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Morgan Stanley, the US investment bank, has paid €220m (£151m, $267m) for IBM’s Iberian headquarters in the biggest single office deal ever seen in Spain.

It is understood that two of the group’s funds, the Morgan Stanley Eurozone Office Fund and its new KAG German open-ended fund, have joined forces to buy the block building in Madrid’s city centre.

The seller was GIC, investment wing of Singapore’s government and a leading global property investor. The deal was at a net initial yield of 5.5 per cent.

Three thousand IBM staff work at the 10-storey building, on Avenida de America, which was purpose-built for the company in 1989.

It was bought by GIC in 2000 on a sale and leaseback basis.

The block has more than 500,000 sq ft of space above ground and another 200,000-plus sq ft of underground car parking – with 1,000 spaces – and other facilities.

IBM is halfway through a 10-year lease, on an inflation-linked index.

However, it is understood that it is in negotiations with Morgan Stanley to add five years to the term.

Office rents in Madrid have fallen by an estimated 25-30 per cent since their peak during the internet bubble.

But Alfonso Munk, vice-president of real estate for Morgan Stanley in Spain, predicted that rents were ready for a recovery.

“We think we are now at a turning point for the Madrid office market, we are at a point where supply is stabilised and rents have bottomed,” he said.

“Brokers and experts predict rents picking up, particularly in the central business district, where goodquality grade-A space is very limited.”

The two funds were advised by Morgan Stanley and GIC was advised by CB Richard Ellis.

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