Colonial Profits Soar by 40% Due to Asset Rotation Strategy and Increased Rents

8 November 2019 – Colonial posted a taxable net profit of 393 million euros in the first nine months of the year, an increase of 40% y-o-y. The firm stated that revenues went up because of its policy of asset rotation and growth in office rental prices, principally in Madrid and Barcelona.

The socimi reported that new office lease contracts this year reflect an 8% increase in prices, compared to the end of 2018. Contract renewals in the third quarter saw increases of up to 36% in Madrid and 24% in Barcelona.

Original Story: Expansión

Adaptation/Translation: Richard D. K. Turner

BNP Paribas: Office Rentals Soar in Barcelona during Q1 2019

23 May 2019 – La Vanguardia

The office market in Barcelona broke historical records in terms of space leased and rental prices during the first quarter of the year, according to a report from the consultancy firm BNP Paribas Real Estate.

According to the data, 152,300 m2 of office space was leased during Q1 2019, up by 65% with respect to the same period in 2018, boosted by a 60% increase in demand for large spaces (those measuring over 3,000 m2).

According to David Alonso, Head of Research at BNP, the office market in Barcelona was traditionally dominated by SMEs demanding spaces measuring less than 1,000 m2. Nevertheless, since 2015, that trend has changed with the arrival of technological companies requiring larger offices, and since 2017, with the entry of coworking companies – the latter leased 22% of the space let during Q1 2019.

As such, 91 new contracts were signed during the first quarter of 2019, with the 22@ district as the main driver, accounting for 30 of the operations and 40% (60,900 m2) of the space.

Nevertheless, the two largest operations were closed in more secondary areas: the rental of 18,000 m2 in Sant Joan Despí by Gallina Blanca and the rental of 17,209 m2 on Gran Vía in Barcelona by La Caixa.

All of this activity drove up rents with prices in prime areas, such as the best buildings on the upper end of La Diagonal, reaching €27/m2/month, and some operations even reaching €30/m2/month, whereby exceeding the maximum recorded in 2008 (€27.5/m2/month).

Original story: La Vanguardia (by Rosa Salvador)

Translation/Summary: Carmel Drake

Regeneration in Madrid: the City’s Office Supply is Set to Increase by 25%

25 February 2019 – Eje Prime

The major urban development projects underway in Madrid are going to multiply the availability of office space in the capital. Madrid Nuevo Norte, the real estate plan from Aena and the work being planned in Las Tablas, Valdebebas and Pegaso will add 3.3 million m2 of office space to the existing supply in the capital. In this way, an increase of 25% is expected, according to a report compiled by Deloitte and reported by Expansión.

Currently, Madrid has an office surface area spanning 13 million m2, of which 9.5% is unoccupied. The average rent in the financial district amounts to €33/m2/month. Together with Barcelona, the city accounts for 85% of all office inventory in Spain, and is the largest business centre in the country by surface area, with more than twice as much space on offer than the Catalan capital.

In the short and medium term, 400,000 m2 of new space will be handed over in Madrid and almost 375,000 m2 in Barcelona, according to Deloitte. For the owners, it is not only important to create new supply, but also to attract new tenants, as well as to increase rents and the valuation of buildings through the transformation of spaces.

Of the major urban development projects underway in Madrid, Valdebebas is probably the most ambitious. It constitutes a business district, called Valdebebas Fintech District, spanning more than 1 million m2, which is also going to include hotel services. Besides that program, there is also a business centre being planned in Madrid Nuevo Norte, with three skyscrapers measuring 250m, 230m and 190m tall, respectively.

The renovation of the space also forms part of the regeneration project. Over the next four years, more than 300,000 m2 of office space in Madrid will be restored. In parallel, the owners of offices in Barcelona are planning to replace buildings with a surface area of more than 58,000 m2.

Original story: Eje Prime

Translation: Carmel Drake

Merlin Invests €55M to Reposition its Assets in Azca (Madrid)

24 May 2018 – Expansión

Merlin has launched an ambitious renovation plan for two of its buildings located in the heart of Madrid’s financial district, the Azca complex, one of the capital’s most important commercial and business areas.

Specifically, the Socimi led by Ismael Clemente is going to invest €55 million to refurbish the building located at number 83 and 85 Paseo de la Castellana and another property located in Plaza Ruiz Picasso. The company plans to start the renovation work in 2020.

In the property located at numbers 83 and 85 Paseo de la Castellana, the company is planning a complete renovation of the façade and entrance lobby, which will have a triple height ceiling. Similarly, the refurbishment of the building will include the common areas and other installations.

This building, the current headquarters of Sacyr, has a surface area of 15,254 m2 spread over the ground floor, 11 above ground floors and two underground floors. The aim of the Socimi is to strengthen the space dedicated to retail.

