M A R K E T B E AT
LUXEMBOURG Office Q1 2022
YoY Chg
12-Mo. Forecast
71,257
YTD Take-Up (sq m)
Luxembourg inflation hits all-time high. The consumer price index in Luxembourg is forecasted to climb to 6.04% in 2022, a record peak. In February 2022, the Russian invasion of Ukraine pushed global energy prices sky-high. With the conflict showing no signs of ending, and EU restrictive measures against Russia, energy prices will continue to drive inflation in Luxembourg. Combined with the fact that consumer spending is set to increase after a record year of saving, inflation is set to rise.
52
Prime Rent, (EUR/sq m/ month)
3.99%
Vacancy Rate
A period of uncertainty is taking place with the crisis in Ukraine and if it continues, Luxembourg’s economic growth could be affected.
3.40%
Rising growth and falling unemployment rate.
ECONOMIC INDICATORS Q1 2022
Luxembourg’s economy is forecasted to grow 2.71% in 2022. This is expected to slow down and stabilise at 2.48% for the next year and slow down further to 1.76% in 2024. This growth is associated with a decrease of the unemployment rate. Due to the fact that an important quantity of previously temporarily unemployed individuals have returned to the workforce in early 2022, the unemployment rate decreased to a level of 4.67% in the first quarter. However, it should be expected to increase further and stabilise around 4.90% by the end 2022 and 5.01% in 2023.
Prime Yield (3/6/9 Lease)
4.67%
YoY Chg
12-Mo. Forecast
Unemployment Rate
2.71%
2022 GDP Growth
6.04%
Consumer Price Index
Source: Moody’s Analytics, STATEC Lux, Eurostat 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.
GDP GROWTH AND UNEMPLOYMENT RATE
INFLATION RATE
8%
7%
6%
6%
4%
5%
2%
4%
0%
3%
-2%
2%
-4%
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
20 25
2016
2017
2018
2019
2020
2021 in fl ation
2022
2023
2024
2025
M A R K E T B E AT
LUXEMBOURG Office Q1 2022 Q1 letting activity in line with the five-year average.
Take-up (in 000s sq m, LHS) & number of deals (RHS) 40 0
25 0
30 0
20 0
25 0 20 0
15 0
15 0
10 0
10 0
50
50
Q1
An important development pipeline is foreseen for the coming years. In 2022 alone, more than 115,000 sq m will enter the market, with 85,000 sq m on a speculative basis, the biggest additions being the Connection in Hamm and the Am Bann Business Center C in Leudelange. In the longer term, another 180,000 sq m are under construction and could enter the market (partially) vacant. In addition to these developments currently under construction, some important projects have- or are about to get their permits and could be launched in the short term. However, the crisis in Ukraine, rising inflation and construction costs could be a source of delay for some of these.
Q2
Q3
20 22
20 21
72% of the pipeline for 2022 is currently available.
20 20
0 20 19
0 20 18
The recent conflict in Ukraine has a more limited impact on the occupational market than the COVID-19 outbreak in 2020. This quarter, we recorded 26,000 sq m more take-up than in Q1 2020.
30 0
35 0
20 17
In Q1, 71,250 sq m of take-up was recorded on the Luxembourg office market, which is consistent with the five-year quarterly average. Despite the period of uncertainty due to the war in Ukraine, activity on the occupational market remains stable. PwC confirms the 33,000 sq m pre-letting of the Project Renault in the Cloche d’Or, which represents 46% of the total take-up in only one transaction.
Q4
# De als
Awaited new supply (000s sq m, LHS) & Vacancy rate (RHS) 25 0
4.50 %
20 0
4.00 %
15 0
3.50 %
10 0
3.00 %
50
2.50 %
At the end of Q1, the vacancy rate stood at 4%, a slight decrease compared to Q4 2021. Speculative projects, combined to the existing and future subleases and space reductions will lead to increases of the vacancy rate. By 2023, the vacancy rate could reach 4.3% before experiencing a new decrease thanks to a robust activity observed on the occupational market. By the end of 2024, the vacancy should stand at 4.2%.
0
2.00 % 20 20
20 21
De live red
20 22
20 23
20 24
Awa ited ne w supp ly
Vaca ncy rate
Prime and average rents (EUR/sq m/month)
The other districts should follow a similar evolution.
CBD Station Oth er inn er districts Peri phe ry
Kirch berg Cl oche d 'Or De central ised
20 22
20 21
20 20
20 19
20 18
20 17
As market activity is expected to remain high in the coming months coupled with low overall vacancy rates, prime rental levels are forecasted to witness upward movements in the coming months and years. In the CBD, prime rents are expected to rise in the coming months to reach €53/sq m/month by 2023 and could even reach €55/sq m/month in 2025.
20 16
No changes of the prime rents were recorded in Q1, it still stands at €52/sq m/month in the CBD.
55 50 45 40 35 30 25 20 15 20 15
General increase of prime rents awaited in the coming years.
