According to the latest Spanish Commercial Property Market Review from real estate analysts Knight Frank covering the first half 2013 it is possible that some form of recovery in the sector will be seen by the end of 2013.
It is expected that the Spanish economy will continue to contract over the coming months, and the fall in GDP in 2013 is projected to be similar to that of 2012, with the economy shrinking by around 1.6% and domestic demand is expected to remain weak but this will be partially offset by a more positive contribution from external demand, the report says.
GDP forecasts for 2014 indicate that growth will be close to 0.5%, boosted by an expected improvement in the global economy. The outlook will also be aided by the measures taken by the European Central Bank (ECB) to stabilise and ensure the survival of the Euro.
The report points out that the success of fiscal reforms aimed at ensuring that Spain reaches its deficit targets depends on the ability of the autonomous regions to meet their commitments and on improvements in the employment market.
While the macroeconomic outlook remains uncertain, a modest improvement in the key indicators is expected. ‘Nonetheless, any boost to economic and business activity is unlikely to be enough to ensure that leasing activity returns to pre-2008 levels, across all property sectors,’ the report says.
‘However, the more modest take up figures recorded in the 2008 to 2010 period may be achievable,’ it adds.
According to the report the Madrid office market had an unusual first half of 2013, with three large scale leasing transactions boosting overall take up. Vodafone took approximately 50,000 square meters, Iberia leased close to 16,000 square meters and Agencia EFE took 14,500 square meters, in deals which were all initiated in 2012.
This helped to bring take up for the first half of 2013 to 197,000 square meter, more than 60% up on the first half of 2012. However, the report points out that without the three large deals, the take up figure for the first half of the year would have been very similar to that of the previous year, and leasing activity has generally remained subdued.
‘This situation will continue until there is a marked improvement in the economic backdrop, which will increase business confidence and encourage companies to begin taking decisions that look beyond the immediate future, and towards preparing longer term strategies,’ says the report.
‘However, the current market conditions have created considerable potential for tenants and owners to identify opportunities not normally present during a period of economic growth,’ it adds.
The report also points out that over recent years, the office market has become ever more challenging due to...