Activity in the Barcelona office market will rebound this year, after a 2023 characterized by a certain sluggishness and a decline in both transactions and contracted surface area. This is according to the consultancy Cushman & Wakefield, whose Capital Markets partner, Eusebi Carles, assures that 2024 will recover the usual market levels: "Without reaching exuberance, the level of activity will rise."
Thus, the contracted surface area will return to levels similar to previous years: "We believe that this year it will again approach the usual 300,000 square meters," after a 2023 in which the figure stood at around 260,000 square meters. The market and the stock will vary this year as the multiple office developments currently underway begin to operate, and which represent more than 116,000 square meters for this year.
Most of these developments are concentrated in 22@, an area where the availability rate is already 25% and which will add nearly 80,000 new square meters this year through new buildings or properties that will re-enter the market after renovation. Among the new developments in 22@, the Two Parc Central building stands out for its size. With 22,900 square meters, it will be operational by the end of the year after an investment of around 50 million. The property will follow the path of its older brother, the One Parc Central, already operational and with 22,300 square meters, located in the Parc Central complex, which occupies four blocks of Poblenou.
The developments in the so-called technology district include projects distributed along arteries such as Pere IV, Llacuna, Àvila, and Almogàvers. The A100 building is located on the latter, with 9,000 square meters across eight floors, which will be operational in the last quarter of the year.
Also in 22@ and with nearly 14,000 square meters, the office tower known as Diagonal 197 will finish its renovation at the beginning of this year. The building, designed by the British David Chipperfield, has 16 floors a few steps from the renovated Plaza Glòries. At the other end of Diagonal and next to Francesc Macià is another building with a similar office area, although with a different past and frequented by many. The old Corte Inglés on Diagonal with Francesc Macià will reopen this year converted into a complex that will combine commercial use with offices, with 13,800 meters for offices.
Five blocks away, the emblematic and prominent Banco Sabadell tower, at the intersection of Diagonal and Balmes, will make almost 12,000 square meters available for offices. With 83 meters high and 24 floors, Sabadell sold the iconic building to the real estate firm Hines for close to 90 million euros in 2021, with the intention of carrying out a comprehensive renovation of the building that will be ready in the second half of the year.
Also by the end of the year, the renovation of Casa Tecla Sala, located on Casp street and a few meters from Urquinaona, is expected to be completed. Located in the heart of the prime area, this rationalist-style building from 1929 has been restored to convert it into a complex with an office area of 5,800 square meters.
However, the star of the promotions underway in the Catalan capital is the Estel Building. The renovation of the former Telefónica headquarters on Avenida Roma will make nearly 50,000 square meters of surface available to the market, after a decade of abandonment and an investment of more than 80 million euros promoted by the Freo and Bain Capital funds. The reconversion of the complex into offices is expected to be completed by the end of 2024, although its first major tenant has announced that it will move in 2025: it will be the AstraZeneca R&D hub. If the works are indeed completed before the end of 2024 and its surface enters the office market, Barcelona will gain more than 150,000 square meters this year.
Looking ahead to 2025, Cushman & Wakefield predicts that Barcelona will incorporate nearly 200,000 square meters for offices, in a calculation that includes the 50,000 of the Estel Building and projects that are currently processing licenses. Among the properties expected to be part of the office stock starting next year is an area of 19,000 square meters of the future CaixaResearch Institute, among other promotions distributed throughout the city, with a strong presence again in 22@.
Available space and the particularity of 22@
The entry of these offices into the market will not significantly affect availability, which will show a slight upward trend, according to the consultancy. Available offices in the city are now around 10.5%, a figure that varies depending on the area, and which has increased due to the reduction in hiring in 2023. Looking ahead to 2024, Carles anticipates that various companies are considering "behind the scenes" to land in significant spaces in the city.
Most new developments and renovated buildings are concentrated in 22@, an area that will add nearly 80,000 new square meters this yearIn 22@, the availability level is above the city average, and is around 25%. "Sometimes 22@ is spoken of as a complicated area, and some even speak of failure, when in reality it is quite the opposite,"claims Carles. He considers that the fact that the bulk of the office supply is concentrated in the technological district generates this increase in availability, in an "absolutely cyclical" situation in which the market has not yet digested the square meters that have been made available to it.
"The area will move forward as this digestion occurs in the coming months or a couple of years," predicts Carles. This availability, in fact, allows large companies to consider 22@ as their landing strip, and starting this year they will have these 80,000 additional square meters that will be added by the promotions that are underway.
These forecasts come after a 2023 that "has not been an easy year for the market from an investment angle." This situation, caused globally by interest rates and international instability, led to about 400 million euros in office assets being transacted in Barcelona in 2023, down from 1.4 billion in 2022 and 2 billion in 2021. The figures translate into office contracting of 260,000 square meters last year, below the more than 300,000 usually registered annually.
"This situation will not necessarily be replicated in 2024," Carles advanced, predicting that inflation control will lead to an interest rate cut that will begin to reverse the current situation. He foresees that the first half of the year will maintain a continuous trend with that of 2023, and that the second half will see a market reactivation.
The star of the promotions underway is the renovation of the Estel Building, which will make nearly 50,000 square meters available for officesCarles has highlighted that the 2023 figures are also conditioned by the fact that no major operations took place. However, he emphasizes that these large transactions "do not generate a trend and occur independently: what truly generates a market are medium-sized operations, which are what indicate whether the market is moving in one direction or another." In this sense, the number of operations that occurred in Barcelona in 2023 did not decrease compared to those in 2022, and stood at around 350 in both years.
Regarding rental prices, Cushman & Wakefield data indicate that they will experience a moderate increase. Carles differentiates the behavior in this area of offices that meet all quality and innovation standards and properties that are in "technical KO", which have taken different paths that are widening the distance between them. "In this area, the historical debate in Barcelona opens up about giving a second life to office buildings that no longer function as such, converting them into housing or hotels," in a context where the opening of hotels is restricted in the city by the Urban Plan for Tourist Accommodation (Peuat).
Offices in the post-pandemic era
Against the voices that suggest that companies will eventually do without their offices to switch to the teleworking model tested during the pandemic, Carles rules out this trend and assures that "activity levels are returning to pre-Covid levels." Thus, teleworking is being integrated into the in-person model without eliminating it.
The incorporation of remote work in multiple companies is having effects on the type of offices demanded, although "it is too early to make a diagnosis." The first years after Covid are registering more demand for offices with collaborative, meeting, and gathering environments, "quality spaces to make the office a place where things happen." They also do so through new models, such as flexible offices that share common spaces and represent 3.5% of the total office space in Barcelona. With these new modalities, the renovation of buildings and the promotion of new developments, the office market aims to revitalize itself in 2024, which foresees notable additions.