Otamendi signed for City from Valencia in a £32 million deal in August 2015. He remains well-regarded in Spain, and the 29-year-old's agent, Martin Sendoa, refused to rule out a return to La Liga, per Radio Continental (h/t Jon Fisher of Goal).
"Nico is happy at Manchester City. But who wouldn't like to play at Real Madrid? It's the biggest club in the world," Sendoa said.
"Pepe is leaving Real Madrid and Otamendi fits the profile they are looking for. Jorge Mendes [Cristiano Ronaldo's agent] is managing Otamendi in Europe. Barcelona have also followed him since he was at Valencia."
Otamendi has arguably struggled to adapt to the pace and high-octane demands required in the Premier League since his move from the Mestalla Stadium.
Ben Nagle of Sky Sports noted after his switch to England that the defender would "slot straight in to the City back line" as he was a player "at the peak of his powers."
He was signed by former City boss Manuel Pellegrini and endured a disappointing first season at the club. However, he has shown some improvement this season under Pep Guardiola, who has started him in 19 of City's 25 league matches, per Transfermarkt.
In Spain, Otamendi enjoyed a fine campaign with Valencia and had a knack of getting goals, scoring six times in the 2014-15 season. But that threat from set pieces hasn't transferred to City, and he has netted just once over two seasons in Manchester.
While Guardiola may expect a little loyalty for showing his faith in the centre-back, it would be no surprise if the lure of another stint in Spain appealed to Otamendi, particularly should one of the top two follow up on the reported interest.
If Zidane were to capture Otamendi, it is likely he'd be used to provide cover behind Sergio Ramos and Raphael Varane rather than as first choice at the Santiago Bernabeu. His style is perhaps better suited to Spanish football than the Premier League, and he would reasonably expect to readjust quickly.
Otamendi has a commanding aerial presence and is comfortable on the ball—a big requirement for Guardiola as he continues to mould City into his preferred, possession-based playing style.
But it's likely the former Barca boss would be helpless if the Argentina international with 40 caps to his name were to opt to call time on a somewhat underwhelming career in England.