Developers Eye More Than €30 Billion in New Business in Madrid

21 August 2019

Developers are eyeing huge new possible investments they expect to build approximately 130,000 new homes over the next 25 years. That is in addition to major new investments in offices, retail spaces and industrial buildings. The sale of homes and other properties is expected to exceed €30 billion.

Developers are planning two new centres of investment in the north and southeast of the capital. The developments include Operation Chamartín (since renamed Madrid Nuevo Norte) and five new neighbourhoods to the southeast: Los Berrocales, Valdecarros, Los Cerros, Los Ahijones and El Cañaveral.

Operation Chamartín was finally approved last month by the municipal assembly, after a 26-year hiatus. A report by the city council forecasts that total sales of homes, offices and commercial areas will reach €13.198 billion, €10.2 billion of which will come from offices and retail areas. 10,500 homes will also be built in the area surrounding the Chamartín train station, 24% of which will have subsidies.

A development with a total of 118,737 homes is also planned for the city’s southeast. Sales for this area are expected to reach more than €20 billion over 25 years with profit margins reaching 20%. El Cañaveral, where construction has already begun, will see total investments of €3 billion. Next will be Los Berrocales and then Los Ahijones by 2021. Lastly, work will begin on Los Cerros and Valdecarros, with plans for more than 50,000 homes, the first of which will be ready in a decade. The owners of these developments, excluding El Cañaveral, calculate investments exceeding €13 billion, generating 965,000 direct and indirect jobs over the next few years.

Original Story: Cinco Días – Alfonso Simón Ruiz

Adaptation/Translation: Richard D. K. Turner

Town Hall of Madrid Reorganises 2,500 Hectares of Land in Valdecarros & Los Cerros into Smaller, More Feasible Areas

16 October 2018 – Inmodiario

The Town Hall of Madrid has agreed to submit to public information the Advance documents detailing two Modifications to the General Plan for four areas belonging to the developments in the south-east: Valdecarros-Cantiles de Manzanares, with a surface area of 1,928 hectares, and Los Cerros-Ensanche de San Fernando, with a surface area of 494 hectares. The main objective of these documents is to adjust urban growth to the real needs of the city, establishing a new framework for the economic, social and environmental feasibility of future developments.

Moreover, the documents prioritise the defence of the general interest of the city in two senses:

They ensure the environmental values of certain areas in the aforementioned zones through the classification of the land.

They increase the economic guarantees and legal commitments of the private management and execution, and they ensure the implementation of facilities, services and infrastructure to the real capacities of the public administrations.

The economic and legal guarantees affect the public and private agents. On the one hand, the capacity of private players to carry out the investment necessary to manage and urbanise and, on the other hand, the public capacity to implement services and amenities.

To streamline the use of the land, a new land classification system has been established for these areas, which allows for their gradual planning and development, in smaller sections. In this way, the urban planning documents program smaller execution units to ensure the production of land for homes, economic activities and amenities in timeframes that match the needs of the city. In this way, the future developments may be adapted to social, economic, technological and environmental changes that evolve in the future, and will avoid the execution of urbanisations and the inappropriate or unnecessary regulation of buildings.

The result of the land reclassification is 2,422 buildable hectares (…).

In total, the potential capacity of the land in Los Cerros and Ensanches de San Fernando decreases by 28.45%, from 14,900 to 10,700 in terms of the number of homes, and by 23.70%, from 570,000 m2 to 440,000 m2 in terms of the buildable surface area for economic activities.

The first development is scheduled for 2022 in the north of the region (….).

Original story: Inmodiario 

Translation: Carmel Drake

Madrid’s Town Hall Faces Compensation Payments of €1.6bn For Suspending Developments in SE of the Capital

16 May 2018 – El Confidencial

The suspension of the developments in the south-east of Madrid could cost the capital’s Town Hall as much as €1.6 billion, in other words, 34% of its annual budget. That is the calculation that two independent experts have performed on the basis of the execution of the Master Plan for the New Development Strategy for the Southeast of Madrid, which has led to the ‘de facto’ paralysis of all of the areas in the south of Madrid: Los Berrocales, Valdecarros, Los Cerros and Ahijones, the last large block of buildable land to the south of capital, which was destined to bring thousands of homes onto the market at affordable prices.

The report, compiled by Federico García Erviti and Gerardo Roger Fernández Fernández, experts in urban planning valuations, estimates that the indemnity payments for the Compensation Boards of Valdecarros, Berrocales and Los Cerros will amount to €1.58 billion. The Master Plan itself, compiled by the Town Hall, mentions possible compensation payments but does not quantify them.

According to this document, the number of homes will be reduced by two thirds – from 105,000 to 38,708 – ; also, the total surface area will be cut and several other modifications will be made to the plans.

