1. real estate
2. apartments

Savills World Research
Madrid Offices
European Real Estate Guide
Madrid Offices
2014
savills.es/research
European Real Estate Guide | Madrid Offices
2014
GRAPH 1
GDP growth
SPAIN
Spain
8%
Madrid
EU 27
6%
Key facts 2014
Currency
EUR
Population (in million)
46.8
Urban population (% of total)
79%
GDP per capita (in USD)
29,863 (*)
Inflation
-0.07%
Construction Costs Index (CCI)
(2010=100)
103.75
Long term interest rate
1.78%
Govt debt (% of GDP)
92.7%
FDI (in billion USD)
44.92 (*)
Fitch Credit rating
BBB+
Corruption Perceptions Index / 10
6.0
VAT
21%
Yoy change
4%
2%
0%
-2%
2015*
2014*
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-6%
2000
-4%
Source: Oxford Economics / *forecasts
GRAPH 2
Service sector employment growth
Spain
Madrid
EU 27
10,0%
Yoy change
8,0%
6,0%
4,0%
2,0%
0,0%
2015*
2014*
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-4,0%
2000
-2,0%
Source: Oxford Economics, World Bank, Eurostat, Transparency
International, Miniterio de Fomento / (*) 2013
Source: Oxford Economics / *forecasts
Local market definitions
■ New building: Newly built building
or building built in the past five years,
which has never been occupied.
■ VERDE: Spanish green certification
granted by Green Building Council
España.
■ LEED (Leadership in Energy and
Environmental Design): Internationally
recognized green building
certification system.
■ BREEAM (Building Research
Establishment Environmental
Assestment Methology) is the world's
foremost environmental assessment
method and rating system for
buildings.
■ Take-up: Total volume of lettings
and sales to end-users, including prelettings and excluding lease renewals.
■ Pre-letting: Transaction signed at
least 6 months before the completion
of a new or refurbished building.
■ Net absorption: Net sum of the
space taken-up minus the space
vacated.
■ Stock: Total occupied and vacant
space.
■ Immediate supply: Sum of all
space currently available on the
market.
■ Future supply: Sum of all new or
refurbished building space planned
requiring a building permit.
■ Achievable CBD Prime rent: Rental
value for prime area based on market
sentiment and expertise.
■ Weighted average rent: Calculation
of average rents taking into account
the weitght of the floor area
transacted.
■ Rents: quoted per sq m per month.
■ Investment volume: Total amount in
euros of commercial property sales to
investors including office, industrial,
retail and hotels.
■ Yield: Market yields are generally
quoted gross.
Measuring practices
All areas are quoted in square meters.
■ GIA (Gross Internal Area): The
Boundary Line of this Unit of
Mearurement coincides with the
perimeter of the wall of the buildings
internal face measured from ground
levels.
■ NA (Net Area): is the entire space
marked by a Boundary Line except
for areas occupied by all construction
or structural elements. I.e. the
standards will not count the divisions
that make up the perimeter, loadbearing walls, pillar, etc. Surface
areas with a height under 1.50 meters
will also be excluded
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European Real Estate Guide | Madrid Offices
2014
MAP 1
Survey map - Madrid Offices
Major submarkets
■ CBD: The Castellana axis is the
most representative office location
in Madrid where some of the city's
most remarkable office buildings
can be found, such as the Edificio
Piramide and high-rise office towers
like the Torres Colon and Torre
Picasso. A number of government
and EU organisations are located
here as well as the Spanish
headquarters of private companies
like Deutsche Bank. Also the financial
centre of Spain, the AZCA complex,
is located on the last stretch and is
considered to be one of the capital´s
main financial hubs. The office space
along the CBD area comprises
almost 1 m. sq m (or 7% of the total
GLA in Madrid).
■ Urban Area: from the heart
of the office market to the M-30
ring road. It is the largest and
most diverse market area with a
significant residential component,
where traditional office buildings
coexist with residential properties,
which in turn often house space that
has been adapted to commercial
property activities. To cite some of
the submarkets, which sometimes
coincide with administrative
neighbourhoods, we would note the
Centre area, Salamanca, Chamberí,
the area surrounding the Retiro Park,
Cuzco, the area around Chamartin
train station, etc. We would also note
the CTBA (Cuatro Torres Business
Area) at the north end of the Paseo
de la Castellana, and while it does
not benefit from a prime location, it
has very prestigious properties.