M A R K E T B E AT
LUXEMBOURG Office Q1 2022 Total invested volumes by quarter (MEUR) 2,50 0
1,50 0 1,00 0 50 0 0
Prime yields stable at 3.40%.
Indeed, according to Moody’s Analytics, if the war drags on, global economic growth could be reduced by 1% and inflation increased by a further 2.5% in the coming months.
20 21
20 22
Q4
Office deals by size (LHS) and average size (MEUR, RHS) 10 0%
10 0 80
60 %
60
40 %
40
20 %
20
0%
0
Under €10m €50-100m Avera ge size
€10-20m €100-200m
20 22
80 %
20 21
In February 2022, the Russian invasion of Ukraine has had an exacerbating effect on the high level of inflation to a record level in Luxembourg. If the conflict persists, the global economy could be severely affected.
20 20 Q3
20 20
Impact of the War in Ukraine
Q2
20 19
Although competition for the best assets is increasing and generally applying pressure on yields, rising construction costs and interest rates limited the compression of prime yields this quarter.
20 19
20 18
All the other districts preserved their prime yields in Q1, ranging from 5.75% in the Periphery to 3.60% in the Kirchberg.
20 18 Q1
20 15
After a period of compression in the past few years, prime yields remain stable since last quarter and are at 3.40% for buildings with standard lease terms in Q1.
20 17
20 17
In the first quarter of 2022, roughly 320 MEUR has been invested in the Luxembourg office market, which is in line with the five-year average. The two most important transactions were the sale of the Icône, building located in the Periphery, by Besix to AG Real Estate and the sale of the Titanium, redevelopment located in the Cloche d’Or, by Nextensa to Codic for 145 MEUR and 110 MEUR respectively, representing almost 80% of the total invested volume during Q1.
2,00 0
20 16
A regular level of investment activity in Q1.
€20-50m €200m+
Prime office yield evolution 6% 5% 4% 3% 2% 1% 0%
Prime
OLO 1 0y.
20 25
20 24
20 23
20 22
20 21
20 20
20 19
20 18
20 17
20 16
-1% 20 15
The different scenarios forecast a rise in government bonds from 0.6% to 2.2% by the end of 2025, therefore narrowing the spread between government bonds and office yields. However, prime office yields are expected to be more resilient and should stabilise or witness only a slight increase in the coming years.
M A R K E T B E AT
LUXEMBOURG Office Q1 2022 MARKET STATISTICS SUBMARKET
STOCK (SQM)
AVAILABILITY (SQM)
VACANCY RATE
Q1 2022 TAKE-UP
CBD
CURENTLY UNDER CONSTRUCTION (SQM)
PRIME RENT (EUR/sq m/month)
PRIME YIELD
870,500
16,000
1.80%
5,400
20,000
€52
3.40%
1,360,000
13,700
1.01%
4,700
130,000
€41
3.60%
Station
424,500
11,200
2.64%
2,100
18,000
€36
3.90%
Cloche d’Or
477,000
10,200
2.14%
41,000
24,000
€35
3.90%
Other inner districts
259,000
15,600
5.27%
525
21,500
€33
5.00%
Decentralised districts
468,000
44,000
9.05%
3,850
56,500
€28.5
5.50%
Periphery
590,000
59,000
9.00%
13,100
164,000
€25.5
5.50%
4,458,000
175,000
3.99%
71,257
444,000
€52
3.40%
Kirchberg
Luxembourg (Overall)
KEY LEASE TRANSACTIONS Q1 2022 PROPERTY
SUBMARKET
TENANT
Project Renault
Cloche d’Or
PwC
SIZE (SQ.M) TRANSACTION TYPE 33,027
Coboluxcenter
Periphery
Cobolux
3,436
Purchase
Emerald
Cloche d’Or
Confidential
3,080
Pre-letting
Pre-letting
Cosy
CBD
Gopuff
2,819
Letting
Terres Rouges
Periphery
Ministère de l’Education
2,733
Letting
SEBASTIEN BEQUET Head of Luxembourg +352 27 21 33 07 sebastien.bequet@cushwake.com BENJAMIN DEVIE Research Analyst | Belgium & Luxembourg +32 492 11 35 10 benjamin.devie@cushwake.com
*Renewals not included in leasing statistics
KEY INVESTMENT TRANSACTIONS Q1 2022 PROPERTY
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com
cushmanwakefield.com
SUBMARKET
SELLER / BUYER
YIELD
PRICE € MILLIONS
Icône
Periphery
Besix RED / AG Real Estate
4.50%
145
Titanium
Cloche d’Or
Nextensa / Codic
-
110
Monnet 4
Kirchberg
Nextensa / Edmond de Rothschild REIM
3.90%
54
Pasteur 8-12
CBD
Credito Emiliano / Northbridge
-
15
A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 50,000 employees in over 400 offices and approximately 60 countries. In 2021, the firm had revenue of $9.4 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. ©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.