This year began on a very positive note for the office sector in Spanish capital, Madrid. The once-threatening omicron variant at the beginning of 2022 was far overcome as companies started to return to normality reinstating traditional “on site working” in their new hybrid models. These hybrid models (where workers work from home-to-office and vice versa) has consolidated as the new standard but it has been proved that working from the office still remains indispensable.

The dynamic has been reflected in office space take-up which reached a volume of 134,200 sq.m. in Q1 22 (an impressive +100% vs. Q1 21). The fact that A and B+ rated buildings account for 75% of this take-up shows that quality continues being the focus of attention.

During Q1 22, average prime office rents also went up notably, reaching €35/sq.m./month in Madrid (+2.9% vs. FY21 average) and 27.25/sq.m./month in Barcelona. This was likely due to the increase in demand for office space, clearly portrayed by the increase in the number of leases signed during Q1 22 which amounted to 110 transactions in this period (+50% vs FY21 quarterly average).

Yields continue to compress in Madrid’s Central Business District (CBD) to c. 3.15% and naturally remain much higher in the periphery at c.6.25%. It should be noted that there is rising demand for offices outside the M-30 ring as rent costs are much lower, there is less traffic and surface layouts tend to be more friendly (allowing for green areas and open broader spaces).

From the relevant transactions taking place in H1 22 in Madrid, we should highlight the acquisition by Yukon Capital Family Office of a 4,500 sq.m. office building in Goya 36 for €50 million. We also shouldn’t lose sight of Castellana 51, where giants like JP Morgan, GMP, GIC sovereign fund and others bid head to head in the hope of acquiring the office building. The sale is expected to close well above €200 million with a price per square metre exceeding €11,000.

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