M A R K E T B E AT
BRUSSELS Office Q2 2022
YoY Chg
12-Mo. Forecast
130,351
YTD Take-Up (sq m)
Inflation in Belgium climbed again in April and in May 2022. As a result, inflation is currently expected to reach a skyhigh 8.3% for the whole year 2022, before decelerating sharply as from 2023 to finally reach finally the ECB objective of 2% by 2024.
7.67%
Vacancy Rate
Recent political evolutions show no signs of a short-term resolution of the Ukrainian crisis. Furthermore, growing tensions between China and Taiwan could potentially have an important impact on the global economy in the mediumterm. With rising uncertainties, central banks across the globe have taken the decision to increase interest rates to fight inflation, with a negative effect on public debt and a potential negative output for the economy.
€320
Prime rent (€/sq m/year)
3.60% Prime yield
In these challenging times, GDP growth has been revised on the downward and should stand around 2.15% for 2023 and continue to decelerate (though remaining positive) up to 2025. This could potentially weigh on the unemployment rate which is still expected to decrease by the end of 2023 to reach 5% in Belgium before rising again to 5.6% by 2025.
ECONOMIC INDICATORS Q1 2022
2.15%
Inflation still on the rise, though decelerating recently.
YoY Chg
Uncertainties will certainly continue to shape the year 2022. 12-Mo. Forecast
2022 GDP Growth
5.35%
Unemployment rate
GDP GROWTH AND UNEMPLOYMENT RATE
INFLATION RATE
9%
8%
8%
6%
8.30%
Consumer Price Index
7%
4%
6%
2%
5% 4%
0%
Source: Moody’s Analytics and Federal Planning Bureau, June 2022
-2%
Please note the economic data can vary significantly from one source to the other. Therefore, the figures provided should merely be used as an indication or trend.
-4%
3% 2% 1% 0%
-6% 20 16
20 17
20 18
20 19
GDP Gro wth
20 20
20 21
20 22
20 23
20 24
Un empl oymen t Ra te
Sources: Moody’s Analytics, BNB, Eurostat, June 2022
20 25
2016
2017
2018
2019
2020
2021
2022
in fl ation
Sources: Moody’s Analytics and Federal Planning Bureau, June 2022
2023
2024
2025
M A R K E T B E AT
BRUSSELS Office Q2 2022 A calm H1 for the Brussels office market.
TAKE-UP BY QUARTER (000s SQ M) 60 0
In Q2, 52,500 sq m of take-up was recorded on the Brussels office market which is consistent with the five-year quarterly average. Due to the period of uncertainty caused by the war in Ukraine and rising inflation, the occupational market is experiencing hesitation and sluggishness from occupiers.
50 0
2022 as a whole is expected to be a calm straightforward year on the Brussels office market.
20 0
40 0 30 0
10 0
Public and non-profit sectors contribute to 32% of the activity. In Q2, public and non-profit sectors contributed some 16,600 sq m across seven deals, led by the KNOPY 8,200 sq m purchase for own occupation by the Embassy of the Netherlands in the Leopold district, and a 6,200 sq m letting by the SHAPE (NATO) in the Parc de l’Alliance in the Walloon Brabant.
0 20 18
20 19
20 20 Q1
Q2
Q3
20 21
20 22
Q4
PUBLIC AND PRIVATE TAKE-UP (000s SQ M) 60 0
The private sector represents close to 68% of the take-up in the second quarter. Air Belgium and Squire Patton Boggs drove the activity for the private sector with respectively a 3,000 sq m letting in the Axis Office Park in the Walloon Brabant and a 1,500 sq m letting in the Louise Legrand in the Louise district.
