� Office take-up has declined considerably thisquarter (just over 43,000 sqm) compared to thefigure for the same quarter in 2010 (60,700 sqm).Although demand in the third quarter of the yearis traditionally low, the overall trend in the marketindicates that 2011 will register the lowest level ofgross accumulated take-up of the decade.

� Speculative developments have virtuallydisappeared from the market. No projects werecompleted in the third quarter of the year and wedo not expect any significant new projects to bedelivered over the next 15 months.

� The complete absence of new projects beingdelivered in the market is continuining to graduallyhelp to stabilize office supply and to slow thevacancy rate upward trend.

� Rental values continue to fall, with prices droppingin almost all of the areas studied, albeit at aslower pace than in the previous quarter. On aquarterly basis, prime rents have declined by-2.6%.

� There is a widespread caution among investors.The volatility in the financial markets, the politicalclimate in Europe, difficulties accessing financeand a lack of quality product at acceptable saleprices are hampering decision-making.

“Market trends continue to be determined by the turmoil affectingthe financial markets. This is shaping decision-making for bothoccupiers and investors who have adopted additional precautionarymeasures until the markets stabilise and a trend becomes moreevident.”

Eusebi Carles (General Manager Barcelona)

Barcelona office marketQ3 2011

Annual gross take-up Annual change in vacancy rate

Source: Savills Research Source: Savills Research

Economy, demand and supplyEconomyThe spotlight with regards to the global economicclimate remains firmly trained on the Europeansovereign debt crisis. The pressure of financial marketson Italy has overshadowed the Greek Odyssey. Thecost of Italian debt has reached record highsdangerously above 7.0%, which was the point at whichbailouts began in Ireland, Greece and Portugal.Political issues in the country are making marketuncertainty worse and this is affecting risk premium,which is currently around 550 base points (bps), whilstthe Spanish premium is hovering dangerously close to500 bps.

Long-term government bond yields (10 years)

Source: Eurostat & Bloomberg

The extent in the situation of Europe is forcing us toimagine a situation where China would have tointervene, therefore becoming Europe’s banker and thepotential repercussions that this could have.

GDP growth in Spain is becoming increasingly weakand this could lead to stagnation or even a double-diprecession at the end of the year. The weakness of theeconomy is clear when one looks at most supply anddemand economic indicators. However, the mostsignificative aspect of the economy is still the gloomyjob market situation - 144,700 people were maderedundant in the third quarter, putting theunemployment rate at 21.5%.

Letting marketDemand & take-up

Office demand in Barcelona continues to suffer theconsequences of uncertainty in the market and theeconomic downturn. Take-up between July andSeptember slightly exceeded 43,000 sqm, which is19% lower quarter-on-quarter and up to 29% loweryear-on-year. To date, gross accumulated take-up hasreached 174,700 sqm, which highlights the weakperformance of the market, reaching minimum levelsachieved over the past decade.

Hence, we estimate that gross take-up for the end ofthe year will not exceed 250,000 sqm (levels similar tothose achieved in 2009 and almost 30% below theaverage for the past 10 years).

Compared to previous quarters, the Periphery hasbecome particularly relevant during the summermonths. Three out of the nine most importanttransactions were undertaken in Periphery areas: themultinational firm Adidas let over 1,400 sqm inVallsolana Garden Business Park in Sant Cugat delVallès, the telecommunications company Colt Telecomexpanded its offices in the WTC Almeda Park inCornellà de Llobregat (3,320 sqm) and the fashionbrand Rosa Clará will move to a new 5,000 sqmbuilding in Sant Just Desvern.

Activity in the office market continues to be affected byfirms’ cost savings strategies, either looking for lowerrents or for more efficient buildings, which would allowthem to significantly reduce costs. The latest strategicrelocation completed in Barcelona has been Unilevermoving from a prime CBD building to Viladecans; thishas freed up space in l’Illa Diagonal, which is one ofthe most prestigious buildings in the city. This is a goodcurrent example of the psychological change in termsof demand for offices; the location of the property is nolonger a key factor for many companies, which canforgo this in order to achieve other necessaryobjectives. Given this, vacant obsolete properties in thecity centre have a clear objective: they must renovatetheir offices or they will not be able to survive in themarket.

