Are Landlords Benefiting Most in the Spain & Portugal Markets?
A few years ago I had a coffee with a colleague from Paris and he said to me, “Gonzalo, doesn’t this market in Madrid bore you? It’s always the same when it comes to buildings, and there’s nothing new compared to other European cities…?”
I kept looking at him and I thought “Well, this colleague is right; but right now, I’m not bored at all.”
Time has passed and the available supply of office spaces in prime areas in Madrid, Barcelona and Lisbon is almost ridiculous: there is practically nothing new and of good quality. The reason why this has happened in Madrid, Barcelona and Lisbon is because during the past 7 years there simply have been a limited amount of new projects. Those that have been built have been pre-leased in a very short period of time – so the domain of the property owners and their negotiation power is greater each time. That is why companies like ours – TTS (The Tenant’s solution) – make it a priority to “master” the properties.
Though tenants and end users are aware of the power of landlords, and although they know that the current economic cycle is good, they are very risk averse in making 5-year-long commitments. Therefore, they continue talking with companies like ours and other Exis partners to advise and guide them:
- We work with them on how to control the rents they have to pay,
- They study more frequently how to adapt their work spaces to their needs,
- They review the possibility of sub-leasing certain spaces in case of “economic downturns,” and
- When they have an existing office space, they make it more adapted to modern work requirements, thus saving the cost of an expensive relocation.
In short, properties – and therefore landlords – currently dominate the market, and they are aware of it. But they are also aware that tenants look at their real estate costs much more than before and what is white today, tomorrow can be black. That is why they are always open to listening to the needs of a tenant who knows what he should do to optimize his real estate portfolio in order to improve his EBITDA.
By the way, my French colleague always says to me “The (economic) cycles always come back; therefore someday the power will pass again to the tenants and so forth…”
Gonzalo Checa Astier is a co-founder of TTS, the leading independent tenant representation firm in Spain. Before joining TTS, Gonzalo had 20 years of extensive experience working for large international companies in tenant rep in Spain and Portugal. He has a Bachelor’s Degree in Law from the University of Zaragoza, a Master’s Degree in Real Estate Management from the Instituto de Empresa, and a Master’s Degree in International Marketing and Foreign Trade.