Office rents in Madrid reduced by 11% in Q1

Office rents in Madrid reduced by 11% in Q1

During the first quarter of 2023, the office rental market in Madrid experienced an 11% decline in leased space compared to the same period last year, reaching a total of 113,000 square metres leased, according to CBRE data.

The consultancy firm notes considerable variation in the availability rate by location and building type in Madrid. Although average availability in the city has increased slightly to 11.6% in the first quarter of 2023, availability in the CBD and CS market remains below 5.5%, while in the rest of the markets it exceeds 16%. In addition, the availability of high quality space is low, with a minimum rate of 2.6% in Grade A buildings.

CBD and City Centre account for 57% of total take-up.

In terms of office take-up, 57% of this is concentrated in the CBD and City Centre, where five of the largest deals have been registered, maintaining the trend of the previous year. In terms of the most active sectors, services and education accounted for around 33% of the total.

In terms of prime rents, most markets remained unchanged from the previous quarter, except in the City Centre, where there was an increase of €0.25/sqm/month to €25.25/sqm/month.


Jose Mittlelbrum, senior director A&T offices CBRE Spain, explains that, "despite a start of the year with high uncertainty and economic factors that have caused some fear, the office rental market in Madrid shows dynamism, especially in buildings that are well located and offer unique experiences to the worker. Companies are looking to locate in the best buildings to retain and promote talent after the turning point of the pandemic".

He notes that "the challenge of attracting teams back to the office is a challenge for both companies and their landlords, and buildings play a key role in that attraction. Although the figure for the first three months is 10% below the average for the first quarter of the last five years, when compared to other European cities such as Paris, London and Milan, Madrid is one of the capitals where the amount of space taken up is the lowest compared to the previous year".

Office investment in Madrid grows by 15% to 393 million euros

Nationally, the volume of office investment fell by 4% in the first quarter of 2023, reaching 557 million. Compared to the average of the last five years, the volume recorded is 35% lower.

In Madrid, the volume of office investment in the first quarter amounted to 393 million, an increase of 15% compared to the same period last year, representing 70% of total investment. Most of the investment was due to VAPAT's acquisition of Colonial's portfolio of three buildings located in the CBD market. Other operations such as the acquisition of the Mizar building and an office in calle Torrelaguna 75, both located in the A-2 area, also stand out.

Prime profitability of offices in Madrid rises by 4.10%.

Prime yields in Madrid increased by 10 basis points from the previous quarter to 4.10%. Compared to the same period last year, the increase was 85%, when in the first quarter of 2022 the yield stood at 3.25%. According to CBRE, this increase, in line with other European capitals, is due to rising interest rates and pressures in the capital markets. Although there are not a large number of comparables in the market, yields are expected to continue to rise slightly until peaking in 2023.

"Most of the operations have been concentrated in the Core/Core+ segment"

"In this first quarter, investment data in Spain has been among the best performing in Europe, highlighting that most of the operations have been concentrated in the Core/Core + segment, less sensitive to the debt market. By investor profile, they are buyers of national capital or with a strong presence and knowledge of the Madrid office market. Midcaps are gaining in importance; during this quarter there has been an increase in the prominence of this type of buyer in terms of both transactions and millions invested", according to Diego Contreras, senior director investment properties offices CBRE Spain.

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