Madrid's office investment market may have seen an ‘unbeatable’ start to 2012 following the EUR 400 mln sale of Torre Picasso, but the transaction will not set a precedent for the year ahead, property consultancy Savills has said in a report on the Spanish market.

The effect of austerity measures stemming from the euro crisis and the fact not all properties on the market are sellable will dampen demand, Savills said. And stagnation in growth affecting business confidence and the job market has already directly impacted on the decline in Madrid’s office market activity.

In addition, constrained leasing demand, a lack of finance and caution from international investors will see domestic buyers account for the majority of activity in 2012 at lot sizes of EUR 30-50 mln, Savills said.

Take-up in 2011 was recorded at 340,000 m2, 23% less than in 2010. Savills predicts that similar levels will be recorded in 2012 as businesses continue to make cost savings.