Spain’s commercial property sector showed signs of improved confidence in the first six months of 2013, according to Knight Frank’s Spain Commercial Property Market Review. There was a sharp increase in the take-up in Madrid office space in H1, and increased numbers of investors have been seeking opportunities in the Spanish market.
Two bank office-buildings in Madrid, Spain
Madrid office take-up hit the 197,000 m² mark in H1 2013. This level was up about 60 per cent from H1 in 2012. It was boosted by some large-scale transactions, including the Vodafone agreement to lease approximately 50,000 m² in a new company headquarters building at Avenida de América.
The office market is also showing some signs of increased stability. Prime rents remained unchanged at €25 per m² per month during H1. They may have bottomed out after decreasing by more than 40 per cent since 2008. The office vacancy rate, which had been on the rise since 2007, fell slightly in the first six months of the year as a result of new space coming onto the market.
The office market is also improving and prime yields in Madrid have stabilized at 6.25 per cent. Increased numbers of investors are seeking opportunities in Spain. They are attracted by the relatively high yields compared to other European markets. Lowered fears of a Eurozone break-up are also driving the market. AXA agreed to buy a portfolio of Barcelona offices for €172 million in June. This was the first deal in Spain since the financial crisis started in 2008.
Activity in the retail sector remains subdued due to lower consumer spending. However, the best-performing shopping centres have been resilient and have maintained their high occupancy levels. There was a lack of investment transactions in H1, but several investors are starting to look at Spanish retail property. Interest in retail properties in secondary and tertiary cities is rising, and investors are drawn to high yields and the opportunity to generate increased returns through asset management.
Leasing activity in Madrid in the industrial and logistics market improved in H1 2013. Take-up reached 190,000 sq. m and the vacancy rate fell by more than two percentage points from 16 to 13.8 per cent. Investors are still cautious in this sector, and demand is focused on prime assets committed to secure tenants on long leases.
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