M A R K E T B E AT
Luxembourg Office Market Office Q4 2020 Economic Overview YoY Chg
12-Mo. Forecast
352,000 Take-Up sq m
The GDP growth is to fall by 3.5% in 2020 (revised from a sharp 6.2% in Q2), as a result of the COVID-19 outbreak. Domestic demand declined due to lower private consumption. Investment will recover gradually during 2021 and 2022. For 2021, a rebound in GDP growth to 4% is expected. Unemployment rate rose to 6.4% (coming from 5.6% in 2019) and should continue to rise to 6.8% despite a growth in employment of around 2% to reach more than 482,000 workers in Luxembourg in 2021.
Occupier Focus
€52
Q4 recorded an exceptional 176,000 sq m of take-up (mainly helped by the 52,000 sq m pre-letting of the CNS in the Station and the 65,000 sq m pre-letting of the EIB in the Kirchberg). Overall, despite a second consecutive decrease in terms of number of deals, the take-up reached a historic 352,000 sq m for the whole 2020. This is especially good considering the turbulent conditions faced in 2020. This, furthermore, shows the strengths of this small office market and its resilience during economic uncertainties. 55% of the yearly take-up has been created by the public sector, both national and European. The vacancy rate for the overall market is currently at 3.50% while the CBD and the Kirchberg still record a vacancy rate below 2% and the Periphery below 7%. A new increase of the prime rental values have been observed in Q4 to stand at 52€/sq m/month in the CBD and at 39€/sq m/month in the Kirchberg. Prime rents in the Cloche d’Or district increased for the second time of the year to reach 35€/sq m/month.
Prime Rent, (€/sq m/ Month)
3.50% Vacancy Rate
3.60% Prime Yield (3/6/9 Lease)
Investment Focus ECONOMIC INDICATORS Q4 2020 YoY Chg
12-Mo. Forecast
6.4% Unemployment Rate 2020
-3.5%
All in all, the office investment market is doing relatively well considering the health crisis. The Luxembourg market stands out from other European markets because its fundamentals are still relevant. In 2020, on a total invested volume of EUR 1,030bn, around 875 MEUR were recorded in the office sector (for 19 deals). Prime yields have witnessed a strong compression in 2020 (though have remained stable in Q4) following a high demand for secured, core and central assets. They stand at 3.60% in the CBD.
Outlook As a result of the COVID-19 crisis, letting activity is expected to decrease in the coming months as corporates, and especially bigger occupiers, are rather adopting a “wait & see” position. As a result, the vacancy rate is expected to increase slightly with the arrival of new office schemes and a probably lower demand but should remain below the 4%. Prime rents could further increase in the central locations, especially in the CBD and the Kirchberg. The investment market remains active and the prime yields are expected to remain quite stable for the following months.
GDP Growth for 2020 TAKE-UP PER QUARTER (000s sq m, LHS) & # deals (RHS)
0.9% Inflation for 2020
400
300
350
250
300 150
200 150
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.
2000
7,0%
1500
6,0%
1000
5,0%
500
4,0%
0
3,0%
200
250 Source: Statec.lu
INVESTMENT VOLUME (MEUR, LHS) & PRIME YIELDS (%, RHS)
100
100 50
50 0
0
Q1
Q2
Q3
Q4
# Deals
Office investment volumes (MEUR)
Prime office yield (%)
M A R K E T B E AT
Luxembourg Office Market Office Q4 2020 MARKET STATISTICS SUBMARKET
INVENTORY (SQM)
CBD Kirchberg
AVAILABILITY (SQM)
VACANCY RATE
Q4 2020 TAKE-UP
CURENTLY UNDER CONSTRUCTION (SQM)
2020 TAKE-UP
862,000
11,000
1.3%
3,060
34,700
32,000
PRIME RENT (€/sq m/month)
PRIME YIELD
€52
3.60%
1,360,000
25,000
1.8%
68,070
82,082
194,000
€39
3.75%
Station
421,000
11,000
2.6%
69,800
75,800
28,000
€36
4.00%
Cloche d’Or
465,000
18,000
3.9%
1,750
33,860
38,000
€35
4.25%
Other inner districts
251,000
16,000
6.4%
3,600
14,200
34,000
€33
5.15%
Decentralised districts
442,000
31,000
7.0%
9,500
42,760
48,000
€28.5
5.70%
Periphery
572,000
39,000
6.8%
20,800
68,750
137,000
€25.5
5.90%
4,373,000
152,000
3.48%
176,600
352,000
511,000
€52
3.60%
Luxembourg (Overall)
KEY LEASE TRANSACTIONS Q4 2020 PROPERTY
SUBMARKET
TENANT
SIZE (SQ.M) TRANSACTION TYPE
EIB Building
Kirchberg
European Investment Bank
65,000
Pre-letting
Cité Santé
Station
CNS
52,300
Pre-letting
Mercier
Station
Office des Publications
17,000
Pre-letting
Twist
Esch-Belval
Etat du Luxembourg – Statec
10,200
Pre-letting
Airport
Cargolux
7,000
Pre-letting
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com SEBASTIEN BEQUET Country Head +352 27 21 33 07 sebastien.bequet@cushwake.com
*Renewals not included in leasing statistics
cushmanwakefield.com
KEY INVESTMENT TRANSACTIONS Q4 2020 PROPERTY
SUBMARKET
SELLER / BUYER
YIELD
PRICE € MILLIONS
Crystal Park
Cloche d’Or
AG Real Estate / Société Générale
4.15%
117
Bijou
Cloche d’Or
Extensa / Swiss Life
3.75%
72
Charlotte
CBD
AG Real Estate / GLL Real Estate
Espace Kennedy
Kirchberg
BGL / BNP REIM
70 3.70%
KEY CONSTRUCTION COMPLETIONS 2020 PROPERTY
SQM
KAD Project
160,000
Kirchberg
SUBMARKET
EU
OBH
13,000
Kirchberg
Pictet & Cie
Altitude – La Paz
8,000
Leudelange
Northern Trust
Bijou
6,000
Cloche d’Or
Ocorian
57
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 52,000 employees in 400 offices and 70 countries. In 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.
MAJOR TENANT ©2021 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.