M A R K E T B E AT
BRUSSELS Office Q4 2021
YoY Chg
12-Mo. Forecast
438,510 YTD Take-Up (sq m)
7.65%
Belgium GDP growth beats forecasts. In the last quarter of 2021, economic growth increased to 5.85% which means that for the first time since the outbreak of the COVID-19 pandemic, the pre-crisis level of economic activity was reached and even exceeded. Growth levels should stabilise to 2.21% in 2022 and 2.63% in 2023. The unemployment rate peaked at 6.36% in the last quarter and should be expected to decline and stabilise around 5.52% in 2022 and 5.23% in 2023. It is expected that a lot of temporarily unemployed people will resume work in the early of 2022 or will be able to find new jobs.
Vacancy Rate
€320
Prime rent (€/sq m/year)
Inflation on the rise in 2022.
3.60%
Core inflation in Belgium stands at 2.44% in the last quarter of 2021. It is projected at 4.21% in 2022 and 1% in 2023. This is due to the fact companies are confronted with rising commodity prices which puts pressure on the price paid by the end consumer. Combined with the fact that consumer spending is set to increase after a record year of saving, inflation is set to rise.
Prime yield
ECONOMIC INDICATORS Q4 2021 YoY Chg
12-Mo. Forecast
5.85% 2021 GDP Growth
6.36% 2021 Unemployment rate
2.44% Consumer Price Index Source:Moody’s Analytics, BNB, Eurostat, January 2022 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.
After having increased sharply from May to September 2021 on the back of a successful vaccine rollout in Belgium, along with the relaxing of constraining measures surrounding COVID-19, consumer confidence index is again on the downside since October. The Belgian population is more cautious namely due to the different variants of the COVID outbreak and growing energy prices. GDP GROWTH AND UNEMPLOYMENT RATE
INFLATION RATE
10%
4.50%
8%
4.00%
6%
3.50%
4%
3.00%
2%
2.50%
0%
2.00%
-2%
1.50%
-4%
1.00%
-6%
0.50% 0.00%
-8% 2015
2016
2017
2018
GDP Growth
2019
2020
2021
2022
2023
2024
2015
2016
2017
2018
2019
2020
2021
Unemployment Rate inflation
Sources: Moody’s Analytics, BNB, Eurostat, January 2022
Sources: Moody’s Analytics, BNB, Eurostat, January 2022
2022
2023
2024
2025
M A R K E T B E AT
BRUSSELS Office Q4 2021 A remarkable quarter for the office market.
TAKE-UP BY QUARTER (000S SQ M) 600
After a shaky Q3 where occupiers were in a wait-and-see position, much was expected in Q4 as far as take-up was concerned. In the last quarter, nearly 190,000 sq m of take-up was recorded on the Brussels office market which is the best Q4 in 12 years. This brought the total for 2021 to 438,500 sq m. In 2021, the Brussels office market recovered from the impact of the pandemic outbreak thanks to a spectacular end-of-year rush, where one third of the take-up was recorded in the last two months.
500 400 300 200
However, in terms of number of deals, the COVID-19 outbreak still weighs on the activity as 328 transactions were recorded this year, which is 14% less than the annual average before the pandemic.
100 0 2015
Small transactions drive the market.
2016
2017 Q1 Q2
2018 Q3 Q4
2019
2020
2021
DISTRIBUTION OF # TAKE-UP DEALS BY SIZE SINCE 2020
Despite the impact of homeworking and space reductions, the office market had one of its most active years.
1% 6% 4% 11%
Over the last two years, nearly 80% of transactions have been realised for surfaces inferior to 1,000 sq m. The COVID-19 outbreak continues to impact the occupational market and the hybrid work trend is here to stay. This trend leads to space reductions, with most occupiers nearing a break, opting for smaller offices.
58% 20%
Belgian administration contributes 25% of the activity. 0-500
The Buildings Agency confirmed the acquisition of the 34,000 sq m Möbius II and of the 14,000 sq m Networks Nor, both projects located in the North district on Boulevard Albert II. This represents 25% of Q4 total take-up in only two transactions.
500-1000
1000-2500
2500-5000
5000-10000
10000+
PUBLIC AND PRIVATE TAKE-UP (000S SQ M) 600 500
Another notable transaction was the temporary move of Proximus into the Boréal Tower, to occupy 37,486 sq m during the renovation of the Proximus Towers, which is set to become a mix-used project in 2025. Overall, these three transactions amount for 45% of take-up in Q4. The biggest deals of Q4 took place in the North district which shows tangible interest in the area and a will to redevelop the district, both from public authorities and private companies.
400 300 200 100 0 2015
2016
2017 2018 2019 Private Public
2020
2021
M A R K E T B E AT
BRUSSELS Office Q4 2021 Important pipeline under construction for 2022, 76% currently pre-let.
OFFICE PIPELINE (000s sq m) 250
An important re-development pipeline is taking shape for the coming years. For 2022 alone, nearly 200,000 sq m are currently under construction, with 46,500 sq m still available. In the longer term, another 250,000 sq m are under construction and building permits have been delivered for 290,000 sq m. Brussels’ office stock should stand to 14,500,000 sq m by the end of 2026.
200 150 100 50
In 2021, 80% of the projects under construction were pre-let. Thanks to this trend, the impact of the new deliveries on the vacancy rate is weaker than expected.
