The capital of Spain is one of the most cyclical markets in Europe and rents are still far from the previous peaks. According to Morgan Stanley, there is more upward potential in values with exposure to offices in Madrid. Besides, Spain is expected to grow above the European average.
“We reiterate the Overweight (OW) at Merlin Properties. In Merlin, although the return profile has slowed down, compression in yields seems to be over, while 20% exposure remains a drag on returns,” MS experts commented.