The Barcelona office market showed strong take-up in the first quarter, a sign that it may soon recover the levels marked in 2007 and 2008.

1. APRIL 2010
TRENDS
OVERVIEW Rental Market
The Barcelona office market showed strong take-up in the first quarter, a sign Supply
that it may soon recover the levels marked in 2007 and 2008. The first three
New construction
months of the year brought a total take-up of 94,000 sq.m, a dramatic
contrast from the less than 32,500 sq.m recorded in the same months of last Take-up
year.
Rents
There was also a trend towards the stabilisation of rental prices, following the TRENDS
softening witnessed throughout 2009. Average prime zone rents stood at
€20.50 sq.m/month, which was only 2.38% below last December’s level of Investment Market
€21 sq.m/month. Supply
Overall availability also stabilised considerably, since the four new projects Demand
delivered in the quarter added only 39,000 sq.m to the entire stock of
Prime zone yields
Barcelona office space. Thus the overall availability rate reached 12.23% at the
end of March.
ECONOMIC ENVIRONMENT
The recovery in take-up and the steadying of rental prices sparked a (Annual Change %)
substantial revival of investor interest, as evidenced by the renewed activity in 2007 2008 2009 2010*
the investment market, most notably the sale of an 18,000 sq.m office building
in Diagonal Mar for 60 million euros.
GDP growth 3,7 0,9 -3,6 -0,4
Private demand 3,5 0,1 -4,7 -0,6
ECONOMIC ENVIRONMENT Jobless rate 8,6 13,9 18,7 19,8
* Economist Intelligence Unit estimates – March 2010
Spain’s macroeconomic indicators remained mixed in the quarter: more new
businesses were launched, but more businesses closed. Housing sales
improved, but private consumption continued to stagnate, while the SERVICES SECTOR ACTIVITY INDICATORS
household savings rate climbed to historic highs. The most telling services
10
5
BARCELONA OFFICE MAP 0
-5
%
Prime -10
-15
City Centre -20
-25
dic-09
ene-08
abr-08
jul-08
oct-08
ene-09
abr-09
jul-09
oct-09
ene-10
Periphery
Source: INE – Latest update March, 2010
New Business
Areas
Business volume in the services sector declined by -5,6% in
November on year-on-year terms, but this was far less steep
than that of April to April (-20.1%), and came close to the levels
posted in mid- 2008.
All services subsectors posted year-on-year turnover declines,
the worst performer being “services to business” (-9.8%),
followed by transport (-5.6%), tourism (-5.4%), information
technology (-5.4%) and retail (-5.0%).
1
BARCELONA OFFICES APRIL 2010

2. sector indicators shows a halt in the recovery trend registered In the initial phase the project will bring10,296 sq.m of new
since the final quarter of 2009, and manufacturing results were space, and the remaining 16,272 sq.m will be completed in the
poorer than expected in January and February. But electricity third quarter. In distrito 22@, 21,000 sq.m of the Illacuna
demand, a fairly reliable predictor of industrial activity, increased buildings will be dlievered in the new Eix Llacuna complex
during the first quarter. adjoining the Parque Barcelona Media, owned by Colonial.
While there is little doubt that the recovery from the current
downturn will be a slow one, it is now clear that it is at last GRAPH 1- TYPE OF SPACE AVAILABLE
underway. But there is a risk that the recovery will do relatively BY SUBMARKET
little to ease unemployment, which now stands at 18.7% of the 450.000
labour force. Second Hand
New
400.000
350.000
SUPPLY 300.000
As regards the supply of available space in Barcelona relative to 250.000
last December, the stock of office space increased by just 39,000
sqm
200.000
sq.m in the first quarter, thanks to the completion of such
projects as the Eureka I building in the UAB university campus in 150.000
Cerdanyola del Vallès, the Media-TIC building designed by the
architect Enric Ruiz Geli in the 22@ district, and one of the two 100.000
office towers in the Plaza Europa, the Zenit building, 45% of 50.000
whose area is now ready for occupancy.
0
Prime City Centre New Business Areas Periphery
The year 2009 witnessed the largest increase in new office space
in a decade, when the annual average came to about 200,000 Source: Cushman & Wakefield
sq.m. But the large number of new buildings reaching the market
in 2007-2009 was followed by a steep decline thereafter, and a
halt in the construction of several projects in metropolitan
Barcelona and its periphery. The suspension of so many projects
and the absence of new ones means that deliveries of new space
in 2010 and 2011 will be very sparse. In addition, about half of
the new space under construction is already spoken for.
At the end of the first quarter of 2010, total available office space
in Barcelona stood at 684,596 sq.m, with an availability rate of
12.23%. The rate has tended to stabilise in recent months which
is partly because of the small number of new projects delivered
in the quarter, but mainly to the recovery in demand.
Specifically, the quarter saw a sharper rise in the availability rate
in the CBD than in other zones, reflecting the recent trend for
companies to vacate space in CBD and relocate to new business Distrito 22@ - Illacuna office complex
areas or more peripheral locations, where this is a good supply
of new and high-quality buildings.
As regards supply, the second quarter will bring the handover of TAKE-UP
one of the building in Barcelona’s first inner-city business park,
Distrito 38, on the Paseo de Zona Franca, designed by the Total take-up volume in the first quarter reached 94,000 sq.m,
architects Arata Isozaki and Zaera Polo and owned by well above even the most optimistic forecasts, and much greater
Gesmadrid. than the figure registered in the same quarter of 2009. The total
number of transactions came to 80, of which 94% were rentals,
and the remaining 6% were purchases and turn-key projects.
2

