Europe -  Madrid, Spain

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Madrid is not only the centre of political life and public administration in Spain, but also a dynamic economic market for real estate, hospitality, commercial banking and higher education. Madrid’s major generators of commercial demand in the local market area are the many corporate head offices and financial institutions in the financial district to the north of the city. The lack of leisure demand is mostly the result of the limited marketing of the city as a destination, given that Madrid has a wealth of cultural heritage to attract short-break visitation. Although Madrid is traditionally recognised for its strong corporate base, with a somewhat weaker proportion of leisure, this is starting to change, as the increase in the number of luxury hotels in the market attests (as such properties are normally more reliant on leisure demand).

The crisis years in Spain seem to be a distant memory, and after an estimated growth of 2.5% in 2018, the EIU forecast real GDP growth of 2.2% in 2019 and a reasonable average growth of 2.0% thereafter. After a non-confidence motion against the former Prime Minister, Mariano Rajoy, was passed following a political party scandal and crisis, Pedro Sánchez, Secretary General of PSOE, ascended as new Prime Minister of Spain on 1 June 2018. However, Spanish general elections are planned for 28 April 2019 and all 350 seats in the Congress of Deputies are up for election, as well as 208 of the 266 seats in the Senate.

Arrivals to Madrid increased by more than a quarter from 2008 to 2018, or a compound annual growth of around 3.0%. Since 2013, solid improvements in occupancy alongside increases in average rate of over 30.0%, resulted in an outstanding improvement in RevPAR of close to 60.0% – although, these results were from a low base, marking the recovery of the market from the severe economic crisis that hit Spain in 2012.

Hotel supply has broadly kept pace with the changes in demand, although growth in overnights still surpassed the increase in rooms (hence the higher occupancy levels). However, there is positive news for Madrid’s luxury hotel market: following its acquisition in May 2015, the 162-room Ritz Hotel closed on 28 February 2018 for a complete renovation which is expected to last for approximately 18 months, and it will reopen as a Mandarin Oriental. Other new openings include, a Four Seasons hotel with just over 200 rooms, expected to open at the end 2019 close to Puerta del Sol; a 141-room proposed W Hotel to also open in 2019; and another luxury hotel with close to 200 rooms in Plaza de las Descalzas, expected to open in 2020. These developments, and the opening of the 159-room Hyatt Centric Gran Vía Madrid in December 2017 and the 214-room VP Plaza España in March 2018, are likely to help raise the ceiling for average rates in the market in the short to medium term. Although values per room in 2018 were up by around 4.9%, values are still 1.5% lower than they were during the 2007 peak.

From a transactions perspective, Madrid has been a relatively liquid market with several hotel transactions over the past two years. Around eight individual assets transacted in 2017 and several more followed in 2018. Some major transactions in 2018 included the 150-room Villa Magna for around €210 million, a 32.5% stake in the aforementioned proposed Four Seasons for approximately €35 million and the 313-room Holiday Inn Madrid, the 62-room NH Pacifico and the 99-room NH San Sebastian de los Reyes as part of the Hispania Portfolio acquired by Blackstone.

Change In Value For Market: (€Euro)

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

For more information, please contact:

Sophie Perret, MRICS, MBA
[email protected]
  • +44 20 7878 7722 (w)
Magali Castells
[email protected]
  • +44 20 7878-7710 (w)
  • +44 7 850205149 (m)