_Office Market Madrid, H1 2017
After overcoming the political uncertainty and instability that arose on the back of events such as the UK’s Brexit vote and the US elections in 2016, and that cast a shadow over the economic recovery, the first half of 2017 has registered clear signs of growth. According to the INE, the Spanish economy registered 3% y-o-y growth in Q2 2017.
The Labour Activity Survey also highlighted that the number of employed climbed 2.7% y-o-y in Q2 2017 and the number of unemployed dropped 14.4%, pushing the unemployment rate down to 17.22%, the lowest level seen since mid-2009. Despite remaining high, forecasts suggest that unemployment will continue to decline over the next two years.
People’s perception of the economic climate has improved, with June’s consumer confidence regaining the positive trend seen in previous months and international organisations, such as the IMF, upwardly revising Spain’s economic growth forecasts to above the Eurozone average and above that of neighbouring countries. The European Central Bank’s lax monetary policy has favoured economic growth.
However, although the risk of deflation is no longer a concern, Mario Draghi’s latest statements regarding future Eurozone monetary policy have confirmed the ECB’s intention to keep the monetary stimulus in place until the end of 2017, in order to further boost the current economic growth momentum.
An upward trend has been observed also in the office occupier market. Prime rents continue to trend upwards, surpassing the €29 per sqm/month mark, with evermore comparables in exceptional buildings exceeding the average prime rent. €30 per sqm/month could easily be reached by the end of the year.
The highest rent achieved so far this year €37 per sqm/month. In respect of office take-up in Madrid during H1 2017, It exceeded of 248,000 sqm, up 13% y-o-y. Take-up in the second quarter of 2017 outstripped the first quarter of 2017’s figure by almost 50%. If the current trend continues nearly 500,000 sqm of take up is expected by the end of the year.
The Vacancy rate stands at 11.8%. and available space in the CBD declined by more than 9% during H1 2017. However, the considerable amount of refurbished space that came onto the market over the past year means that the overall amount of available space in the CBD is still 7% higher in the quarterly y-o-y comparison.
In terms of office investment market in Madrid and Barcelona, It is breaking above the €1,1 billion barrier, Madrid exceeded €700 million in the first half of the year. SOCIMIs and investment funds accounted for a combined investment volume of close to €748 million, more than 65% of the total invested in Madrid and Barcelona. The average price in Madrid’s CBD stands at close to €8,200 per sqm, while in Barcelona the same figure has reached €6,900 per sqm. Yields for the top prime properties have tightened to 3.5% in Madrid and 4% in Barcelona.
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