European Real Estate Guide Madrid Offices 2014

Transcription

1 Savills World Research Madrid Offices European Real Estate Guide Madrid Offices savills.es/research

2 GRAPH 1 GDP growth Yoy change 8% 6% 4% 2% 0% -2% -4% Spain Madrid EU 27 SPAIN Key facts Currency EUR Population (in million) 46.8 Urban population (% of total) 79% GDP per capita (in USD) 29,863 (*) -6% * 2015* Inflation -0.07% Source: Oxford Economics / *forecasts GRAPH 2 Service sector employment growth Construction Costs Index (CCI) (2010=100) Long term interest rate 1.78% Yoy change 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% Spain Madrid EU 27 Govt debt (% of GDP) 92.7% FDI (in billion USD) (*) Fitch Credit rating BBB+ Corruption Perceptions Index / VAT 21% -4,0% * 2015* Source: Oxford Economics, World Ban, Eurostat, Transparency International, Miniterio de Fomento / (*) 2013 Source: Oxford Economics / *forecasts Local maret 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. Tae-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 taen-up minus the space vacated. Stoc: Total occupied and vacant space. Immediate supply: Sum of all space currently available on the maret. 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 maret sentiment and expertise. Weighted average rent: Calculation of average rents taing 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: Maret 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 mared by a Boundary Line except for areas occupied by all construction or structural elements. I.e. the standards will not count the divisions that mae up the perimeter, loadbearing walls, pillar, etc. Surface areas with a height under 1.50 meters will also be excluded savills.es/research 02

3 MAP 1 Survey map - Madrid Offices Major submarets CBD: The Castellana axis is the most representative office location in Madrid where some of the city's most remarable office buildings can be found, such as the Edificio Piramide and high-rise office towers lie 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 lie Deutsche Ban. 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 maret to the M-30 ring road. It is the largest and most diverse maret 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 submarets, which sometimes coincide with administrative neighbourhoods, we would note the Centre area, Salamanca, Chamberí, the area surrounding the Retiro Par, 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 pars 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 submaret 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 par 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 Par 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 maret, in some cases, equivalent to industrial rents. Finally a small office submaret has emerged in the shadow of the Tres Cantos Technology Par. savills.es/research 03

4 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: % 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%. 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: 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: bps TABLE 1 Key investment indicators Maret Zones Investment volume 5-year average investment volume Prime yield Q4 Annual change in bps Secondary yield Annual change in bps CBD 44.90m 84.80m 5.0% % -100 Urban Area m m 7.0% % -75 Inner Suburbs m m 6.5% % -100 Outer Suburbs m m 8.5% % -50 Table source: Savills savills.es/research 04

5 Occupancy Lease sturcture Typical lease length: 3+2 years, with options to brea 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. Brea options: Either Tenant Only, Landlord Only or Mutual brea 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 ban guarantee of an agreed amount, typically six months rent. Rental increases: Rent normally escalates annually to CPI with an open maret review every 5 years. Assignment & Sublease: Uncommon in the Spanish office maret. 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. CASE STUDIES Letting deals: Average annual letting cost per sq m and per employee Ban - Finances District: CBD Location: AZCA Property type: Multi Tenant Size: 250 Employees: 6 Paring spaces: 5 Lease: 3-2 years Agent fee: 15% Rent free: 5 months 663 per sq m 27,155 per employee IT Company District: North Area Location: Manoteras Property type: Multi Tenant Size: 3,900 sq m Employee: 327 Paring spaces: 80 Lease: 6 years Agent fee: 12% Rent free: 12 months 169 per sq m 1,996 per employee Real Estate / Construction District: North Area Location: Pinar de Chamartín Property type: Multi Tenant Size: 2,300 sq m Employee: 188 Paring 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 15,470 Fit out 110,498 Rent free - 14,324 Rent 103,131 Service charges 16,200 Paring spaces 9,000 Land tax 5,900 TOTAL 245,874 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 Paring spaces 57,600 Land tax 36,974 TOTAL 1,542,750 Annual letting cost Year 1 Agency fee 46,101 Fit out 874,552 Rent free - 12,806 Rent 307,343 Service charges 117,840 Paring spaces 45,900 Land tax 28,485 TOTAL 1,407,415 savills.es/research 05

6 TABLE 2 Key letting indicators Office submarets Tae-up in sq m 5-year average 6-month forecast Achievable prime rent in sq m/month Exclusive office use buildings 5-year average 6-month forecast Weighted average rent in sq m/month Exclusive office use buildings 5-year average 6-month forecasts CBD 40,726 35, Urban area 137, , g Inner suburbs 107, ,389 g g m Outer suburbs 63,376 82,274 m g m Table source: Savills Savills Madrid - Offices Please contact us for further information Rafael Merry Managing Director [email protected] José Navarro Deputy Managing Director [email protected] Luis Espadas Capital Marets [email protected] Research Pablo Pavía Investment Spain [email protected] Ana Zavala Office Agency Spain [email protected] Jesús Mateo Valuation and Consultancy [email protected] Alberto Pellejer Property Managment [email protected] Gema de la Fuente Research [email protected] Isabel Abella Research [email protected] Savills plc Savills is a leading global real estate service provider listed on the London Stoc Exchange. The company, established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This bulletin is for general informative purposes only. Savills accepts no liability whatsover for any direct or consequential loss arising from its use. It is strictly copyright and reproduction of the whole or part of it in any form is prohibited without permission from Savills Research. Savills Commercial Ltd savills.es/research 06