According to the latest study, “The Office Property Telescope,” conducted by EY’s real estate team in the area of Strategy and Transactions, there is a trend in Madrid and Barcelona to reposition low-rent office spaces to alternative residential properties with higher rental yields and increased interest from capital markets.
In Madrid, there is approximately 1.8 million square meters of built office space that could be converted to alternative residential properties, adding around 20,000 residential units. This transformation could potentially increase the average rental prices of prime office buildings in business districts by at least 30%, up to 44 euros per square meter per month.
A similar trend is seen in Barcelona, with the potential to incorporate 8,000 residential units by converting 763,000 square meters of office space that currently do not meet expected profitability levels for their promoters or owners. In the best office areas of Barcelona, rental prices could reach 37 to 39 euros per square meter per month.
This transformation of office spaces into alternative residential properties represents an opportunity for significant appreciation for property owners and could help alleviate the current housing shortage. However, it requires a public-private collaboration to streamline the necessary urban planning procedures.
The office investment market in Spain has experienced a 40% decline in capital transactions compared to the previous year. In the international market, the decrease in transaction volume is even more significant, with a 70% drop during the first half of 2023.
In Madrid, the gross leasing of office space in the first half of 2023 reached 215,000 square meters, a 9% decrease from the previous year. While the nominal rental prices have remained stable, the real rental values have adjusted by 5% due to more than 1.5 million square meters of vacant office space.
In Barcelona, gross leasing stood at 130,000 square meters until June, a 25% year-on-year decrease. Like Madrid, nominal rental prices have remained stable, but there is potential for a downward pressure on prices in the 22@ district.
Looking ahead, EY’s analysis suggests that many buildings in Madrid’s urban core outside major business districts are suitable for conversion to alternative residential use. Similarly, Barcelona is expected to consolidate the 22@ area as the new office central, while approximately 8,000 residential units could replace 11% of its total office inventory, improving residential yields compared to office buildings.
Read the original article: https://brainsre.news/dos-millones-y-medio-de-m2-de-oficinas-en-madrid-y-barcelona-podrian-transformarse-en-viviendas-en-los-proximos-20-anos/
