Madrid Office Market in Equilibrium

MADRID-Office rents are stable in Madrid after an 8% increase during the first eight months of 2001, according to CB Richard Ellis. Prime rents now stand at Pts 6,500 per sq m per month ($35 per sf per annum), but the broker is not expecting any further increases as an increase in supply has taken some of the pressure off the market.

Availability now stands at 2.475 million sf, an increase of 860,000 sf in the past 12 months, but CB Richard Ellis notes that the increase would have been much larger had there not been significant pre-letting activity this year. The withdrawal of technology companies from the market has hit demand, however. CB Richard Ellis is forecasting an annual take-up of 4.85 million sf by the end of 2001.

Reflecting this more subdued market, investment activity has slowed, and prime office yields in the CBD have moved out to 6.25%. Investors are concerned that rental growth has halted, and many are now switching their attentions to buying development sites rather than standing investments.