Madrid hits an FDI sweet spot

Madrid is enjoying impressive growth in foreign investment thanks to a variety of factors. As a result of political developments, the city and its surrounding region have seen an upsurge in FDI interest following October 2017’s controversial referendum by Catalonia on independence from Spain. Nearly 2000 companies shifted their legal headquarters out of the Catalan region in the wake of the poll.

According to reports by the country's finance ministry and the Bank of Spain, investors concerned about political instability are showing a high level of confidence in Madrid, which has been rated Europe’s third most crime-free city after Amsterdam and Frankfurt. In 2017, Madrid accounted for 61.1% of FDI in Spain, a year-on-year increase of 24.7%. In the same period, investment in Catalonia dropped by 39.8% to represent 13% of the total.

Major internationals

Ikea is one major company with plans to invest in Madrid, spending €6m on its largest European outlet, following the recent opening of its first Spanish shop, also located in the city. Likewise, Singapore’s Novena Global Lifecare Group has chosen Madrid for its first clinic outside Asia. Following this initial stage of development, the company plans to open 150 sites in Spain, according to a company spokesperson.

Rocío Güemes, director of investment promotion agency Invest in Madrid, a joint initiative of the government of Madrid and the Madrid Chamber of Commerce, says there are currently about 650 investment ventures in the pipeline.

“This includes start-ups and aftercare projects, including in the property sector, which is back on the agenda after years of crisis,” she says. “One of the most eye-catching schemes is the Four Seasons hotels group, which plans to open its first hotel in Spain in Madrid’s city centre next year.”  

Ms Güemes says the logistics sector is also attracting investors on the back of a strong outlook for growth in e-commerce. “We have four data centre projects in the pipeline and we are hoping they will attract companies in the IT and electronic communications sector,” she says. “Madrid is also making a strong pitch for fintech investment.”

Interest from China

Chinese investors have appeared on the scene and are taking a keen interest in business opportunities in Madrid. So far in 2018, capital has flowed in from major companies such as Huawei Technologies, which is spending €71.4m to expand its ICT and electronics operations, along with €12.5m from Alibaba Group on a greenfield internet publishing and broadcasting and web search operation in Madrid.

“Apart from the logistics sector, the Chinese are investing across the board in areas like textiles, wine and food,” says Ms Güemes. “There is a great deal of interest in baby food, given Spain’s high standards of quality control.” Shanghai-based Bright Food has announced a €28.8m investment to expand its food and beverage business in Torrejón de Ardoz, outside Madrid.

Meanwhile, Madrid is expanding its infrastructure in response to the boom in FDI. The new central business district in the city’s northern area now offers hi-tech office space in a business centre of four tower blocks, with offices “that enable companies to adapt to technological change, control their costs and develop a sustainable business model”, according to Lola Martínez, research director at CBRE Consultants. “The city can now compete on an even footing with other European financial centres,” she adds.