According to international real estate advisor Savills, 25% of Madrid’s new office space in 2012 will be refurbished projects.
According to international real estate advisor Savills, 25% of Madrid’s new office space in 2012 will be refurbished projects. The firm suggests that these newly renovated properties will improve the balance between supply and demand.
The vacancy rate in Madrid has maintained a level of 11% for three consecutive quarters in 2011. With just over 1.4 million sq m of total office stock in the market, supply levels have increased by just 0.2% since July 2011. The firm suggests that vacancy rates are being controlled by gradual completion of new developments and the amount of total new or renovated space is now around 150,000 sq m, of which only 100,000 sq m is not pre-let. 2011 take up is anticipated to reach 450,000 sq m, with circa 100,000 sq m let in the last quarter.
Ana Zavala, head of Savills office agency in Spain, says: “We anticipate 2011 year end take up to reach a similar level to 2009, but vacancy rates will be higher with lower rents. The trend to refurbish current stock will help bring vacant properties up to a lettable standard whilst providing supply in a climate which lacks new development. These properties should also be able to offer more cost effective rents, which will appeal to many companies who continue to maintain a prudent approach to cost control.”
Savills data suggests that achievable rents in Madrid’s CBD are around €26.50 sqm/month, a decrease of 2% quarter on quarter and 5% year on year. This decline has been more apparent in some of the prime areas outside the M-30, partly due to vacant properties being brought to market, and these locations have seen an achievable rental price of €16.50 sqm/month, indicating a 3% decline quarter on quarter and 9% year on year.
In terms of the investment market, costs of financing, difficulties securing credit and wider economic factors such as the Eurozone crisis will see Spain’s 2011 total investment volume at its lowest levels over the last decade. Properties registered for sale between June and September amounted to €70m, a 60% increase from Q2, however overall the past five quarters have seen the least investment activity in historic terms since 2000. Recently exchanged properties have seen private investors buying from international funds.
Pablo Pavia, head of national capital markets, adds: “In the midst of economic uncertainty and weak occupier market, the total investment activity for 2011 is expected to be the lowest recorded over the past decade. In addition to the current investment stock for sale, new opportunities will also come onto the markets from owners that are seeking to obtain liquidity, due to tight financing conditions.”