According to the Office Market Report for 2S 2016, this sector is going through a very positive stage due to its stability and solidity. The low product availability predicted a restricted year regarding take-up, but results confirmed this fact has not been an obstacle, quite the opposite.
Office take-up in Barcelona for the 2016 financial year, according to data from the consulting firm, has risen to 303,000 sqm while availability rate stands at at 10%.
According to the Office Report of Forcadell, office take-up 2S 2016 stood at 155,000 sqm, 4.7% higher than results obtained in H1 2016. Although there was a total take-up of 303,000 sqm (-5.6% year-on-year) in the year as a whole, Forcadell's overall assessment is good, since it has followed the positive trend of the past 2 years. The low availability at the beginning of the fiscal year 2016 predicted a restricted year regarding take-up, but results confirmed it has not been this way, if not quite the opposite. In this sense, the evolution of the office real estate sector in Barcelona continues to be promising and is expected to continue next year, due to its stability and solidity. Companies wishing to establish themselves in Barcelona must take into account the scarcity of sqm.
The availability of offices in Barcelona, according to the data of the consulting firm, has continued to decline progressively, especially in Prime, where today it stands at 2%. Altogether, in the Barcelona office market the rate has dropped to 10%. In the same period of the previous year, availability was 2 percentage points higher, so releasing new projects into the market is becoming increasingly urgent, especially since some of these projects are being delayed. The major transactions that will take place in the coming months will most likely occur in the Periphery, where space options are easily found, unlike Prime, where there is a pronounced shortage of sqm. Precisely the supply in Periphery concentrates 2/3 of the total space in the city of Barcelona, estimated in 5.8M sqm. It should also be noted that although Plaça Europa and 22@ (NDN/New Business Districts) have closed a large number of operations throughout 2016, they still have a great availability to host companies. Most of the projects will take place at 22@ and Plaça Europa.
The Forcadell report highlights that companies’ demands for spaces up to 500 sqm are the most requested, both for sale (60.7%) and rent (73.4%). These demands are concentrated again in Prime Zone, Center Zone and Business Districts. In 2017, an increase in demand in the Periphery Zone (7.2%) is expected since many companies do not see their needs fulfilled in the city center and study the possibility of a new location further away in functional buildings, open spaces and with more competitive prices than in the center of the Barcelona. However, most companies will continue to focus towards the Center Zone, mainly because for its location, its excellent communications and its proximity to the prestigious Prime. It also highlights an increase in international demand, mainly European, which values attractive prices, the avant-garde image of the city, its climate and its communications network. More specifically, these are usually younger people and technological companies.
The single owned buildings office market continues with its progressive reduction of sqm, an occurrence which has been observed for the past couple of years. The net absorption rate is consistent, so the need for new spaces becomes increasingly urgent, with restoration projects such as the Torre Mafre (Vila Olímpica – NDN/New Business Districts). NDN/New Business Districts and Periphery are currently the areas where the largest supply of sqm is concentrated, in the rest of the areas the options are reduced. Although the snapshot of the situation is not getting better, for the moment it is still possible to find quality product in office buildings, as Forcadell pointed out in previous reports. Developers’ activity started to reactivate in 2016 and it is expected that in 2017 the market will begin to balance supply and demand. The forecast of market output for 30,000 sqm during 2S 2016 was not completed due to the delay in projects but it is expected they will be finished this upcoming year.
According to the Office Market Report, the trend in office rental prices in Barcelona remains stable with respect to 1S 2016, registering only a slight increase of 2.94% in the average rental the Prime Zone. In year-on-year terms, the increase is 6.1%, going from €16.50/sqm /month 2S 2015 to the current €17.50/sqm/month. As for Barcelona's average rental prices, it has increased by 9.7% compared to the same period last year, from €11.39 / sqm/ month to € 12.50 /sqm /month. In previous reports, Forcadell already pointed out to price stability in successive financial years due to compressed yields.
Forcadell highlights that the evolution of sale prices follows the pattern of the rental market, which leads the way towards stability. In Prime, the average price has increased 11.1% year-on-year respect 2S 2015, evolving from €4,500/sqm to €5,000/sqm. The rest of zones have maintained a tendency of stability throughout the year with hardly any notable variations. The average sales price of offices in Barcelona at the end of 2016 stands at €2,800 /sqm (6.5% year-on-year increase).
The Forcadell market report points out that office investment is at a very positive stage since it is the real estate sector registering the best figures this year, compared to the rest of the areas. Although 2015 was a very good year in which investment volume registered €5,500M, 2016 has followed closely with a total investment of €5,000M between the markets of Madrid and Barcelona. The expectations for the beginning the year did not predict the sector would experience such a positive year even taking in consideration the lack of product. The interest of investors today encompasses all types of office products (buildings and independent offices). Furthermore, REITs are driving important transactions of office packages, and product from the tertiary industry in general
According to data from the consulting firm, the development of the office investment market has been extermely positive, confirming the consistency Forcadell predicted. After two years of great results, the sector confirms its consolidation. It is therefore expected 2017 will follow the same line than these past years, with large transactions being carried out mainly by REITs. Given the potential of the Barcelona market, it is likely that it will once again account for a quarter of the total tertiary industry product investment in Spain.
Once again, REITs together with investment funds have been the entities that have captured the largest number of operations this semester for their ability to manage large volumes of assets. It must be taken into account that there has been an 80% more of Listed Companies of Real Estate Investment that have been incorporated into the Alternative Investment Market (AIM) than in 2015. Since 2013, they have a relevant role in the investment sector both in the Office as well as in the Residential market.