Specifically, according to the report from these experts, we will be talking about a payment of more than €640 million for the Compensation Board of Los Berrocales, another €755 million for Valdecarros, whilst, in the case of Los Cerros, the indemnity payment will amount to €182 million. To all of these figures, possible additional compensation payments to each one of the owners – around one thousand – will have to be made, who may also file claims with the Town Hall of Madrid, for example, for the taxes paid over the last few years for buildable plots, whose classification is now going to change on the basis of this Master Plan.

“The Master Plan does not have any legal validity to make a modification such as the one required”, said Juan Antonio Gómez-Pintado, Chairman of the Association of Property Developers of Madrid (Asprima), who considers that “during periods of real estate activity, such as the one the sector is experiencing at the moment, the effects of these measures and the damage for the city as a whole are irreparable, given that they have paralysed the only block of buildable land with these characteristics, where homes could be built for the lower and middle classes in the capital, driving those who want to buy a home at an affordable price out of Madrid”. Moreover, he considers that “the Master Plan will lead to significant increases in the price of land, whilst the legal uncertainty will scare off investors” (…).

The (Compensation) Boards filed an appeal against the Master Plan, as well as the legality of it, with the Supreme Court of Justice (TSJM), because they consider that “a pseudo planning instrument has effectively been approved. A town hall cannot approve an urban planning instrument”, and they have requested the precautionary suspension of it. The TSJM has admitted the appeal for processing but has not ruled on the matter for the time being.

Since the arrival of the new Government in Cibeles, “developments have slowed down and there have even been written requests for their agreements to be adapted to the Master Plan”, claim sources from Asprima.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Madrid’s Town Hall Approves the Master Housing Plan for SE of the Capital

29 January 2018 – Inmodiario

The Governing Body of the Town Hall of Madrid has approved the Master Plan that defines and organises the actions that the Town Hall of Madrid is going to launch to execute the Strategy for the Development of the Southeast of the capital (EDSE). The Master Plan covers the districts of San Blas-Canillejas, Vicálvaro and Villa de Vallecas and aims to adjust the urban growth strategy of the General Plan of 1997, whereby ensuring its feasibility and coherence, and making it compatible with a sustainable, balanced, social and environmentally responsible regional model.

Los Cerros, Los Ahijones, Los Berrocales, Valdecarros, la Nueva Centralidad del Este and el Ensanche de San Fernando were spaces planned by the General Plan of 1997 to develop 4,400 hectares, building more than 105,000 homes and 6.5 million m2 of space for economic activity.

The Master Plan that has just been approved proposes a redefinition of that Plan, which adjusts the public use, the residential use – it proposes half the number of the homes, down from 105,000 to 53,000 – and the economic activity use.

The objectives of the new plan include improving the urban quality of the Los Ahijones and Los Berrocales neighbourhoods in terms of public spaces, commercial activity, the location of facilities, and the necessary public transport networks, introducing modifications in their detailed planning.

It also requires a strengthening of the management conditions and guarantees from the Compensation Boards that build the 38,000 homes and develop 1.9 million m2 of space for economic activities.

Moreover, new areas of management will need to be defined with smaller territorial dimensions, inside the M-45, that continue the existing city, corresponding to the new areas of Valdecarros-La Gavia and Los Cerros Norte-San Fernando with almost 530 hectares and capacity for 14,500 homes. And to strengthen the network of free spaces with two large green spaces around the Cerro de Almodóvar and the connection of the La Gavia park with the Manzanares River.

The new Master Plan also proposes the creation of a 1,850-hectare land reserve on the remaining land in Los Cerros, Valdecarros and the Nueva Centralidad del Este, whose planning and execution will be defined and scheduled depending on future needs (…). That land has capacity for approximately 45,000 homes and 2 million m2 of buildable space for economic activity (…).

Finally, the plan stresses the need to carry out two programs of land development, in accordance with the real demand for residential housing and economic activity: the first, forecast for the years 2022-2030 will allow the construction of 27,700 homes and 1.3 million m2 of buildable space for economic activities; the second program, which will run between 2031-2039, will involve the construction of 26,000 homes and 1.2 million m2 of buildable space for economic activities.

Original story: Inmodiario

Translation: Carmel Drake

Madrid’s Town Hall is Blocking 105,000 New Homes in SE of the Capital

11 December 2017 – Idealista

Madrid has the potential for a large urban development at its disposal in the form of the PAUs located in the southeast of the city, covering a surface area of almost 37 million m2 and with the capacity for the construction of up to 105,000 new homes over the next 15 years. The plans have already been sketched out, and they have been approved by the Supreme Court, but clashes between property developers/landowners and the Town Hall led by Manuela Carmena have frozen the permits and licences for completing the development of the area and, therefore, the construction of affordable new homes, which are so necessary and so sought-after in the city.

