New research by Cordea Savills shows Spain’s Office sector offers one of the most compelling investment opportunities in Europe because of its strong correlation with the unemployment rate, which is falling sharply as the country emerges from a deep recession.

Rental levels in Spain’s Prime Office sector have a six-quarter lagged correlation factor of 76% with the country’s unemployment rate in the two decades between 1994 and 2014. In 2014, Spain saw the largest annual drop in the number of unemployed since 1998. The unemployment rate fell from 25.2% in February 2014 to 23.4% in February 2015. Consensus forecasts are that the economy will grow by 2.4% in 2015 and 2.3% in 2016.

Analysis by Cordea Savills of the year-on-year rental growth for six different property segments in Madrid and Barcelona suggests that Spanish real estate generally has turned the corner, with no rental decreases in the first three quarters of last year and a small minority of decreases in Q4.

Spain’s improving property rental cycle, combined with a positive economic backdrop, is resulting in strong capital flows, which indicates that institutional investors are back in the market. Rolling annual investment volumes have increased 142% since bottoming at around €2bn in Q2 2013.