Building Activities in Barcelona and Madrid Metropolitan Areas

This chapter approaches the role of commercial real estate markets in Spain’s two most important metropolitan areas. It covers the description of how retail and office markets are organized in these two regions, the structural characteristics, both economics as well as demographics, and their relevance within the Spanish economy. The chapter covers the structure, evolution, size and main drivers explaining office and retail market structure and dynamics, analyzing different databases. It uses a dataset with micro data recording offices in rent collected for this purpose to analyze main location and estimate how each metropolitan region is organized as mono (Madrid) or polycentric (Barcelona) market. A second data set used coming from main private companies serves to analyse available space, vacancy rate, transactions, prime rents or new space supply and compare cap rates between metropolises. Third source are census data, which provides statistical information to study the stock and its distribution, and construction data allowing to observe the construction dynamics in both markets. Three empirical analyses have been conducted in this chapter as well. First, the rent gradient theory in both office markets is tested. Second, based on the model of Di Pasquale and Wheaton, it is analysed whether or not new office supply follows the demand drivers. The third empirical model conducts a vector autoregression analysis to estimate the existence of some leadership in office market between both metropolitan areas.