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Barcelona's Housing Boom Prompts Concerns of a Technology Bust

Meire Sayuri moved to Barcelona from Brazil to train as an architect, attracted by the city's reputation as a center for design. She left after three years, because she couldn't afford her own place to live.

``Barcelona's a great city really, the only problem is the work,'' says Sayuri, 29, who earned about 21,000 euros ($28,500) a year. ``People have to share an apartment till they're 40, and it gets to the point where you can't do that anymore.''

Barcelona's effort to transform itself into a hub for software, computers and design rivaling the U.S. West Coast may be jeopardized as the rising cost of living outstrips salary gains. Housing prices have jumped 43 percent in the past three years, compared with a 9.5 percent increase in average wages.

The city has attracted employers such as Yahoo Inc., Microsoft Corp. and Hewlett-Packard Co. to a neighborhood called 22@, until recently a collection of abandoned warehouses and obsolete factories. Barcelona began redeveloping the area seven years ago, installing fiber-optic cables and relaxing planning rules to permit a mix of housing, offices and related factories. The plan is expected to create as many as 130,000 new jobs.

``When they ask who we want to be compared with, I'm looking toward Seattle or San Francisco,'' says Deputy Mayor Jordi Carnes. ``They have this combination of technology, universities, tourism, quality of life and entrepreneurs.''

Yet wages haven't kept pace with living costs because demand for new jobs still outweighs supply, with unemployment running at 15 percent among Spaniards age 20-29. While 22@ has generated about 4,300 new jobs a year since 2000, Barcelona's universities produce 40,000 graduates annually, according to city hall.

Agbar Tower

The name 22@ combines article 22 of the city's old industrial land-use law and the @ symbol to signify the shift to new technology.

At the edge of the district stands Agbar tower, a 34-story symbol of Barcelona's ambition. The building is headquarters to Sociedad General de Aguas de Barcelona SA, the local water company that has branched out into health care and vehicle inspection while making acquisitions in the U.K. and Denmark.

The building is clad in aluminum plates to protect it from the heat. Its form, resembling a jet of water shooting into the sky, is a tribute to the city's genius of modern architecture, Antoni Gaudi, says architect Jean Nouvel. On every floor Nouvel placed a floor-to-ceiling window looking out across the rooftops to Gaudi's sinuous cathedral, the Sagrada Familia.

Barcelona's design culture combined with technological and business expertise persuaded Hewlett-Packard to make the city its global headquarters for graphic arts, where it designs and markets printers for building-sized advertising posters.

Cheap Labor

``We're here today because of the ease of attracting people with talent and the quality of people coming out of universities,'' says Enrique Lores, chief executive officer of HP's inkjet unit in Barcelona.

Companies have also come to Barcelona in search of cheaper labor costs. A computer programmer earns about 30,000 euros a year in Barcelona, a third less than in France, says Albert Esplugas, the local director for Microsoft.

The gap between wages and housing prices is undermining Barcelona's ability to attract talent and crimping the ambitions of many who do come. A two-bedroom apartment in the cheapest part of town now costs 12 times the 20,000-euro average salary.

``This is one of the weak points,'' Esplugas says. ``This will be a real handicap for Barcelona.''

Also for workers such as Pau Soler, an HP engineer with a doctorate from Paris University.

``It stresses a lot of people out,'' says Soler, 32. ``You have to get a mortgage and then you can't take the risk of setting up a business.''

High-Flying Freelancers

Entrepreneurs and freelancers have benefited most from Barcelona's aspirations.

Lo Iocano, a digital animator who moved from Frankfurt last year, makes 300 euros to 500 euros a day as a freelancer. A local design studio tried to hire him at 1,100 euros a month for a 50- hour week.

Iocano, 30, works on accounts across Europe, including Molvena, Italy-based Diesel SpA's jeans brand, yet he, too, may leave Barcelona.

He is plugged into Barcelona's thriving design scene, which is making waves as far away as New York. Psy-Op, the Manhattan studio that designed ads for AT&T Inc., Coca-Cola Co. and Nike Inc., set up a network of seven studios around the world to feed it fresh ideas. Three are in Barcelona.

``Barcelona is a network city,'' Iocano says. ``It's crazy how fast you build your connections. I live three times faster than I did in Frankfurt.'' He plans to use that network to make the jump to New York or Asia in a few years.

It isn't just the world's leading business centers that can drain the city's talent.

Sayuri was lured away by an architecture firm in Manchester, England, that offered to double her salary, allowing her to rent her own place.

``It's boring and rainy and there aren't many restaurants or bars,'' she says. ``But I feel like a grown up finally.''

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

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