'Right now, rents for office space are still just halfway along their growth trajectory,' commented Pere Viñolas, CEO of Colonial, at the most recent session of Desayunos ESADE, sponsored by CriteriaCaixa. In the speaker’s opinion, this upward trend began a couple years ago as a result of 'improvements in the real economy'. 'Rent volume depends on how the economy is going,' commented Mr. Viñolas. 'In Spain, we are looking at a healthy situation where office rents are still just halfway along their growth trajectory. City-centre rents have been rising for the past two or three years, but locations further afield have not yet seen a noticeable increase.'

In relation to the dynamics of supply in relation to growing demand driven by office-space rents, Mr. Viñolas downplayed fears of excessive supply. 'In Madrid, there is neither a shortage nor an oversupply of office space,” he commented. “We do not have excessive supply in relation to demand. The dynamic is reasonable.'

REITs as vehicles for savings

Before embarking on an analysis of changes in rent prices, Mr. Viñolas described key trends in the investment world. Real estate investment trusts (REITs), he explained, constitute a separate segment of real estate development that seeks to provide a profitable vehicle for global savings that offers returns on real estate investments in the form of rent. 'REITs channel savings into the real estate sector,' he explained. 'We are asked to invest in income-producing properties and to distribute that income as dividends among our shareholders. This is intended to be a long-term activity that encourages savings, that attracts global as well as local investors and relies on equity rather than debt in order to moderate the risk.'

Mr. Viñolas described a global savings outlook in which REITs attract savings-oriented investors away from common alternatives such as government bonds. 'The world of savings is very large,' he noted. 'Until recently, savers tended to gravitate toward government bonds. Over the past decade, it has become clear that bonds are not risk-free, nor are they particularly profitable. As a consequence, the volume of savings invested in real estate has been growing.'

Colonial doubles in value in recent years

In the current environment, characterised by the need to attract savings, Colonial has managed to double in value over the past three or four years, according to Mr. Viñolas. 'Not in terms of volume but in profitability for shareholders,' he clarified. Colonial’s success can be attributed to a strategy focused on injecting value into the office buildings that make up the bulk of the company’s assets. 'The way we operate is to seek transformation by investing in buildings to increase their performance and returns,' commented Mr. Viñolas. 'Our company now manages a portfolio of properties valued at €12 billion, with €1.3 billion currently invested in generating value in Madrid, Barcelona and Paris.'

According to Mr. Viñolas, Colonial’s commitment to value creation involves equipping all of the company’s office space with the latest trends driven by sociological changes in today’s workplaces. For example, the company has invested in the differential elements characteristic of smart buildings as well as features designed to make people happier, more creative and more productive at work. 'The offices of the future will be more like hotels or residences in terms of services,' explained Mr. Viñolas. Through Utopicus, the Colonial Group has also invested in co-working centres and flexible workspaces. Utopicus recently opened central Madrid’s largest co-working space, located on the city’s Gran Via.