■ Inner suburbs: are comprised of
urban areas closed to the M-30 ring
road (outside). Among them are the
Northern zone that includes business
parks located near the Nudo Norte
and on both sides of the first section
of the A-1 motorway; the Eastern
zone where one of the main business
areas is the A-2 motorway leading
out of the city forms; the Southern
zone that is a fully consolidated
submarket located along the inner
edge of the M-30 ring road that has
sprung up around the Méndez Álvaro
station and the Northern quadrant of
the M-40 ring road that is the Campo
de las Naciones business park and
its subsequents extensions and is
considered the main prime area
outside of the M-30.
■ Outer suburbs: are made up
of business clusters that emerged
along the principal access roads,
and generally from part of other
towns. Among these are the Moraleja
Business Park and the Arroyo de la
Vega area off the A-1 motorway, the
Eisenhower and San Fernando de
Henares areas off the A-2, as well as
other office complexes in Pozuelo
and Las Rozas off the A-6. Rivas
Vaciamadrid off the A-3 motorway
has a huge business complex called
Rivas Futura that is located in a
not very competitive area and the
closing rents are currently among
the lowest in the market, in some
cases, equivalent to industrial rents.
Finally a small office submarket has
emerged in the shadow of the Tres
Cantos Technology Park.
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European Real Estate Guide | Madrid Offices
Ownership
Conditions and restrictions
■ Foreign ownership: no
restrictions.
■ Type: Freehold mainly
Investment vehicles
■ Socimi: Listed limited liability
company dedicated to the
purchase, development and
refurbishment of real estate.
Spanish equivalent of REITs.
Legal entities (residents and nonresidents) benefit a deduction over
the tax credit.
■ SPV'S: The usual structure for
international funds consists of the
set up of an sPV to acquire the
asset that is usually 100% owned
by a Dutch BV.
Costs
■ Agency fees: 1% - 1.5%.
■ Legal fees: 0.15 - 0.25%
■ Property transfer tax (stamp
duty): Each sale, grant and transfer
of real estate or of an interest
in real estate shall be presumed
taxable. The applicable tax rate
will depend on the value of the real
estate and the region. In Madrid the
tax is around 1%.
Ownership costs
■ IBI (Real Estate Tax): Depends of
the area, around 0.4% to 1.1%.
■ Capital Gains Tax on the property
sale: Municipal payable on sale.
■ Corporate taxes: 30%.
2014
CASE STUDIES
Core investment deals: Taxation impact on gross to triple
net yield gap
Case 1: Asset deal
■ District: Prime OOT
■ Purchaser: Private equity
■ Size: 13,000 sq m
■ Price: €30,000,000
■ Gross yield: 7.03%
■ Transfer tax: 1.00%
■ Due diligence: 0.55%
■ Agency fee:1.75%
Triple net yield: 6.79%
Gross to net yield gap: 24.10 bps
Case 2: Share deal
■ District: Urban Area
■ Purchaser: Private equity
■ Size: 47,000 sq m
■ Price: >€100,000,000
■ Gross yield: 6.25%
■ Transfer tax: 1.00%
■ Due diligence cost: 0.25
■ Agency fee: 0.00%
Triple net yield: 6.36%
Gross to net yield gap: 58.47 bps
TABLE 1
Key investment indicators
Market Zones
Investment
volume 2014
5-year average
investment
volume
Prime yield
Q4 2014
Annual
change in
bps
Secondary
yield
Annual
change in
bps
CBD
€44.90m
€84.80m
5.0%
-100
5.25%
-100
Urban Area
€372.20m
€215.90m
7.0%
-75
7.25%
-75
Inner Suburbs
€839.90m
€251.20m
6.5%
-100
6.75%
-100
Outer Suburbs
€346.30m
€180.90m
8.5%
-50
8.75%
-50
Table source: Savills
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European Real Estate Guide | Madrid Offices
Occupancy
Lease sturcture
■ Typical lease length: 3+2 years,
with options to break and extend
the lease in year 3. In accordance
with the Spanish Urban Lease
Act 29/1994, of 24 November,
parties can agree the term of lease
agreement.