Small transactions drive the market. Although take-up is decreasing, the higher number of deals (a 10% increase compared to Q2 21) reflects an undeniably dynamic market, currently based essentially on small transactions. Indeed, 64% of the transactions recorded this quarter were for surfaces of less than 500 sq m. Conversely, only two deals took place for surfaces between 5,000- and 10,000 sq m, which represents just under 3% of the total number of deals recorded. The resurgence of COVID-19 continues to impact the occupational market and the hybrid work trend is here to stay. In addition, record inflation due to the conflict in Ukraine is raising concerns about high indexation of rents, which is why occupiers are opting for smaller but more ecologically efficient office spaces.
50 0 40 0 30 0 20 0 10 0 0 20 18
20 19
20 20 Priva te Pub lic
20 21
20 22
Q2 TAKE-UP BY OFFICE SIZE (SQ M)
0-500
5001,000
1,0002,500
2,5005,000
5,00010,000
Takeup
10,829
7,530
16,865
2,943
14,437
# of deals
48
11
13
1
2
M A R K E T B E AT
BRUSSELS Office Q2 2022 Speculative pipeline required for market to thrive. Although an important development pipeline is foreseen for the coming years, 68% is already pre-let. This shows the interest of occupiers in ESG buildings. For the next three years, more than 140,000 sq m will enter the market on a speculative basis, some of the biggest ones being The Louise in the district of the same name, The Wings in the Airport district, The Luxia in the Centre district or the Montoyer 10 in the Leopold district. The fact that new (re-)developments must be regularly added to the stock to meet occupiers’ demand for ESG is a certainty.
OFFICE PIPELINE (000s SQ M) 25 0 20 0 15 0 10 0 50 0 20 22
20 23
20 24
Pre-l et
In addition to these developments currently under construction, some important projects have or are about to get their building permits and could be launched in the short term. However, rising inflation and construction costs could be a source of delay for some of these.
Vacancy rate on the rise for the next couple of years.
20 26
Avai lab le
VACANCY RATE (%) 10 % 9% 8% 7% 6% 5%
No changes of the prime rents were recorded in H1, it still stands at €320/sq m/year in the Leopold district.
20 25
20 24
20 23
22 H1
20 21
20 20
20 19
20 18
General increase of prime rents awaited in the coming months.
20 17
4% 20 16
At the end of H1, the vacancy rate stands at 7.67%, a slight decrease compared to Q1 2022. Speculative projects, combined to the existing and future subleases and space reductions will lead to further increases of the vacancy rate. By 2023, the vacancy rate could reach 8.3% before experiencing a new decrease as the office market will adapt to its new paradigm. By the end of 2025, the vacancy rate should stand at 8%.
PRIME RENTS (in EUR/SQ M/YEAR) 40 0 35 0 25 0 20 0 15 0 10 0 50
CBD
De central ised
20 24
20 23
20 22
20 21
20 20
20 19
20 18
0 20 17
The other districts should record a similar evolution. In the Louise, Centre and Airport districts, new developments such as The Louise, Chancelier and The Wings tend to drive the rents upwards. Prime rents could reach new levels of €330/sq m/year, €310/sq m/year and €185/sq m/year by 2023 in the Louise, Centre and Airport districts respectively.
30 0
20 16
Due to an intense competition for the best buildings and best locations as well as rents indexation, new and efficient developments could record a rise in their prime rents in the coming years. In the Leopold district, prime rents are expected to reach a new level of €340/sq m/year by the end of 2023.
Peri phe ry
M A R K E T B E AT
BRUSSELS Office Q2 2022 A record quarter for the investment market. In the second quarter of 2022, EUR 1.11 bn has been invested on the Brussels office market. In absolute volume this represents the best Q2 ever recorded, although heavily boosted by one single transaction. Indeed, KB Asset Management, a South Korean investment fund, acquired the North Galaxy. A 627 MEUR transaction, representing more than 55% of the total investment volume in Q2.
OFFICE INVESTMENT VOLUMES BY QUARTER (MEUR) 4,00 0 3,50 0 3,00 0 2,50 0 2,00 0
The second largest deal was the Baloise Assurance’s acquisition of the Royale Belge, a new iconic mixed-use development in the South district.
1,50 0 1,00 0
The increase in interest rates decided by central banks, in order to fight inflation, has led some investors to close their deals early.
