Outlook positive for spanish commercial property

Photo: Rick Ligthelm

The advisor's latest report reveals that investment volumes in Spain’s office market during 2014 totalled €2.8 billion, triple the €990 million total in the previous year.

Madrid made up the majority (60 per cent) of investment, followed by Barcelona (30 per cent) and other locations (10 per cent).

Luis Espadas, director of investment at Savills Spain, comments: “Investors preference for Spain’s more mature market of Madrid is undeniable, accounting for a total of €1.65 billion."

However, yields are expected to be put under pressure in the coming year, as a lack of supply and high demand pushes up prices. CBD office yields in Madrid are forecast to move from 5 per cent to 4 per cent and 4.5 per cent for super prime properties, as a lack of good quality stock puts pressure on pricing. 

Prime yields at the end of the year moved in 100 basis points, secondary areas 75 basis points and out-of-town locations saw a Change of 50 basis points.

The firm finds that SOCIMI, the Spanish equivalent of REIT’s, were very active in the office market, with 27 per cent of their total capital being invested in commercial property and 76 per cent of that total in offices.

Pablo Pavia, director of investment at Savills Spain, adds: "While the SOCIMI and domestic investors were very active in 2014 this year we predict we will see large Latin American investors capitalizing on opportunities in the Spanish office market."

Savills states that take up in the office market at the end of 2014 was 382,000 sq m, 2.5 per cent less then the previous year. However, 2013 take up was heavily distorted by the Vodafone letting of 50,000 sq m; discounting that letting take-up grew 12 per cent on the previous year. Additionally, there are a number of large space requirements currently in the market, several of which are seeking space exceeding 5,000 sq m.

Ana Zavala, director of office agency at Savills, says: 2Thanks to signs of a recovery in Spain some occupiers are more willing to sign pre-lease agreements on speculative space in the CBD which in term is prompting major market players to carry out speculative developments. The increase in take up activity will cause rents in the best properties to continue to rise through 2015."