Madrid’s Office Market in Q3-2022
Madrid’s office market availability rate decreased in Q3 2022 to 11.6% (-50 bps vs. Q2 2022). Thus, in the CBD or A-2 areas this shortfall has been least noticeable, as also the stock of new product increased with the addition of c. 50,000 sq.m.
Companies are still particularly interested in central locations, pushing average rents up 4% year-on-year in the CBD. Although the CBD gets most of the attention, growing performance is also observed in the rest of Madrid’s areas, both at contracting level and average rents levels. A-1, A-6 and other peripheral areas increased its average rents by c.15%, c.10% and c.25% respectively. All this translates into an increase in prime rent levels in the following Madrid’s office submarkets, resulting in: €24.50/sq.m./month in Secondary Centres (+€0.75/sq.m./month vs. Q2 2022), €16.50/sq.m./month in A-1 (+€0.25/sq.m./month vs. Q2 2022), €16.00/sq.m./month in A-2 (+€0.25/sq.m./month vs. Q2 2022) and €15.00/sq.m./month in A-6 (+€0.25/sq.m./month vs. Q2 2022).
In terms of investment volume, as of Q3 2022 the total cumulative volume reached €1.1Bn in Spain, of which €475 million correspond to Madrid (+180% vs. Q3 2021), which brings it back to the national leadership in terms of investment volume.
Prime yield in CBD, driven by rising interest rates and the inflationary scenario, has increased in October by a total of c.50 – 75 bps from the historical low of 3.25%-3.50%. The figure now stands at 3.75%-4.25%. This trend is expected to continue in the coming months, in the face of an increasingly restrictive monetary policy tone and macroeconomic expectations for both the end of the year and 2023. This new scenario in which prime yields are expected to rise, however, will be partially offset by the increase in rents, which are under upward pressure from inflation.