Madrid office vacancy rate eases: Savills

Office vacancy rates in Madrid have eased in the second quarter of 2011, standing at 4.73% in the city's Central Business District (CBD), down from 5.31% in Q1 2011, according to international real estate advisor Savills.

The main reason for the decrease is not, however, occupier take-up, but a lack of new stock coming to the market. Take-up levels for Madrid reached 90,000 m² in Q2 2011, down from 160,000 m² in Q2 2010.

As a result of the continued stagnation in Madrid's development pipeline, which saw just over 26,000 m² of new space completed in Q2 11, landlords have increasingly looked to refurbish their existing properties in order to make them more competitive and efficient. In fact, Savills expects that almost 20% of the total new supply in 2011 will be refurbished space, compared with 9% in 2010, and predicts this stock could account for more than a third of new supply in 2012.

Prime examples of markets that have already witnessed an increase in refurbished properties are on Calle Alcalá and the Castellana area where several properties are due to come back to the market having undergone technical and technological improvements that are currently demanded by the market. In some cases owners are making the most of lease expiries to completely refurbish their facilities, which is the case at Mutua Madrileña's property at Paseo de la Castellana 50.

'The lack of good office stock in the Madrid market has prompted a response from landlords to refurbish their existing stock, which is a promising sign. However, we need a greater level of refurbishments in the city's urban centre as whilst we are still seeing prudence and caution from occupiers generated by a lack of confidence in Spain's economic outlook, there are several large space requirements circulating that will be a good boost the market,' said Ana Zavala, head of office agency Savills Madrid.

'In addition, we are expecting to see some growth in the Spanish economy at the end of 2011 and beginning of 2012, which will also help to ease confidence concerns.'