3. BARCELONA OFFICES APRIL 2010
GRAPH 2 – ANNUAL OFFICE TAKE-UP
Of all the space taken up, among the most noteworthy
operations were those of WTC Almeda Park in Cornellà de 450.000
Llobregat, where the insurance group AXA leased 9,000 sq m 400.000
and Puma Sports Spain leased 3,000 sq.m.
350.000
Turning to occupancy in the quarter, the entire 10,200 sq.m 300.000
Torre Pujades building in Provençals and Pujades streets in
Take-up sqm
250.000
distrito 22@ was occupied by Servihabitat. Another major
operation was the leasing to Bankpime of the 2,750 sq.m 200.000
corporate headquarters building owned Núñez i Navarro on 150.000
Barcelona’s Pere i Pons street. Meanwhile, in distrito 22@
100.000
Sellbytel leased a total of 3,200 sq.m on levels 1-3 of Avenida
Diagonal, 197. 50.000
0
In this first quarter, there was an unmistakable upturn in activity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q12010
from the same quarter of last year, and a number of major Source: Cushman & Wakefield
transactions took place. Companies, especially those located in
older buildings, are capitalising on the weak market to upgrade
in terms of both quality and efficiency of premises, while cutting RENTAL LEVELS
occupancy costs. In the first quarter the long awaited
convergence on supply and demand pricing has been evident
and this is demonstrated by the take up figures. Rents continued to fall thanks to the high vacancy rate and
continuing weakness of demand, reflected by lacklustre take-up
until Januray 2010. Still, the quickening of demand and the good
levels of take-up in the quarter suggest that prices will stabilise near
current levels, depending on the zone. The greater availability of
space in the New Business Areas and Periphery means that rents
there may still have some way to fall.
Some smaller sized lettings were closed during the first quarter in
CBD buildings with rents higher than those in the prime zone, but
these were too few and small to enable us to determine that Prime
rents are higher than 20.50 €/sq.m/month in Barcelona. Maximum
rents are down about 25% from their 2007 peak of €27 sq.m
/month.
GRAPH 3 – PRIME ZONE RENTS AND OVERALL VACANCY RATE
TRENDS
30 15%
28 14%
26 13%
24 12%
22 11%
20 10%
18 9%
16 8%
14 7%
12 6%
10 5%
8 4%
6 3%
4 2%
2 1%
0 0%
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Q1 2010
L’Hospitalet - Plaça d'Europa - Torre Inbisa Prime Rents Vacancy Rate
Source: Cushman & Wakefield
3

4. BARCELONA OFFICES APRIL 2010
THE INVESTMENT MARKET
The improvement in take up volume and gradual stabilization
in rents have helped to restore investor interest in the office
market. In the last quarter, investor activity has been greater
than in the final months of last year. The market remains
cautious due to the lack of liquidity and this is also reflected
by the market for changes of use from offices into residential
or hotel uses where no deals have been seen in recent years.
In terms of investment volume, the first quarter witnessed
only one investment transaction with the sale of Torre
Diagonal Litoral B2 by Iberdrola Inmobiliaria to a private
investor for the sum of €60 million.
Investment yields have remained stable over the last quarter
and it appears that the upward movements registered last
year have come to end particularly for Prime product where
yields currently stand at 6.00%. Investors continue to reject
product offering greater risk, be that due to deal structure,
location or type of building, focussing on properties offering
income security based on good locations, long lease
contracts and high occupancy levels.
Hospitalet - Plaça d'Europa - Torre Realia BCN
GRAPH 4 – PRIME YIELDS
12,00%
11,50%
11,00%
10,50%
10,00%
9,50%
9,00%
8,50%
8,00%
7,50%
7,00%
6,50%
6,00%
5,50%
5,00%
For more information, please contact: 4,50%
Research Department 4,00%
Dolores Martínez – dolores.martinez@eur.cushwake.com 3,50%
Research Manager, SPAIN
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Q1 2010
Marta Esclapés – marta.esclapes@eur.cushwake.com
Research Barcelona Source: Cushman & Wakefield
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