Last year the pandemic shook not only economic activity, but also the way of working in offices, since due to confinement and social restrictions, companies gave priority to teleworking. The direct consequence on the real estate market is the reduction in the hiring of office space, which in Madrid and Barcelona as a whole fell by 51%, a decrease to 470,000 m², according to a report by the consulting firm JLL.
The hiring of spaces was produced mainly thanks to the pull of financial and technology companies. In Madrid, the financial sector (20.3% of the total) led the demand (see graph), followed by technology companies (16.5%) and distribution and consumption (13.6%). In the case of Barcelona, the pull was basically caused by technology (37.4%), where the 22 @ district has become a pole of attraction in recent years. They are followed by financial entities (15.6%) and real estate (5.8%). The report does not explain whether there is a net hiring of offices (more spaces hired than unoccupied).
JLL expects a gradual recovery in activity as 2021 progresses and considers that after the initial boom, the influence of teleworking on office demand will be limited in the medium and long term. “A reduction in fixed positions is foreseeable, but at the same time more surface area will be dedicated to services, common, collaborative and creative spaces”, the report explains.
During the worst moment of the pandemic, in lockdown last spring, 71% of employees who routinely work in offices did so from home, according to JLL. 58% of employees miss going to the office, 44% long to socialize with their colleagues and 26% their daily routine.
52% of those consulted by JLL indicate that they do not feel very productive working at home, although they positively value both flexibility and conciliation as a benefit of teleworking.
In JLL they consider the statement that the increase in teleworking will directly translate into a decrease in the demand for offices, as other factors of interest to companies must be considered “too simplistic”.
The consultant explains that there will be a change in the use of the offices, with more surface dedicated to collaborative spaces and services. “From a company perspective, offices provide a physical space to bring people together, coordinate work, drive performance, and foster creativity and synergies internally. Likewise, corporate culture plays a key role in the attraction and retention of talent “, highlights the JLL report.
“From an employee point of view, the office represents a place that promotes social interaction. Even after the telecommuting boom after the Covid-19 outbreak, most employees state that they would like to work from the office,” he recalls the consultant.
The hiring of offices in Madrid was mainly concentrated in the financial area of the center, for example in the Azca area, predominantly transactions of surfaces smaller than 500 m². In Barcelona, the 22 @ market together with the metropolitan area of the city have concentrated 60% of the demand.
The study emphasizes that for the next few years, it is expected that in Europe 50% of companies will seek to increase their investment in high-quality spaces, while only 7% expect to reduce offices in those prime buildings.
Regarding the reasons for hiring offices, most of it is due to relocation of headquarters, not to the creation of new companies. In the case of Madrid, 81% is justified by a move, although 36% of all movements are transfers with expansion of spaces for employees. Only 2% corresponds to the creation of new companies.
In Barcelona, the figures are similar, since 79% of the contracted spaces are due to transfers (42% with office extensions) and 13% come from the creation of new companies, probably justified by the interest of technology firms through the Catalan capital.
The report from the real estate consultancy highlights that cities such as London, Lyon or Madrid, among others, recorded a slight decrease in prime rents –what tenants pay for better located buildings–. “However, these downward adjustments were marginal and indicate segment resistance prime in this unprecedented time, ”according to JLL.
The upward trend in rents in Madrid over the last six years was broken in 2020 due to the effects of the pandemic. The adjustment was residual, according to JLL, with a slight drop of around 1% in rents prime, which are around 36 euros per square meter per month. In the Catalan capital, the upward trend of the last six years was also paralyzed with the Covid-19 outbreak and they fell between 1% and 2%. In this way, the maximum prices are close to 27 euros per month per m2.
Regarding investment in office building purchases, it was also a bad year in Spain. The figure remained at 1,700 million euros in transactions, with a significant decrease of 78% year-on-year (or a drop of 63% if the operation of the Santander headquarters in Boadilla del Monte in 2019 is excluded, for a value of about 3,200 million) .
The volume of investment in offices represented 22% of all real estate transactions in Spain (excluding hotels), after the record volumes reached in 2019. “For 2021 a rebound in investment is expected, with a volume expected to exceed the levels last year ”, they predict from JLL.
The largest operation in the market was the sale of the Helios Building in Campo de las Naciones by Blackstone, for more than 180 million, which houses the new headquarters of ING in the capital. In Barcelona, the sale of Actual Capital Advisors to DWS of a turnkey office complex in 22 @ stood out.
Regarding the investor profile, the funds continue to be very active in the market, accounting for 61% of investment in 2020. Socimis have been reducing their exposure in recent years, representing less than 6% of volume, falling from almost 30% in 2017.