Supply and vacancy rate

Office supply in Barcelona remains unchanged in thethird quarter of the year due to the complete absenceof new developments in the market.

Vacancy rate by sub-markets

Source: Savills Research

As we anticipated in our previous report, no significantspeculative projects will come onto the market withinthe next 15 months, although two office buildings arebeing refurbished in the city centre: the first is located

Barcelona office market -Q3 2011 2

Rents & investment marketon Calle Calabria and is owned by Núñez y Navarroand the second is located on Travessera de Gràciaand is owned by Colonial.

The majority of developer activity within the next fewmonths will take place in the Nova Bocana complex,where the company of the same name is developingthree office buildings where the future headquarters ofDesigual and Fundació Pascual Maragall are expectedto be located. In total, both head offices amount to atotal of 30,000 sqm.

The lack of new projects has become a stabilisingfactor in the market and this is curbing the growth ofthe vacancy rate, which is currently at 13.3%. The0.1% quarter-on-quarter increase is essentially inresponse to more second hand offices becomingavailable.

Rents

After a period of relative rental price stability in the finalmonths of 2009, rents have continued to trenddownwards since the beginning of 2010. Rental levelshave fallen quarter-on-quarter in all areas analysed,however it is important to highlight that they have fallenmoderately if we compare the figures to those at thebeginning of the recession period (2008-2009).Accordingly the prime rent has fallen 2.6% to€18.50/sqm/month, which is similar figures in the 22@district, where rents have fallen by 2.8%.

Quarterly prime rents

Source: Savills Research

Rental levels in the City Centre and the Periphery havebeen more flexible, with a 4.4% and 4.3% fallrespectively. Owners with properties in these areasstudy the possibility to renew their rental strategies, butfor different reasons. In many cases, properties locatedin the city centre are gradually losing theircompetitiveness due to their obsolescence comparedto a vast stock of new and more efficient buildingslocated in the New Business Areas and the Periphery.However, on the other hand, when faced with theconsiderable number of modern offices in thePeriphery, it is more complicated for firms to decide to

move to these premises due to the lack of adequatepublic transport infraestructure. As a result employeesare reluctant to move to these areas.

Incentives (rent free periods, temporary rentaldiscounts and help with fit-out costs) are becomingimportant factors when negotiating contracts.

Investment market

The sale of the Diputació 260 building by Pontegadeato IVG in August has been the only significanttransactions this quarter. This is certainly a very smallvolume in a market which was used to registering overten transactions per quarter just four years ago.Annualized investment volume has fallen to €224million, which highlights the extent of the decline inactivity in the market, with volumes falling by around90% compared to the market highs achieved in 2007.

Annual investment volume

Source: Savills Research

The volatility in both financial markets and the politicalclimate in Europe has caused investors with capital toset aside to invest in offices to err on the side ofcaution and they are analysing the situation further.

If we add this to the fact that there is not much qualityproduct in the market at sale prices reflecting theselevels of uncertainty, the combination of these twofactors has severely affected the flow of investment.

Barcelona office market -Q3 2011 3

Barcelona office market

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Eusebi CarlesDirector Barcelona+34 93 272 4100ecarles@savills.es

Frédéric StravrakyOffice Agency+34 93 272 4100fstavraky@savills.es

Josep GarciaCorporate+34 93 272 4100jgarcia@savills.es

For further information, please contact:

Muna BenthamiResearch Barcelona+34 93 272 4100mbenthami@savills.es

Andrew StevensValuations+34 93 272 4100astevens@savills.es

Eri MitsostergiouResearch Europe+31 (0)20 301 2087emitso@savills.com