up digital screens to attract young people (to the area) at the weekend, that organises initiatives for the neighbours (of the area) and the wider city, that becomes an icon of ‘digital Madrid’, in the style of New York’s Times Square”, says Ángel Serrano, Business Director at Aguirre Newman.

His company is managing the last major transaction in the area, the sale of Castellana, 89, in which a great deal of interest is being shown; the price may reach €140 million. The same interest was seen recently in the bid to acquire the Torre Saint Gobain, which GMP ended up purchasing for €90 million (with plans to spend a further €14 million on its refurbishment) and the land that El Corte Inglés purchased from Adif for €136 million, when the starting price was €40 million.

These transactions confirm the conviction that the major landlords in Madrid have that Azca is going to emerge stronger from the current situation, which means it will be able to increase its prices again in the medium term. Nevertheless, for the time being, it will have to endure a couple of years “crossing the desert”, during which time GMP, Infinorsa and whoever ends up winning the bid to acquire Castellana 89 will refurbish their buildings as well as the Torre BBVA (where the bank will continue to occupy the top five floors and display its logo on the outside), Torre Saint Gobain and, most likely, the Torre Europa.

It is expected that all of these construction works will be carried out in parallel to the aforementioned Master Plan to relaunch the area, which means that now is the perfect time (for tenants) to move to Azca before all of these improvements have been completed and prices increase. “We are currently experiencing a historic moment in terms of low prices, which provides the perfect opportunity for many of the companies that moved out of the centre and now want to move back. Moreover, this is supported by the gradual recovery of the economy and the privileged location of Azca, which I think will play an important role in its favour (in the future)”, says José Luis Guillermo, managing partner of Inmospace. Nevertheless, in his opinion, this metamorphism of the area will require support from the Public Administrations, not only in terms of the necessary changes to certain uses (of the area), but also in terms of the adoption of measures to promote the entry of multi-national companies into the capital’s ‘City’.

Experts consider that now is the time to move to Azca, before prices rise.

Madrid has some of the highest forecasts for (rental) income growth over the next five years of any city in Europe. Currently, according to data from Knight Frank, its vacancy rate amounts to 11.9%, although in the central business district, known as in the jargon of the trade as CBD, the figure decreases to 7.3%, and for Grade A buildings (highest quality) within the M-30, the vacancy rate is a low as 2%. This means that there are very few good buildings (available) in prime areas in Madrid.

In this context, a third of the leaseable office area in Azca is currently vacant and, despite that, both the experts and the large investors that are bidding to purchase buildings expect average rental income in the area to return to €30/m2 (per month), i.e. 20% more than now, over the next five to seven years. How come?

Patricio Palomar, Director of Alternative Investments at CBRE provides a good summary of where Azca is going and the price of its rentals: “To analyse the evolution, three points should be taken into account: the Master Plan for the area, which will favour (higher) prices; how Azca is going to change in terms of immediate availability, since various buildings are currently being refurbished, which will work in the area’s favour, but that will also mean there is more supply and therefore, tenants will have greater bargaining power, which may contain the increase to some extent. The third element is that there are few square metres concentrated in one area in Madrid and there are few high quality buildings for tenants looking to rent more than 10,000 m2 of space inside the M-30; a supply that Azca will indeed have (in the not too distant future). Add to that the fact that many tenants of this type, which moved to peripheral areas in the past, now want to return to locations such as this one, make me think that we will see price increases”.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake