April 26, 2024

Investment Insights

In the heart of Spain, an urban trend is gaining momentum: the conversion of vacant and obsolete offices into modern residential apartments. This shift is revolutionizing the real estate market in some of the world’s major cities, including Madrid and Barcelona, where housing shortages and new hybrid work models are driving transformation.

In places like New York, this practice has been widely adopted, with local government facilitating the conversion of offices into thousands of homes. In Spain, although the movement is still in its early stages and lacks significant public administration support, the impact is already noticeable. According to consulting firm CBRE, since 2013, there have been 156 conversions in Spain, with a notable increase from 2019.

The year 2023 marked a significant upswing in this sector, with nearly 300 million euros invested in transactions related to building use conversions, involving approximately 30 buildings. This includes 15 transactions specifically aimed at changing the use of the purchased properties, signifying a growing niche in the market, especially following the pandemic. Not all transformations involved transactions, but a total of 30 changes of use were recorded by CBRE throughout the year.

The pressing need for more housing options has led to nearly 224,000 square meters of office space being transformed into residential units over the last decade. These conversions are not limited to homes for purchase but also extend to rentals, coliving spaces, and senior living facilities, adding a diverse range of residential offerings in central urban areas.

These changes are not merely altering the aesthetics of cities like Madrid and Barcelona but are also revitalizing them. The building reconversion addresses not only the scarcity of land and residential options but also aims for a more sustainable and efficient future for urban real estate. However, this trend does not necessarily translate into more affordable housing, particularly since many of these projects target the luxury segment.

The demand for office space now concentrates on high-quality buildings, primarily in financial districts, leaving lower-grade offices with high availability rates and non-compliance with modern sustainability policies as prime candidates for residential conversion. This scenario presents an attractive investment opportunity, especially for developers and investors looking to capitalize on building luxury homes in prime locations.

The transformation of obsolete office spaces into homes is not just a response to the need for more housing; it is also a reflection of the evolution of our cities, adapting to new economic and social realities. The conversion of offices into homes is not just a trend but a necessary urban evolution that could define the future of housing in Spain’s major cities. Investors and developers attentive to these changes could benefit significantly by strategically positioning themselves in this emerging market.