The most worrying thing is not that the future of so many thousands of homes is up in the air, but rather that they are homes that would go to middle-class families and vulnerable groups: primarily young people and people with limited purchasing power, through social housing schemes, and with prices ranging between €160,000 and €240,000. Los Berrocales, Los Ahijones, Valdecarros and Los Cerros, known in the real estate sector as land destined for the construction of the most affordable housing in Madrid, are PAUs that find themselves on this journey through a desert. And the impasse has already lasted for more than a decade.

The strategy for the southeast started to take shape with the PGOU of 1997, under the PP Government when José María Álvarez del Manzano was the mayor, with the intention of joining together all of the potential in the towns to the south of Madrid, such as Getafe, Leganés, Alcorcón and Móstoles, with the Corredor del Henares.

After completing the PAUs policy in the north of Madrid, with Sanchinarro, Montecarmelo and Las Tablas, and also the PAU of Carabanchel in the 1990s, the municipal border of Madrid was reaching its limit in terms of developable land capacity. To the north, expansion had already reached Alcobendas and San Sebastián de los Reyes; to the west, the buildable land in Madrid was already bordering on Pozuelo and Majadahonda; and in the south, the PAU of Carabanchel already reached Alcorcón and Getafe. The only free area left in the capital was to the east.

And so the initiative to develop the southeast of the capital was launched, although it has been suspended for years by the courts and has been held back by the economic crisis. But now, when the economy has started to recover and the Supreme Court has approved the project, the building work has come up against a new problem: the position of the Municipal Government.

What is the problem?

(…) The Town Hall believes that the urban development proposal for the southeast does not meet the current needs of the city. The first main stumbling block is over the number of homes to be built.

Although the Supreme Court gave the green light in September last year to the plans that involve the construction of 104,737 homes, of which approximately 53% would have some degree of protection (subsidy), as well as to the building of offices and industrial warehouses (35% of the surface area will be destined to those developments), Manuela Carmena’s team considers that the capital will not have sufficient demand to justify the construction of so many homes (…).

Specifically, the Town Hall calculates that the city will have demand for approximately 6,000 homes per year over the next few years – that figure is well below those forecast by other researchers in the market. The IESE business school, for example, estimates that the Community of Madrid will need more than 25,000 homes per year until 2025, at least (…), a figure that falls to 12,000-13,000 in the case of the capital itself (…).

Another reason that the municipal government cites against the progress of these urban developments is that the city still has a significant stock of empty homes. But, again, research and official figures exist that call into question its claims (…).

The discussions are set for the long-haul.

A 10-year paralysis that could go on for another 10 years

(…) “Regardless, if we suppose that we obtain the necessary licences and that construction starts immediately, the first homes would not be ready to be handed over until 2022-2023. If to that timeframe, we add the years needed to change the General Plan (PGOU), in the end, we are going to be talking about another decade gone to waste”, said Javier López Linares, Manager of the PAU for Los Cerros (…).

Original story: Idealista (by Ana P. Alarcos, David Marrero and Alejandro Soto)

Translation: Carmel Drake

Asprima: Buildable Land is Running Out in Madrid

25 November 2017 – ABC

Land is running out and the market is becoming distorted in the Spanish capital. For two years, the price of buildable land for the construction of new homes in the Community of Madrid has been rising, especially in the centre. There is not much buildable land left and the space that is available has seen its value rise due to the increase in demand. This equation means that, unless new variables are introduced, we will end up seeing an acceleration in house prices. “Real estate activity has returned with a vengeance and new housing is needed”, according to Daniel Cuervo, the Director General of the Association of Property Developers in Madrid (Asprima) (…). By way of example, “in Valdebebas, two years ago, people were paying €800 per square metre for buildable land “and now that price is above €1,500/m2 (…)”.

He also thinks that the property developers feel very certain about the sale of their homes “and that there is competition between them”, which translates into high house prices. Certain political decisions have paralysed several developments (…).

The Councillor for the Environment and Town Planning at the Community of Madrid, Pedro Rollán, was quite explicit this week when he said that “talking about housing requires us to talk about land” (…). “Many people have been obliged to go outside of Madrid due to the (high) price of land (in the centre),” he said, at a conference organised by the Association of Housing Managers (AGV). At the same time, he called for “a policy that allows for the development of sufficient land to deal with the true demand in the city of Madrid”. Rollán made reference to the importance of the “large batch of land in the south-east of Madrid”, where “at least 50% of the homes will be subsidised properties”.

