The office sector in Spain is at an interesting juncture, posing a challenge to national expansion strategies for companies with demand for space. The year 2024 has been particularly good in terms of transactions, marking a change of trend in the market.
This intense activity has been accompanied by a downward trend in the stock of available office space in recent years. In cities such as Madrid (downtown) the office stock is in the 4% range, and in other growing cities such as Valencia and Malaga the figure is even lower, close to 2% in central locations. This is a clear indication of a growing demand that far exceeds the existing supply.
If I stop to analyze the causes of this, one of them is undoubtedly the transformation of the needs of employees in general and especially those of large companies. Today, workers are looking for greater flexibility and comfort, but also companies are looking to attract and retain talent. This is causing an exodus to the urban center, which in turn creates a strain on existing availability, as opposed to the increased availability of metropolitan areas. Working in the center remains a trend.
Companies are not only looking for central locations, but also for space in buildings with sustainability seals and ESG criteria. This trend has led to a massive renovation of buildings to meet these standards. As a result, the availability of buildings with these certifications is still low.
On the other hand, compared to other European cities, Spain remains relatively affordable in terms of office rental costs. Cities such as London or Paris have significantly higher rental prices (up to double). This differential means that large companies are willing to pay a little more in Spain, as it is still an economical option in comparison. This cost-benefit attractiveness is a key factor that is driving demand in cities such as Madrid and Barcelona, causing prices to continue to rise.
This temporary bottleneck in terms of stock contrasts with the new land developments that will alleviate the situation in the coming years. Against this backdrop, in my view the office market in Spain continues to offer interesting investment opportunities today. We continue to work in a tight but dynamic environment and we see that alternatives continue to come onto the market, each time with better quality standards and competitive prices.
Investing in the creation of new office space not only responds to the growing demand, but also presents an attractive opportunity, in terms of profitability, response to this demand, growth...
Although we are navigating times of change and high demand, the office sector in Spain continues to be a good scenario for strategic investment.