0 2022
2023 Pre-let
Vacancy rate on the rise for 2022. At the end of 2021, the vacancy rate stands at 7.65%, a slight decrease compared to Q3 2021. In the short term, the vacancy rate should rise because of new offices arriving empty on the market as well as occupier space reductions. During 2022, the vacancy rate should reach 8.5% 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%.
2024 Available
2025
2026
VACANCY RATE (%) 12% 10% 8% 6% 4%
Prime rents general increase awaited in the coming years. Despite the high level of activty, most districts preserved their prime rents. The North district however saw an increase in its prime rent from €225/sq m/year to €230/sq m/year in Q4 with Ageas letting 5,000 sq m in the Manhattan Center and a 3,800 sq m lettin in the Quatuor by Sopra. The district is undergoing major facelift. For the overall market, a general increase is expected in the coming years. In the Decentralised districts, prime rents rose to €200/sq m/year thanks to different transactions recorded in the Royale Belge which is set to become a new iconic mixed-use development by 2023. In the Periphery, new developments such as The Wings tend to drive the rents upwards. They could reach €185/sq m/year by the end of 2022 and even €195/sq m/year by 2025 – against €175/sq m/year currently.
2% 0%
PRIME RENTS (in €/sq m/year) 350 300 250 200 150
CBD
Decentralised
Periphery
M A R K E T B E AT
BRUSSELS Office Q4 2021 An outstanding quarter for the investment market.
OFFICE INVESTMENT VOLUMES BY QUARTER (MEUR) 4,000
In the last quarter of 2021, EUR 1.10 bn has been invested in the Brussels office market, which is one of the best last quarters ever. The most important transactions were the sale of the Astro Tower by FG Asset Management to Union Investment Real Estate and the sale of Möbius II by Immobel to the Buildings Agency for 238 MEUR and 216 MEUR respectively, representing 41% of the total invested volume during Q4. This brings the total investment volume to EUR 2.28 bn in 2021. Indeed, the high investment volume recorded in Q4 was boosted by the Buildings Agency, which has adapted its real estate program in Belgium by considering purchases for own occupation when the opportunity is right.
3,500 3,000 2,500 2,000 1,500 1,000 500 0
Prime yield compresses to 3.60%.
2015
2016
2017 Q1
Investors’ interest in core assets was confirmed in H2. Due to this intense competition for core assets, prime yields recorded a further compression to a new level of 3.60% for products with 3/6/9 leases. In the longer term, it is expected that in 2022 the prime yield will continue to drop to 3.50% and the longterm prime yield, standing at 3.20% in the end of 2021, is expected to drop to 3.15% as soon as next year.
2018
Q2
Q3
2019
2020
Q4
PRIME OFFICE YIELDS IN BRUSSELS (%) 6% 5%
As expected in the last quarter, and conversely to other European cities where an increase of prime yields in the coming 12- to 24 months is expected, Brussels should be more resilient with a forecasted prime yield at 3.50% up to the end of 2023.
4%
Outlook: Towards a “greener” office market.
1%
3% 2%
0%
A trend emerges from the figures recorded this year, this is the rush for green and ecological buildings. This trend should profoundly alter the market, and force developers and investors to make their buildings ESG proof. In the coming years, the vacancy rate could explode among obsolete buildings.
-1%
Prime
LT Prime
10y. Bond
2021
M A R K E T B E AT
BRUSSELS Office Q4 2021 MARKET STATISTICS UNDER CONSTRUCTION (SQM)
PRIME RENT (€/sq m/year)
PRIME YIELD
80,275
75,646
€320
3.60%
63,980
157,643
€260
3.90%
103,632
114,219
91,505
€230
4.90%
4.59%
10,984
21,974
28,000
€275
4.10%
20,481
3.38%
3,800
4,040
-
€195
5.25%
2,594,098
286,564
11.05%
18,823
56,495
50,000
€200
6.25%
2,171,171
400,351
18.44%
24,134
97,527
52,183
€175
6.00%
13,767,486
1,052,878
7.65%
189,814
438,510
454,977
€320
3.60%
STOCK (SQM)
AVAILABILITY (SQM)
VACANCY RATE
Q4 2021 TAKE-UP
TAKE-UP 2021 YTD
Brussels (Leopold)
3,382,669
124,865
3.69%
18,336
Brussels (Centre)
2,492,755
97,787
3.92%
10,105
Brussels (North)
1,645,608
82,616
5.02%
Brussels (Louise)
875,282
40,214
Brussels (Midi)
605,903
Brussels (Decentralised) Brussels (Periphery)
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 Q4 2021 PROPERTY
SUBMARKET
TENANT
SQ M
TYPE
Boreal
North
Proximus
37,486
Letting
Möbius II
North
Buildings Agency
34,000
Purchase
Networks Nor
North
Buildings Agency
14,000
Purchase
*Renewals not included in leasing statistics
BENJAMIN DEVIE Research Analyst | Belgium & Luxembourg +33 6 29 45 32 81 benjamin.devie@cushwake.com
KEY INVESTMENT TRANSACTIONS Q4 2021 PROPERTY
SUBMARKET
SELLER / BUYER
Volume (in MEUR)
Yield
Astro Tower
Leopold
FG Asset Management / Union Investment Real Estate
238
3.25%
North
Fidentia / Buildings Agency
216
-
Môbius II Stephanie Square
Louise
AG Real Estate / KGAL Investment
150
-
Tweed Building
Centre
AG Real Estate / BNP Paribas REIM
112
-
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