BRUSSELS
Office Market Snapshot Fourth Quarter | 2018
Overview
MARKET INDICATORS
Annual GDP growth in Belgium weakened to 1.4% in 2018 and, despite rising geo-political uncertainties, is forecasted to slightly increase in 2019 to 1.5%. The unemployment rate was at 6.3% in Q4 and is expected to remain at this level throughout 2019. Interest rates are also expected to remain unchanged, at least up to the end of 2019 as announced by the ECB.
Market Outlook Prime Rents:
Prime rents increased in Q4 to 315€/sq m/year and are expected to remain stable throughout 2019.
Prime Yields:
Prime yields compressed further to record low levels at 4.25% and are anticipated to stabilise in 2019.
Supply:
Important pipeline is scheduled for 2019, both speculative and committed. Vacancy in less qualitative office spaces is likely to increase due to relocations.
Demand:
Occupier focus
Significant demand is forecasted, especially in the CBD and the Airport district. Demand in 2019 will be mainly boosted by the public sector.
Prime Office rents – December 2018 LOCATION
€ SQ.M YR
US$ SQ.FT YR
Brussels (Leopold)
315
33.4
3.3
2.8
Brussels (Centre)
275
29.1
5.8
6.6
Brussels (Decentralised)
185
19.6
-2.6
0.0
185
19.6
0.0
3.6
155
16.4
3.3
CURRENT Q
LAST Q
LAST Y
10 YEAR HIGH LOW
Brussels (Leopold)
4.25
4.30
4.40
6.30
4.25
Brussels (Centre)
4.60
4.80
4.80
6.50
4.60
Brussels (Decentralised)
7.25
7.25
7.40
8.10
6.70
7.25
7.25
7.25
8.25
6.70
6.75
6.75
6.75
7.50
6.75
Brussels (Periphery North – Airport) Brussels (Periphery South – Walloon Brabant)
GROWTH % 1YR 5YR CAGR
Prime Office yields – December 2018 LOCATION (FIGURES ARE GROSS, %)
Brussels (Periphery North – Airport) Brussels (Periphery South – Walloon Brabant)
NOTE: The above yields are for typical 3/6/9 leases. With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property.
Recent performance Yield - Prime Rental Growth - Country Average
8,00%
15,0%
7,00%
10,0%
6,00%
5,0%
5,00%
0,0%
4,00% 3,00%
déc-08 déc-10 déc-12 déc-14 déc-16 déc-18
-5,0%
Rental growth (y/y)
Yields
Yield - Country Average Rental Growth - Prime
The presumption that 2018 would be a weak year in terms of take-up no longer holds thanks to better-than-expected activity in Q4 which recorded 130,000 sq m. The total for the year amounts to 367,000 sq m, still an 8% decrease compared to last year. Co-working operators contributed close to 20% of the total take-up in 2018 (fourteen deals). WeWork recorded the largest take-up activity of Q4 with almost 14,000 sq m (two deals) followed by SilverSquare with 10,500 sq m (one deal). The vacancy rate in Q4 fell to 7.98%, its lowest level in 17 years. Availability will start to increase again due to the delivery of partly empty speculative developments in 2019. This will negatively affect the vacancy level in grade A buildings, which currently stands at 34,000 sq m, or around 3% of the total vacancy. Nevertheless, the numerous projects in the pipeline should also increase the number of pre-letting transactions. As anticipated, prime rents in Brussels increased before the end of the year to 315€/sq m/year. Q4 saw an increase in prime rents for the three most important central districts of the capital (Leopold, Centre and North).
Investment focus
Around 380 MEUR has been invested in Q4, bringing the total for the year in Brussels to 1.9 billion EUR, the best year since 2007. With notable transactions such as the Egmont, the Passport and The One, 70% of the total investment volume came from foreign investors. Demand remains relatively strong but the growing lack of products for sale in the market can still be observed. Prime yields compressed further to a historically low level of 4.25%. The long-term prime office yield remains at 3.65%.
Outlook
In terms of occupier activity, 2019 is expected to be a successful year with take-up exceeding 400,000 sq m, mainly boosted by public bodies actively looking to relocate. Although a significant pipeline will be delivered in 2019, the investment volume is unlikely to exceed this year’s level due to the increasing lack of assets in the market. Prime yields for 2019 are expected to remain stable throughout the year at 4.25%. cushmanwakefield.com
BRUSSELS
Office Market Snapshot Fourth Quarter | 2018
LOCATION
BUILT STOCK
AVAILABILITY
VACANCY RATE
TAKE-UP Q4 18
TAKE-UP 2018
2019 – 2022 UNDER CONSTRUCTION
(SQ.M)
(SQ.M)
(%)
(SQ.M)
(SQ.M)
(SQ.M)
Brussels (Leopold)
3,338,082
150,749
4.5%
26,119
85,728
59,904
Brussels (Centre)
2,457,611
107,286
4.4%
14,679
60,339
187,965
Brussels (North)
1,470,085
54,718
3.7%
29,477
56,546
206,572
Brussels (Louise)
861,498
61,962
7.2%
13,573
23,469
3,500
Brussels (Midi)
571,446
51,272
9.0%
6,475
8,672
8,620
2,710,888
361,738
13.3%
7,315
65,967
20,579
1,628,880
268,599
16.5%
28,654
44,950
0
Brussels (Decentralised) Brussels (Periphery North – Airport & Ring) Brussels (Periphery South – Walloon Brabant) Brussels (Overall)
429,396
18,390
4.3%
3,674
21,452
25,548
13,467,886
1,074,714
7.98%
129,966
367,123
512,688
Source: Cushman & Wakefield
Key Occupier Transactions PROPERTY
SUBMARKET
TENANT
SIZE
TRANSACTION
(SQ.M)
TYPE
10,500
Pre-letting
Quatuor Building
North
SilverSquare
Belmont Court
Leopold
WeWork
7,000
Letting
Botanic Tower
North
Alpha Crédit
7,000
Letting
Brederode Corner
Centre
McKinsey & Company
7,000
Pre-letting
Light-On
Leopold
WeWork
6,405
Pre-letting
SUBMARKET
SELLER / BUYER
YIELD
Source: Cushman & Wakefield
Key Investment Transactions PROPERTY
PRICE € MILLIONS
The One
Leopold
Atenor / Deka
Tour de l'Hopital
Centre
Tetis / Arax Properties & Quilvest
C71
Leopold
Patrizia / M&G Real Estate
Moulin à Papier & Serenitas
South
Cofinimmo / BPI
65 4,5%
40 27
Arts 27
Leopold
Patrizia / Cofinimmo
Connexion Building
Ring
AXA REIM / Growners
4,75%
20
20
Woluwe Atrium
North-East
M&G Real Estate / Eaglestone
18
Arts 44
Leopold
Schroders / CastelForge Partners
16
Source: Cushman & Wakefield, Real Capital Analytics
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. ©2019 Cushman & Wakefield LLP. All rights reserved.
Cédric Van Meerbeeck
Head of Research Belgium & Luxembourg Avenue des Arts 56, 1000 Brussels Tel: +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com cushmanwakefield.com