Q4 2022 | Industrial Marketbeat | Belgium

2022, a year that was anything but normal

After two years of ups and downs, marked by the COVID-19 pandemic in 2020 and booming economic activity following the post-crisis rebound in 2021, one might have expected somewhat 2022 to be a regular year 2022 was an unusual year from every point of view yet

Economic conditions have suffered throughout the year in the aftermath of the conflict in Ukraine. Europe is significantly impacted due to its reliance on energy imports. To fight soaring inflation, the European Central Bank (ECB) have passed successive rate hikes. While GDP held up well this year, price pressures have reached a high and a recession is looming. As a result, GDP growth is expected to drop to 1.1% in 2023. However, we anticipate just a little slowdown because Europe has already managed to reduce Russian gas imports without disrupting activity and is expected to gain from the same post-pandemic improvements Given the lowered prospects of a major recession and sustained inflation, we now anticipate rises until May, with the ECB peaking at 3%.

Despite remaining above the ECB targets, inflation slowed in the last quarter of 2022 as the economy faltered. However, annual inflation has been revised upwards to a new threshold of 9.74%. According to the most recent forecasts, running inflation will continue in 2023, and the market should suffer a mild recession. Inflation level will decelerate to 7.40% in 2023 before broadly closing in on the ECB’s 2% target from 2024.

Despite a mild recession impacting the Belgian economy, the unemployment rate is expected to decline further next year to 5% before increasing again in the following years, according to Moody’s Analytics’ baseline scenario. Significant job growth is projected in the administration, personal services, and industry-R&D sectors during the next couple of years, while the banking, finance, and insurance sectors are expected to employ fewer people.

GDP Growth, GVA Growth: Industry & Manufactoring And Transport & Communication Inflation rate

BELGIUM

Industrial Q4 2022

Resilient take-up despite challenging market

The semi-industrial take-up has not been able to match the level of 2021 The take-up for the Q4 is 399,000 sq m, bringing the total for 2022 to 1,131,000 sq m. Although 2022 had a lower take-up than 2021, this does not necessarily mean that 2022 was less successful. In this challenging market environment, the market has shown to be quite resilient.

The semi-industrial and logistics markets continues to be impacted by the lack of available buildings. The development of new, high-quality properties has slowed down along with the rise in energy and construction prices, which has impacted the take-up in the fourth quarter.

One of the key transactions for this quarter was a 24,000 sq m letting in for Stow Robotics in Lokeren (East Flanders) The global leader in industrial storage solution has expanded its production on the WDP-site (Ex-DPG Media Services)

The demand for logistic has increased in Q4 with 285,000 sq m, to reach a total of 1,192,000 sq m for 2022. This puts the logistics market back on pre-pandemic levels. Although the high demand remains strong, the stock remains insufficient.

Amongst the largest transactions of Q4 are the development of 60,000 sq m for Gosselin, 48,500 sq m occupied by Easylog and 23,000 sq m occupied by Worldex in Zeebrugge Geen Logistics.

Increase in prime rents

The Belgian semi-industrial prime rent increased to 64€/sq m/year, which is its first increase since 2019. The prime rent has been impacted by a variety of factors, including rising energy expenses, rising land prices, and rising construction costs.

At the same time, the average weighted rent witnessed an increase towards 48€/sq m/year The insufficient stock for high-quality properties has been putting pressure on the existing stock.

Take-up, SQ M

Logistics Semi-Industrial

Semi-Industrial Rents, EUR/SQ M/YEAR

The Belgian logistic prime rent increased for a second time since 2020. Due to the higher demand for high-grade properties, the prime rent increased to 64€/sq m/year. The sustainability remained a key issue for the logistic occupiers throughout the year.

The average weighted rent for Belgian logistic stock has not increased for this year, despite increasing demand for high-quality stock

Logistics Rents, EUR/SQ M/YEAR

Slow quarter despite historical year

In Q4, no notable investment transaction was recorded in both semi-industrial and the logistic markets. Despite the slowdown from Q3 on, the first two quarters showed unprecedented investment volumes.

For 2022, a total of EUR 1 billion has been invested in the logistics market (EUR 750 million), the semi-industrial market (EUR 190 million) and a mix of both (EUR 60 million) Compared to previous years, the investment volumes have largely surpassed the five-year average.

Further prime yield increase

The uncertainty is still present as a result of the current economic situation. With time, the commercial real estate market started to adjust to these conditions, as evidenced by the slowdown in the fourth quarter. The prime yields for semi-industrial and logistic assets have been impacted by the higher interest rates that the European Central Bank decided to implement to combat inflation.

As a result, the prime yields have been revised upwards for the semi-industrial and logistic markets. The semi-industrial prime yield has increased from 5.80% at the end of 2021 to 6.20% (+45 bps) in the end of 2022.

For the logistic market, the prime yield increased from 4% to 4 50% (+50 bps), comparing end 2021 to the end of 2022

Annual Invested Volumes, EUR M

1.000

800

600

400

200

1.200 2018 2019 2020 2021 2022

Logistics Semi-industrial # deals (RHS)

Prime Industrial Yields

8,00%

6,00%

4,00%

2,00%

0,00%

-2,00%

Logistics Semi-industrial OLO-10Y

0

40

30

20

10

50 0

Cédric VAN MEERBEECK

Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 cedric.vanmeerbeeck@cushwake.com

Oscar DE GROOTE

Research Analyst | Research Belgium +32 478 05 38 71 oscar.degroote@cushwake.com

Bart VANDERHOYDONCK

Head of Industrial Agency | Belgium +32 510 08 09 bart.vanderhoydonck@eur.cushwake.com

Michael DESPIEGELAERE

Head of Capital Markets | Belgium & Luxembourg +32 476 82 08 59 michael.despiegelaere@cushwake.com

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

©2022 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

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