The office investment markets in Madrid and Barcelona will be driven by corporate transactions this year, according to a research report published by Savills. Real estate companies are expected to put large property portfolios on the market in a move aimed at reducing their liabilities. In 2007, Spain's main office markets continued to perform solidly, with the summer marking a point of inflexion in the dynamism of demand. Total take-up in Madrid reached record levels at circa 900,000 m[sup]2[/sup] last year, while Barcelona saw its take-up level drop by 2.7% in 2007 to 360,000 m[sup]2[/sup].
The office investment markets in Madrid and Barcelona will be driven by corporate transactions this year, according to a research report published by Savills. Real estate companies are expected to put large property portfolios on the market in a move aimed at reducing their liabilities. In 2007, Spain's main office markets continued to perform solidly, with the summer marking a point of inflexion in the dynamism of demand. Total take-up in Madrid reached record levels at circa 900,000 m2 last year, while Barcelona saw its take-up level drop by 2.7% in 2007 to 360,000 m2.
Rental growth in both markets continues although this is expected to be slow somewhat. In Madrid annual average rental growth was above 10%, principally due to the strong performance of prime out of town rents. Rental levels also grew in central areas although this was at a lower rate of 5.75%. In Barcelona, the most notable increases were in areas with high levels of demand and low availability such as the Central Business District. The 22@ district registered a 10% increase in rents during 2007.
'The turbulence in the international financial markets has caused a wobble in the property sector, although the commercial sector appears more stable than the residential. Slowing levels of rental growth together with global economic and financial conditions have resulted in a fall in values and an increase in yields. However, the Spanish economy continues to grow and there is still value in prime markets', said Rafael Merry del Val, head of Savills Spain.
In Madrid, the downward trend in prime yields has finally come to a halt, having moved out at the end of 2007 from 3.75% - 4%. The investment market reached its highest volume since 2000 and is now close to EUR 3 bn, whilst in Barcelona the volume of investment reached a record of almost EUR 2 bn with yields moving out from 5% to 5.5% for CBD product. 'The Barcelona office investment market in 2008 will be marked by an increase of quality leased office buildings. The drivers of demand should remain strong with rents following a moderate upward trend', said Ian Cassidy, head of Savills' Barcelona office.
