International property adviser Savills has advised IVG Institutional Funds in the sale of an office building in Madrid. The property was acquired by local private investors for about EUR 28 mln.

International property adviser Savills has advised IVG Institutional Funds in the sale of an office building in Madrid. The property was acquired by local private investors for about EUR 28 mln.

Savills said that local these types of investors are the most active for this type of investment in today's market.

The property is located in the centre of Madrid’s cultural and commercial activity, between Plaza de Colón and Plaza de Cibeles. The five-storey office building comprises approximately 4,000 m2 and is currently fully let to leading national and international companies.

According to Savills, the imbalance between supply and demand is causing continuing yield compression. The sale of the building, with a net initial yield in the region of 5.25%, confirms this downward trend for CBD yields. Savills data shows that during the third quarter of 2010 prime yields ranged between 5.25% and 5.50% and they estimate that yields will stand at 5.00-5.25% by the end of the year.

Manuel Santos, Head of National Investment of Capital Markets said: 'This transaction demonstrates the high level of interest currently being shown by investors for buildings of this type located in Madrid's CBD. The recent downward pressure on rents and the lack of decent product has lead to an aggressive yield being paid for this building. To the contrary, if we look at current capital values per square meter, these now seem reasonable in comparison to historic figures for properties of this type located in this area.'

Savills has been mandated on the only two investment transactions closed in the CBD this year.