Recovery in Spain’s commercial property market is currently ahead of the residential sector. Madrid in particular is a hub of office activity, offering better than average occupancy rates, which adds to its investment appeal. A recent flurry of massive, and even record-breaking, office investment deals reflects a desire for prime assets, but rents haven’t kept pace. See the following article from Property Wire for more on this.
Spain’s residential real estate market may still be in the doldrums but the country’s commercial property sector is moving forward.
Madrid office take up in the second quarter of the year rose threefold to 160,000 square meters compared to, according to international real estate advisor Savills. Its latest report also shows that take up in the first half of the year is double the total for the first six months of last year.
The data shows that of the deals completed in the second quarter three ‘mega’ deals of over 10,000 square meters took place involving tenants Spanish Airports and Air Navigation (AENA), Alcatel and AMPER. Of particular note, outside the popular city center, the east area of the city saw 17% of transactions with significant lettings between 6,000 square meters and 9,000 square meters. Meanwhile a rise in owner occupier sales appeared to be on the increase with over 10% deals closed.
In terms of investment, Savills reports first half of the year volumes are 7% higher than the same period in 2009 with hot demand for prime office assets such as Paseo de Recoletas 3 and 56% transactions focused within the M-30. The average investment volume rose from €15 million in the first three months of 2010 to €34 million in the second quarter.
‘One of the most significant investment deals lately, Paseo de Recoletas 3, has set a new record for the length of negotiation period at two months. It has also exceeded the previous records for yield and price per square meter set in recent years. The number of buyers reflects the demand for this type of asset in the market,’ said Luis Espadas, capital markets Director.
Savills finds that despite the steady growth in the investment markets, rents are not yet rising in fact in the CBD they remain at the same levels as the first quarter of 2010 showing averages of €28 per square meter per and €29 per square meter per month but outside this area rents continue to fall. Year on year rental falls in the submarkets range from -11% to -20%.
The report also shows that average vacancy rates outside the CBD now stand at 12% but in CBD they have fallen to 7% from 11% in the first quarter of the year. In the second quarter CBD registered 10% of take up due to a letting to Banca Civica for 7,000 square meters and this has allowed CBD vacancy level to revert back to its characteristically lower rate than average vacancy for the city.
‘We anticipate that national investors will continue to focus on Madrid’s CBD for the second half of the year as with its vacancy rates below market average, it will continue to be the safe haven,’ added Espadas.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.