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Market report

Madrid offices - Q3 2013

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Take-up between January and September increased by 27% year-on-year to almost 270,000 sq m; however this figure is heavily distorted by several mega deals that were signed in the first quarter of the year, which accounted for almost a third of the total.

Subdued demand, which is a far cry from the high amounts of take-up actually registered, is still waiting to see clear signs of economic recovery and growth.

The vacancy rate now stands at over 14%, which equates to more than 1.8 million sq m of vacant space. New office developments in the pipeline in Madrid are still few and far between, particularly if they are speculative projects, which are virtually non-existent in the market. 75% of speculative space in the pipeline between 2013 and 2014 relates to refurbishment projects.

The achievable rental price in the CBD remains unchanged for the fourth consecutive quarter, given the lack of quality space in prime areas of the city, and recurring demand in the area.

On the one hand, the current investment market is marked by the arrival of a large number of different types of investors, with significant amounts of capital behind them, who are very interested in analysing purchasing options and closing deals, and on the other hand by the lack of product in the market.

This imbalance between supply and demand would suggest that yields should harden in prime locations. However, as of today, the lack of comparable deals has led us to leave the theoretical yield at 6%.

Source : Savills