Value of land

Daniel Cuervo also said that the project underway in Los Berrocales, Los Ahijones, Los Cerros and Valdecarros (the Strategy for the Southeast, within the municipality of Madrid) will allow “the relaxation of new house prices, given that more than 100,000 homes are planned”. To this end, the Town Hall needs to “continue complying with urban planning legislation to convert plots into buildable land”.

The Director General of Asprima also (…) made reference to a study conducted by IESE, which indicates the need for 13,000 new homes per year in the municipality of Madrid “and the impossibility of achieving that”.

According to the experts, the price of land, with respect to the price of a home, should not exceed 20-25% of the total value; and the traditional unwritten rules indicate that it should represent one third. “In the neighbourhood of Salamanca, in certain cases, the price paid for land may reach 70%-75% of the final value of the home”, explains Óscar Ochoa, Director of the New Build department at the real estate firm Gilmar (…).

Areas on the rise

If we talk about other parts of Madrid, things change. In San Sebastián de los Reyes, for example, the value of land “represents around 30%-35%”. Ochoa warns that it is not only in the centre that it is impossible to find new land, the supply is also scarce along some of the main access roads. “Such is the case in Las Tablas, San Sebastián de los Reyes, Montecarmelo and Valdebebas along the A-1 and in Pozuelo and Las Rosas along the A-6”.

For Ochoa, the solution involves establishing urban development plans designed to meet the true demand for the areas (…). Ochoa acknowledges that in terms of buildable land “we are in the hands of the politicians”. That is why he asks “for the plots to be organised and for the concession and licence processes to be streamlined”.

According to the Community of Madrid, there is a need for between 15,000 and 20,000 homes per year, including the repositioning of homes for those who want to change the kind of property they live in and new homes that are built. (…).

The situation is also affecting the rental market, according to José María García Gómez, Director General of Housing and Rehabilitation for the Community of Madrid (…). “The rental market is under pressure and prices are rising there once again”.

García Gómez believes that the role of the Administration “is not to put obstacles in the way, but rather to grant licences. He believes that the new Land Act, which is being drafted, will bring stability, pointing out that of the 178 municipalities in the region, only 20 have a general housing plan in place. The conclusion is clear: much remains to be done” (…).

Original story: ABC (by Belén Rodrigo)

Translation: Carmel Drake

RE Investment Worth €13,000M At Risk In Madrid East

23 May 2017 – El Mundo

Landowners with town planning and real estate projects in the south-east of Madrid, represented by Compensation Boards in the new neighbourhoods of Los Berrocales, Valdecarros, Los Cerros and Los Ahijones, warn that the Town Hall’s failure to define the development of the area could put at risk investments amounting to more than €13,000 million.

It is estimated that this investment, relating to urban planning, property development and the construction of housing, business and retail parks, public spaces and green areas, would generate 965,000 direct and indirect jobs in total over the next few years.

The Compensation Boards, which are grouped together under the Madrid East brand, have issued a statement in which they denounce that, with the establishment of the so-called working groups for the analysis, evaluation and assessment of the alternatives for the development strategy for the south-east, the Town Hall “is doing nothing but delaying the development of projects that have already been granted the necessary legal and town planning support and that have now been suffering delays for more than 20 years”.

For Madrid East, the urban planning activities in the south-east of Madrid “are essential for facilitating access to housing at affordable prices, given that an increase in the supply would help to contain the house price rises that have been seen in the capital in recent months, in both the ownership and rental segments”. In addition, in its opinion, these developments would allow the Community and Town Hall of Madrid to boost their social housing plans aimed at supporting those groups most in need.

“Failure to respond to the increase in demand that is expected, given the forecast growth in households over the next few years, will put upwards pressure on prices, whereby restricting effective access to housing. In the context of the high prices of the available housing stock in the north of the city and inside the M-30, Madrid East’s strategy would allow the construction of new homes at accessible prices for young people and families with the least purchasing power”, said the statement.

“We have the opportunity to resolve the housing problem for the next 30 years. We cannot repeat the same mistakes that were made in the 1980s when the Town Hall of the time considered that Madrid would not groanymorere and then promoted the urgent development of the PAUs”, it said.

Sources at the Compensation Boards believe that the Town Hall “must ensure that public investment is made in the developments to the south-east of Madrid, guaranteeing the best services for citizens, but at the same time, respecting the plans that have already been approved, as well as providing legal certainty for investors”.

In this sense, the landowners in these areas say that private investments in the main activities in Madrid South-East “already exceed €300 million, with mortgage commitments acquired over the medium and long term for their execution” and they warn of possible “legal consequences for the city of Madrid in the event of any stagnation in this regard”.

Original story: El Mundo

Translation: Carmel Drake