As Spain moves towards economic recovery, Madrid has emerged as one of Europe’s most dynamic centres for investment. A recent report from the OECD forecasts 1.6% growth for Spain in 2015, the first significant increase since the global economic recession began to bite more than five years ago.

Madrid is the capital of one of Spain’s 17 semi-autonomous regions and last year the Comunidad de Madrid, as it is known, reaffirmed its position as the country’s top destination for foreign investment. “In the 2008 to 2014 period, Madrid accounted for 66% of foreign investment in Spain,” says Rocío Güemes, director of the promotion agency Invest in Madrid. "The figure rose to 69% in the first half of 2014 and we consider this to be an excellent time to be looking at opportunities in Madrid.”


European launchpad

Ms Güemes’ sentiments are echoed by Madrid’s mayor Ana Botella, who highlights the city’s advantage as Spain’s transport and commercial hub. “Another factor that strongly influences decisions on investment is security. Madrid ranks as Europe’s third safest city, after Vienna and Copenhagen. To this I would add the importance of stability, taking into account the potential for political disruption in, for instance, Barcelona, following the failed bid to hold a referendum on Catalonian independence,” she says.

Ms Botella also points to the fact that Madrid acts as a European launchpad to a market of more than 500 million Spanish-speaking consumers in Latin America and the US. Indeed, Madrid airport handles one of every five European flights to Latin America. Airlines are increasingly recognising the importance of Madrid as a European transportation hub. Norwegian Air Shuttle, a commercial airline, has established a base of operations in Madrid, servicing the demand for flights between Madrid and cities in Norway, Sweden, Denmark, Germany, Poland and the UK.

Norwegian Air Shuttle chief executive Bjørn Kjos says: "We see major passenger potential from the main airport in Madrid and at the same time it is strategically important for Norwegian to have a base in the Spanish capital in light of our presence in the Spanish market and not least, in terms of our future plans”.

Madrid’s four-terminal international airport and its nearby Coslada dry port compensate for the landlocked city’s lack of a sea port, according to Ms Güemes. “Coslada has its own customs facilities and it is linked to all major sea ports by a high-speed rail network,” she says. “We have the world’s second largest high-speed rail system after Japan.”

Hi-tech priority

Invest in Madrid has identified five priority areas for investment, with hi-tech projects high on the list. One company to recognise Madrid’s advantage as a technology centre was UST Global, the US provider of IT services and solutions, which in 2014 set up its Spanish headquarters in the capital. The company plans to create 3000 jobs over a three-year period. Madrid is UST’s second European centre after London.

Former Mexican president and UST's Spain representative Vicente Fox says the group is recruiting engineering graduates, and adds that UST was attracted to Madrid because of its human capital. “Graduates come out of university with a good knowledge of English,” he says. Mr Fox believes Spain’s image in the US has changed dramatically. “In 2012 no one wanted to come here. Now US companies see it as an investment opportunity,” he says. A reflection of Madrid’s status as an IT centre is a Eurostat survey ranking the city second in the EU, behind Île-de-France, in the number of people in hi-tech jobs.

Likewise, internet company Google in November 2014 revealed plans to join the Madrid start-up community with a new Google Campus, hosting Google programmes. This is the company’s third such campus worldwide, after London and Tel Aviv. “Our hope is that Campus Madrid will supercharge tech entrepreneurs and encourage even more innovation in Spain,” says Mary Grove, director of Google for Entrepreneurs.

IT companies are also being drawn to the high number of qualified graduates from the Madrid region’s three business schools and 16 university campuses. Almost half of the active population has a university degree, nearly double the EU average. One company that has taken advantage of the availability of qualified staff is Switzerland’s Fundinfo, the international platform for investment funds. Fundinfo has set up a Madrid operation in the software and IT services sector with a sales, marketing and support project. Jan Giller, its head of sales and marketing, says: “The UK and Spain are both important fund distribution markets in Europe, and our new local subsidiaries will bring us closer to our clients in the respective countries, enabling us to better serve their needs.”

A star performer

Apollo Enterprise Solutions, a US provider of technology solutions for complex financial transactions, has also opened an office in Madrid to serve the domestic market. Chief executive Joseph Konowiecki says: “Our products have met with a great deal of enthusiasm in Spain and we felt we needed to be close to our Spanish customers and partners. As one of the major hubs of world banking activity, Madrid offers us a very important operating base in Europe.”

UK fibre optic network company Interoute is investing in Madrid in an ICT and internet infrastructure project. The company has opened a distributed data centre in the city to serve customers in Spain and the rest of Europe. “The investment we have made in the Madrid data centre shows Interoute is committed to the Spanish market and the growing demand for both physical and virtual computing resources we are seeing here," says Diego Matas, general manager of Interoute Iberia.

Madrid's star performer over the past year, however, has been has been the property sector. The most eye-catching investment came from Chinese billionaire Wang Jianlin, who in March 2014 paid €260m to acquire the 26-storey landmark Madrid building Edificio España from Spanish bank Santander. The failed redevelopment of the Madrid skyscraper had become an emblem of Spain’s property crisis and local officials expressed hope that the investment by Mr Wang’s property firm Dalian Wanda would herald a rebirth for Madrid’s city centre.

Global property consultancy Knight Frank says Madrid is set to outperform other European property markets. “Prime rents reached their floor in 2013 and increased by 14% in the first half of 2014, to currently stand at €28 per square metre per month,” it said in a report. “Office investment has risen sharply, with volumes amounting to €700m in January to June 2014, compared with €400m for the whole of 2013.” A Knight Frank opinion poll of 200 investors showed that Spain was the top target country for investment in 2014, knocking the UK off the top spot.

Darren Yates, global head of capital markets research at Knight Frank, says: “The combination of a more active occupier market, limited development pipeline and low rents offers a realistic prospect of strong rental growth. The investment case for Spanish property is compelling.”