Comprehensive renovation

The Socimi will invest €25 million in that renovation project, which will require almost the entire building to be vacated. “It is one of the best buildings in Madrid and we hope that it will be the doorway to the future reconfigured Azca that we are working on”, said Ismael Clemente, CEO of Merlin, speaking a few days ago at the General Shareholders’ Meeting. In addition, Merlin will invest €30 million to reposition the property in Plaza Ruiz Picasso and to create a building with “the most extensive and best-equipped floor space in all of Azca”.

That asset, which has a surface area of 31,576 m2, will have dual access, from Calle Trías Bertrán and Plaza Ruíz Picasso, and will contain various retail spaces. “This building is almost invisible at the moment but that situation will change after the renovation. The location is crying out for it”, said Clemente.

The director explained that the property has an “exceptional” parking provision for an office building, given that, initially, it was conceived as a shopping centre. Merlin is working with the Spanish architecture studio Fenwick Iribarren to renovate this building (…)

These two buildings owned by Merlin live alongside Torre Titania, the skyscraper owner by El Corte Inglés (…). Meanwhile, Castellana 81 and Torre Ederra, located at number 77 Paseo de la Castellana, are owned by the Socimi GMP; Torre Europe is controlled by Infinorsa; whilst Torre Picasso belongs to Pontegadea, the investment vehicle owned by Amancio Ortega (…).

The Landmark I Plan

The renovation of these two properties forms part of a larger project, the Landmark I Plan, which comprises a total investment of €250 million in office buildings over the next four years.

Within the framework of the Landmark I Plan, Merlin is going to handover Torre Glòries in Barcelona and Torre Chamartín. Over the next few years, the Socimi is also going to renovate the properties located at numbers 38 and 40 Calle Alcalá, Castellana 93, Alfonso XI and Princesa 5-7 in Madrid;  as well as Diagonal 605 in Barcelona; and Monumental and Marqués de Pombal 3 in Lisbon.

“Over the next 12 to 18 months, there is going to be more demand than supply in the market due to the volume of obsolete products. At that point, rents will enjoy a sweet moment, and will move significantly upwards”, say sources at the Socimi.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

UBS Euroinvest Fund Acquires Core Madrid Office Asset

6 March 2018 – Property Funds World

UBS Real Estate has acquired the Titán 8 office asset in Madrid on behalf of the UBS (D) Euroinvest Immobilien fund. This transaction represents Euroinvest’s debut investment since the fund’s recent strategic relaunch.

Titán 8 is a prominent office asset in the south of Madrid comprising 18 storeys spread across 10,633 sqm and including 228 underground car parking spaces. The imposing tower has been acquired in Grade A condition having been completed according to the highest quality, efficiency and design standards in 2008 and well-maintained since. It features a glass curtain wall façade that offers impressive views from upper levels. Main tenants are from the financial business, the energy and service provider industry.

The asset is strategically located in Madrid’s business district of Méndez Álvaro, in the south of the city centre, and benefits from strong transport links, positioned adjacent to the M30 ring-road, providing access to Madrid’s international airport in just 15 minutes and with the capital’s main train station, Atocha, nearby. With highly constrained supply in the area and resilient occupier demand, Méndez Álvaro office rents have demonstrated buoyant performance over recent years.

Euroinvest comprises an EUR820 million portfolio of predominantly core office assets located across key European cities. Following a strategic review of the Fund, Euroinvest has strengthened its core-profile through the disposal of non-strategic assets and delivered a strong performance of 4.4 percent for its investors (as of 31 December 2017), outperforming its benchmark (MSCI OFIX Europe) by 260 basis points. The Fund’s management team is actively seeking further attractive investment opportunities that are in line with its strategy across top performing European markets.

Alexander Isak, Fund Manager of Euroinvest, says: “As the fund’s maiden investment since relaunching, Titán 8 is a perfect illustration of the high quality and resilient assets that we are targeting, benefitting from an excellent location which is proven to generate robust occupier demand and offering further upside as the Spanish economy strengthens.”

“We are pleased to be in a position to prudently invest in new attractive opportunities that we are identifying in the market, following a disciplined programme of non-strategic disposals and the extensive management of the Fund’s assets that has delivered a viable core European real estate portfolio for our investors.”

Euroinvest was established in 1999 as the first open-ended public fund focusing primarily on institutional investors, with this category of investors currently holding more than 95 percent of the Fund’s units. Its investment strategy is focused on core office properties located in the strongest European cities, demonstrating resilient occupational demand.

Original story: Property Funds World

Edited by: Carmel Drake

The RE Sector Is On Course For Record-Breaking Year

12 September 2017 – Expansión

The real estate sector is experiencing a whirlwind year. After breaking the investment record in 2016, experts now expect the pace to continue this year and for a new investment record to be registered, excluding corporate operations.