■ Break options: Either ‘Tenant
Only’, ‘Landlord Only’ or ‘Mutual’
break options.
■ Frecuency of rent payable: rent
payable monthly in advance.
■ Legal and rent deposit: The
Spanish Urban Lease Act 29/1994
establishes a compulsory legal
deposit of two months rent.
Landlords have the obligation to
deposit legal deposit in Public
Housing Agencies which is held
until lease expiry. Additionally, and
if required by the landlord, tenant
will need to provide additional
security in the form of a deposit
or bank guarantee of an agreed
amount, typically six months rent.
■ Rental increases: Rent normally
escalates annually to CPI with an
open market review every 5 years.
■ Assignment & Sublease:
Uncommon in the Spanish office
market.
■ Dilapidations: Tenant’s
responsibility to leave premises in
its original state.
■ Early termination: Permitted
following expiry of compulsory term
and complying with the agreed
prior notice.
■ Right of first refusal: not
common.
Letting / Releted Costs
■ Agency fee: 12-15% of the
annual rent for new lease/
relocation.
■ Renewal: tenant would typically
pay a percentage of saving over
lease period.
■ Tenant’s fit-out: cost usually
assumed by tenant and supervised
by landlord.
■ Legal Fee: Each side bears its
own legal costs.
■ Property Tax: cost borne by
the landlord, but usually passed
included in service charge and
passed on to tenant. Amount varies
according to area (roughly 0.4% to
1.1%).
■ Waste Management and Disposal
Tax: Calculated upon the area
leased and payable by tenant.
2014
CASE STUDIES
Letting deals: Average annual letting cost per sq m and per
employee
Bank - Finances
■ District: CBD
■ Location: AZCA
■ Property type: Multi Tenant
■ Size: 250
■ Employees: 6
■ Parking spaces: 5
■ Lease: 3 -2 years
■ Agent fee: 15%
■ Rent free: 5 months
€663 per sq m
€27,155 per employee
Annual letting cost
Year 1
Agency fee
€15,470
Fit out
€110,498
Rent free
-€14,324
Rent
€103,131
Service charges
€16,200
Parking spaces
€9,000
Land tax
€5,900
TOTAL
€245,874
IT Company
■ District: North Area
■ Location: Manoteras
■ Property type: Multi Tenant
■ Size: 3,900 sq m
■ Employee: 327
■ Parking spaces: 80
■ Lease: 6 years
■ Agent fee: 12%
■ Rent free: 12 months
€169 per sq m
€1,996 per employee
Annual letting cost
Year 1
Agency fee
€37,436
Fit out
€1,039,886
Rent free
-€51,994
Rent
€311,966
Service charges
€110,883
Parking spaces
€57,600
Land tax
€36,974
TOTAL
€1,542,750
Real Estate / Construction
■ District: North Area
■ Location: Pinar de Chamartín
■ Property type: Multi Tenant
■ Size: 2,300 sq m
■ Employee: 188
■ Parking spaces: 62
■ Lease: 2 years
■ Agent fee: 15%
■ Rent free: 1 month
€379 per sq m
€5,043 per employee
Annual letting cost
Year 1
Agency fee
€46,101
Fit out
€874,552
Rent free
-€12,806
Rent
€307,343
Service charges
€117,840
Parking spaces
€45,900
Land tax
€28,485
TOTAL
€1,407,415
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European Real Estate Guide | Madrid Offices
2014
TABLE 2
Key letting indicators
Achievable prime rent in sq m/month
Exclusive office use buildings
Take-up in sq m
Office submarkets
Weighted average rent in sq m/month
Exclusive office use buildings
2014
5-year
average
6-month
forecast
2014
5-year
average
6-month
forecast
2014
5-year
average
6-month
forecasts
CBD
40,726
35,690
k
€25.00
€25.90
k
€20.90
€23.60
k
Urban area
137,216
112,111
k
€17.25
€18.90
k
€17.20
€21.10
g
Inner suburbs
107,653
122,389
g
€14.00
€15.30
g
€11.90
€18.20
m
Outer suburbs
63,376
82,274
m
€9.50
€10.80
g
€9.30
€11.50
m
Table source: Savills
Savills Madrid - Offices
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Investment Spain
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Office Agency Spain
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Research
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Valuation and
Consultancy
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Research
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Research
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