50 0 0 20 18
Prime yield stable with a possible rise by the end of 2022. After a period of compression in the past few years, prime yields remain stable in the first half of the year and stands to 3.60% for buildings with standard lease terms. Long-term prime yields still stand at a level of 3.20% and record no further compressions as well in H1.
The war in Ukraine, a decisive factor for the Economy and Real Estate. In February 2022, Russian invasion of Ukraine pushed the already high inflation to a record level in Belgium. If the conflict persists, the global economy could be severely affected. According to Statbel1, inflation continued to rise in June, reaching 9.6%, up from 8.9% in May. Measures taken by central banks to fight inflation, including the increase of interest rates, should have an impact on the prime yields. The office market should adapt to this new economic pressure and although the spread between OLO and yields is narrowing, prime yields are expected to rise by the end of the year. In Central districts, an increase of 10 bps is expected by the end of the year, while in the Decentralised and in Periphery, an increase of 25 bps is expected.
1
https://statbel.fgov.be/en/themes/consumer-prices/consumer-price-index
20 19 Q1
Q2
20 20 Q3
20 21
20 22
Q4
PRIME OFFICE YIELDS IN BRUSSELS (%) 8% 7% 6% 5% 4% 3% 20 15
20 16
20 17
20 18
20 19
20 20
20 21
Q2 22
Ce ntral
De central ised
Peri phe ry
LT Prime
Q4 22
M A R K E T B E AT
BRUSSELS Office Q2 2022 MARKET STATISTICS STOCK (SQM)
AVAILABILITY (SQM)
VACANCY RATE
Q2 2022 TAKE-UP
H1 2022 TAKE-UP
UNDER CONSTRUCTION (SQM)
PRIME RENT (€/sq m/year)
PRIME YIELD
Brussels (Leopold)
3,372,958
123,339
3.66%
12,304
19,325
91,294
€320
3.60%
Brussels (Centre)
2,469,552
106,756
4.32%
4,470
25,427
77,643
€260
3.90%
Brussels (North)
1,645,608
117,822
5.46%
-
-
91,505
€230
4.90%
Brussels (Louise)
875,282
40,749
4.66%
7,537
12,739
32,600
€275
4.10%
Brussels (Midi)
605,903
14,690
2.42%
1,096
1,096
-
€195
5.25%
Brussels (Decentralised)
2,580,797
294,333
11.40%
5,125
14,274
78,000
€200
6.25%
Brussels (Periphery)
2,166,419
383,567
17.71%
23,168
57,490
83,983
€175
6.00%
13,716,519
1,081,256
7.67%
52,604
130,351
455,025
€320
3.60%
SUBMARKET
Brussels (Overall)
CÉDRIC VAN MEERBEECK Head of Research and Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com
KEY LEASE TRANSACTIONS Q2 2022 PROPERTY
SUBMARKET
TENANT
SQ M
TYPE
Leopold
Embassy of the Kingdom of the Netherlands
8,200
Purchase
Parc de l’Alliance
Walloon Brabant
Shape (NATO)
6,237
Letting
Axis Parc
Walloon Brabant
Air Belgium
2,943
Letting
Lola Liza
1,600
Letting
K-NOPY
Place du Samedi Centre *Renewals not included in leasing statistics
BENJAMIN DEVIE Research Analyst | Belgium & Luxembourg +32 495 11 35 10 benjamin.devie@cushwake.com
KEY INVESTMENT TRANSACTIONS Q2 2022 PROPERTY
SUBMARKET
SELLER / BUYER
Volume (in MEUR)
North Galaxy
North
KB Asset Managment / ATP & AXA
627
Royale Belge
South
Baloise / Cores, Urbicoon, APE, Foresite
158
Proximus Towers K-NOPY Twin Square
North
Immobel / Proximus
93.45
Leopold
Embassy of Netherlands / Eaglestone
78.25
Ariport
MiDEAL Group / Limestone
25
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