For Adolfo Ramírez-Escudero, President of CBRE, 2017 is going to be an “exceptional” year, once again. “Investment could reach €12,000 million, whereby exceeding the expectations at the beginning of the year, which would make 2017 the best year since records began, if we exclude the corporate transactions carried out by Merlin in 2015 and 2016”, he says.

The CEO of JLL, Enrique Losantos, says that investors are maintaining their interest in the Spanish market “attracted by the strong underlying economics, returns that are still higher than in certain other European markets such as Paris and prices that are much more affordable, comparatively”.

For Oriol Barrachina, the CEO of Cushman & Wakefield, although the ECB is expected to inject less money, the appetite from investors will continue into 2018, given that the growth in wealth and the performance of assets comes from economic activity and not from the issuance of money by the Central Bank”.

Meanwhile, according to Alberto Valls, Partner in Financial Advisory at Deloitte, whilst institutional stability continues and the expectation of growth and the creation of employment in the economy is sustained, Spain will continue to be an attractive country. “We are not ruling out consolidation in the sector towards larger vehicles, involving Socimis and property developers, therefore I forecast a high level of activity in terms of corporate operations in the sector in 2018 due to concentration”.

The star players

In this sense, the Partner responsible for the Real Estate sector at KPMG in Spain, Javier López Torres, says that “the trend of consolidation amongst the new real estate companies, and their debuts on the stock market, is going to continue, and there will also be new inter-relations between new players”.

In terms of the most powerful players, institutional investors with the lowest capital costs will be the stars of operations with less need for management, which are becoming increasingly fewer because most of what could be sold has already changed hands, explains the Partner in Financial Advisory at Deloitte, Javier García-Mateo. “In the face of a pipeline of operations where there is a need for a strong transformation component, the PERES (Private Equity Real Estate) will be the players that will likely lead the sale and purchase of properties”, he adds.

Meanwhile, the Socimis will have more freedom to divest their assets as most have now fulfilled the three year period since their purchase, the fundamental requirement to be able to enjoy the tax benefits afforded to these vehicles, says Alejandro Campoy, Director General of the Investments Divisions at Aguirre Newman.

Increase in rents

In terms of the behaviour of rents in the office segment, Mikel Echevarren, CEO at Irea, says that “the economic recovery and the creation of employment will lead to an increase in occupancy rates and rents in Madrid and Barcelona”.

Sources at CBRE indicate that Barcelona is already ahead of Madrid, due to the even greater scarcity of high-quality office space in the Catalan capital. Moreover, that situation is giving rise to a significant number of pre-rental operations.

“The growth forecast in rental income is clear and very robust. Our data estimates that for the period 2017-2019, office rental prices in Barcelona will grow by around 5.2% p.a. on average, and in Madrid by 4.3% for the same period”, explains Losantos (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Office Rents In Madrid & Barcelona Are Still Very Competitive

19 September 2016 – Expansión

London: €116.25/sqm – and up to €198/sqm in the West End -. Dublín: €64/sqm. Frankfurt: €45/sqm. Madrid: €34.5/sqm. Barcelona: €28.5/sqm.

Spain’s two largest cities still have the lowest office rental costs in Europe. But, how are these costs calculated and why are Madrid and Barcelona still the most attractive cities in this sense?

A study prepared by the real estate consultancy Knight Frank compares average rents for prime offices, along with occupancy costs, which include amongst other items, taxes, services and establishment costs that companies deciding to open offices in these cities must incur.

For Raúl Vicente, Director of the Office Agency at Knight Frank, “if we compare our markets with those of our European counterparts, then the office markets in both Madrid and Barcelona are still more attractive in terms of costs”.

Moreover, the available supply is also greater and we are currently at a low point in terms of the rental cycle”. The Madrilenian market is proving to be particularly active and the sector may still generate lots of good news between now and the end of the year. Madrid leads the ranking of cities with the greatest potential for rental growth, followed by Amsterdam, Barcelona, Budapest, Lisbon, Milán, Paris and Stockholm.

Average rents have increased in some of these cities, including Madrid, but the price level is still a long way below that of other capitals such as London, where costs soar. The occupancy rate has grown in the Spanish capital by just 1% during the first half of the year and it is noteworthy that no major operations have been signed – i.e. those involving leases for more than 10,000 sqm of space – during the first six months of the year.

Despite everything, the real estate consultants are optimistic and they expect the Madrilenian office market to experience a better second half of the year. Madrid’s capacity to attract businesses is one of the variables that will help this improvement.

Original story: Expansión (by E. Viaña)

Translation: Carmel Drake