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Madrid’s commercial market offers a prospect of strong rental growth

There has been good news for the residential market in Spain with sales steadily increasing and now the country’s commercial property market, particularly in Madrid, is striding ahead.
Over the next couple of years, Madrid is forecast to be one of the best performing European office markets, after staging a strong recovery.

offices in Madrid 300x240 - Madrid's commercial market offers a prospect of strong rental growthThis change reflects the much improved economic backdrop, providing occupiers and investors with renewed confidence and optimism. Historically, the Madrid office market has correlated closely with corporate performance and employment levels.

Prime rents reached their floor in 2013 and increased by 14% in the first half of 2014, to currently stand at €28 per square meter per month. Office investment has risen sharply, with volumes amounting to €700 million in the first half of 2014, compared with €400 million for the whole of 2013.

There has been limited development over recent years, which has helped to stabilise the vacancy rate at 11.5%. With limited development in the pipeline, a shortage of good quality stock is expected in the medium term, which is expected to lead to further rental growth.

An increasing number of companies are looking at relocating; having delayed their expansion plans throughout the recession which adds weight to the view that increasing demand will further boost take-up over the coming months.

In conclusion, the combination of a more active occupier market, limited development pipeline and low rents offers a realistic prospect of strong rental growth.




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