During 2019, the overall trend in the Málaga office market was stability.

The size of the stock was close to 485,000 sq m for the third consecutive year, pending the incorporation of large developments that will have a significant impact on the city as well as the restructuring of business activity.

Due to the scarcity of supply, the occupier market maintains a moderate take-up level while rents continue to be almost flat, with more notable growth in certain areas.

The office market in Málaga has a stock of 484,910 sq m (including buildings for exclusive office use as well as office space in mixed buildings, but excluding properties owned by public administration). This is the third consecutive year without variation, after the marked adjustment in 2018 with the exit of 174,690 sq m, due to change of use to residential or commercial.

The availability of office space continues the downward trend that began in 2015. In Q1 2020, the variation in supply volume stood at 35.84% below the figure recorded in the previous year (25,300 sq m in 2020 compared to 39,433 sq m in 2019).

The vacancy rate of the total market in Málaga stands at 4.88% (about 3.2 percentage points below the 8% registered in 2019), although the prime area accounts for barely 2.5% of vacant spaces.

Evolution of average rent (city vs prime area)
Evolution of stock
Evolution of stock vs availability


Greater activity in the city’s business sector, along with a growth in demand and insufficient supply, has led the Málaga office market to a situation of gridlock.

Despite this, Málaga is showing up on the radar of more and more multinational companies (many related to the technology sector) looking to set up their headquarters. The city offers not only an attractive quality of life, with an excellent climate and a wide variety of cultural and leisure activities, but also an innovative environment and infrastructure that provide direct access to major national and international capitals. All of these are key factors in attracting and retaining talent.

The decline in the volume of available space kept rental values in an expansion phase during 2019, albeit at a moderate pace, associated with the slowdown in take-up.

The average closing rent stood at €10.80 per sq m/month, representing a 1.40% y-o-y increase. The prime area recorded the highest average level (close to €13.85 per sq m/month) and also the maximum asking rent (€18.50 per sq m/month). The average rent in the decentralised area (€9.65 per sq m/month) accounted for the highest year-on-year increase in the market (10% compared to 2018), as it made up most of the stock of buildings for exclusive office use and, consequently, most of the activity of the occupier market.


Continuing with the trend observed in recent years, increases in rental values are mainly recorded in buildings for exclusive office use with occupancy levels in the region of 100%.

With regards to income-producing transactions, Málaga is prominent at the national level. The influx of international capital (the Canadian REITS company Inovalis acquired the Málaga Business Park office complex at the end of 2019) signifies the increased confidence of investors in a city with a clear growth path.

There are also assets available on the market that are expected to be transacted in the coming months.

Meanwhile, the execution of these planned projects will be enabled with the possible entry of land developers and the alliances between local developers and international funds specialised in offices, the aim being to put the product on sale once an occupancy level close to 100% has been reached.

The yields in the Málaga office market range from 5% to 5.5% for the prime area and 8% in the submarkets further away from the centre. These levels are similar to other secondary cities.

Comparision Rental income
Achievable rents across Europe Q2 2019
Achievable Yield comparison (%)


Where is the opportunity in the office market in Málaga?

With regards to income-producing transactions, Málaga is prominent at the national level. The influx of international capital (the Canadian REITS company Inovalis acquired the Málaga Business Park office complex at the end of 2019) signifies the increased confidence of investors in a city with a clear growth path.

There are also assets available on the market that are expected to be transacted in the coming months.

Meanwhile, the execution of these planned projects will be enabled with the possible entry of land developers and the alliances between local developers and international funds specialised in offices, the aim being to put the product on sale once an occupancy level close to 100% has been reached.

The yields in the Málaga office market range from 5% to 5.5% for the prime area and 8% in the submarkets further away from the centre. These levels are similar to other secondary cities.

HIGHLIGHTS

  • Office stock in a state of disrepair, with the need for new projects adapted to current requirements (vacancy rate at overall minimum level of 4.88%, <3% in most areas)

  • Flexible space arrives in Málaga, two top-tier operators, new players and interest from other companies

  • Málaga as a destination for international companies

  • Optimistic trend, sustained rental growth and active demand

  • Málaga piques interest from investors specialising in offices

  • Overall market availability <5% (4.88%) with vacancy rates in the main areas, or even lower than the general average (>3% PRIME, CBD and PTA)

  • Insufficient office stock to continue the city's economic growth

  • Comparative Stock:
    - Málaga 485 k sq m (availabiity 4.88%)
    - Seville 1,2 M sq m (availability >25%)
    - Barcelona 6.2 M sq m (availability 4.15%)
    - Valencia approximately 774 k sq m (availability <10%)

  • In the last 12 months, there have been 3 income-generating transactions from players who were previously uninterested

COVID19

IMPACT

OPPORTUNITIES

Uncertainty about the impact of remote working and changes in the office model

The new projects to enter will be positioned in the market given the strong demand identified and the need to update/renew the office stock

Slowdown in the demand for office space

The City Council acts as the initial promoter in the expansion of office stock

Implementation of professional building management (Covid-free measures, etc.)

Sustainable quality projects in urban location

Opportunistic investors expect discounts, but still show interest