M A R K E T B E AT
LUXEMBOURG Office Q4 2021
YoY Chg
12-Mo. Forecast
376,768
Luxembourg GDP growth beats forecasts. In the last quarter of 2021, economic growth increased to 7.03% 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 2.52% in 2022 and 2023 and around 2.70% in 2024 and 2025.
Take-Up 2021 (sq m)
52
The unemployment rate stood at 5.64% in the last quarter and is expected to decline and stabilise around 5.00% for the coming years. It is expected that a lot of temporarily unemployed people will resume work in early of 2022 or will be able to find new jobs.
Prime Rent, (EUR/sq m/ month)
4.10% Vacancy Rate
Inflation on the rise in 2022. Core inflation in Luxembourg stands at 2.54% in the last quarter of 2021. It is projected at 3.35% in 2022 and 1.44% in 2023. This is due to the fact companies are confronted with rising commodity prices which puts pressure on their 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.
3.40% Prime Yield (3/6/9 Lease)
ECONOMIC INDICATORS Q4 2021 YoY Chg
12-Mo. Forecast
5.64%
After having increased sharply from May to September 2021 on the back of a successful vaccine rollout in Luxembourg, along with the relaxing of constraining measures surrounding COVID-19, the consumer confidence index is again oriented downards since October. The Luxembourgish population is more cautious due to the different variants of the COVID outbreak and growing energy prices.
Unemployment Rate 2021
7.03% GDP Growth for 2021
2.54% Inflation for 2021
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 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3%
INFLATION RATE 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP Growth
Unemployment rate
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
M A R K E T B E AT
LUXEMBOURG Office Q4 2021 The best year on record, despite tough circumstances.
Take-up (in 000s sq m, LHS) & number of deals (RHS) 400
Despite ramifications from the global health crisis, office activity soared to a record level of take-up recorded in 2021 with as much as 377,000 sq m and close to 270 occupier transactions. Much is owed to a record H1 (270,000 sq m), mainly driven by the public sector with 127,000 sq m occupied by the European Parliament in the brand-new K2.
Despite the pandemic, the office market had its most active year. Over the last two years, nearly 80% of transactions have related to surfaces inferior to 1,000 sq m. The COVID-19 outbreak continues to impact the occupational market and hybrid work is here to stay. This trend leads to space reductions, with most occupiers nearing a break, opting for smaller offices.
Vacancy rate on the rise for 2022. An important pipeline is taking shape for the coming years. For 2022 alone, nearly 115,000 sq m are currently under construction, of which 76,500 sq m still available. In the longer term, another 300,000 sq m are under construction, and there are plans for an additional 350,000 sq m. Luxembourg’s office stock should stand at 5 million sq m by the end of 2025.
300
350
250
300 200
250 200
150
150
100
100 50
50 0
0
Q1
Q2
Q3
Q4
# Deals
Awaited new supply (000s sq m, LHS) & Vacancy rate (RHS) 250
5.00%
200
4.50% 4.00%
150
3.50%
At the end of 2021, the vacancy rate stood at 4.10%, a slight increase compared to Q3 2021. In the longer term, the vacancy rate should rise because of new offices arriving empty on the market. During 2022, the vacancy rate should reach 4.40% and even 4.60% in 2023 before experiencing a decrease as the office market will adapt to its new paradigm. By the end of 2024, the vacancy rate should stand at 4.30%.
100
As market activity is expected to remain high in the coming months and low overall vacancy rates, prime rental levels are forecasted to witness upward movements in the coming months and years. Although no major changes are awaited before year-end, prime rents could reach EUR 56/sq m/month by the end of 2025 in the CBD. The other districts should follow a similar evolution.
2.50%
0
2.00% 2020
Prime rents increases awaited in the coming years. Despite the high level of activity, most districts preserved their prime rents. Only the Kirchberg saw an increase in its prime rent this year, from €39/sq m/month to €41/sq m/month, due to a vacancy rate exceptionally low.
3.00%
50
Delivered
2021
2022
2023
2024
Awaited new supply
Vacancy rate
Prime and average rents (EUR/sq m/month) 55 50 45 40 35 30 25 20 15
CBD Station Other inner districts Periphery
Kirchberg Cloche d'Or Decentralised
M A R K E T B E AT
LUXEMBOURG Office Q4 2021 Total invested volumes by quarter (MEUR) 2,500
A remarkable quarter for the investment market. 2,000
In the last quarter of 2021, nearly 510 MEUR has been invested in the Luxembourg office market, which is one of the best last quarters ever. The two most important transactions, both in the Kirchberg district, were the sale of The Stage by Batipart to Real IS and the sale of Kubik by Ceetrus to Schroders for 140 MEUR and 84.8 MEUR respectively, representing 44% of the total invested volume during Q4. This brings the total investment volume to EUR 1.325 bn in 2021.
1,500 1,000 500 0 2015
Foreign players invest in Luxembourg.
2016
2017 Q1
Not only were two thirds of the transactions recorded this quarter, but the three largest deals were also carried out by foreign investors, which shows a tangible interest in the Luxembourg market.
Prime yields compress to 3.40%. Investors’ interest in core assets was confirmed in the last quarter of 2021. Due to this intense competition for core assets, prime yields recorded a further compression to a new level of 3.40% 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 3.25%.
Q3
2019
2020
2021
Q4
Office deals by size (LHS) and average size (MEUR, RHS) 100%
100
80%
80
60%
60
40%
40
20%
20
0%
0
Looking at the other office districts, Kirchberg and Cloche d’Or districts also recorded a compression of their prime yields to 3.60% and 3.90% respectively in the last quarter of 2021. Activity should remain intense in Luxembourg in the coming months as it is expected that the majority of the workforce will return to the office in early 2022, with potential positive ramifications for the office occupational market.
2018 Q2
Under €10m €50-100m Average size
€10-20m €100-200m
€20-50m €200m+
Prime office yield evolution 5.5%
Outlook : Towards a “greener” office market. 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 compliant. In the coming years, the vacancy rate could explode among obsolete buildings.
5.0% 4.5% 4.0% 3.5% 3.0% 2015
2016
2017
2018
2019
2020
2021
2022
2023
M A R K E T B E AT
LUXEMBOURG Office Q4 2021 MARKET STATISTICS SUBMARKET
STOCK (SQM)
CBD
AVAILABILITY (SQM)
VACANCY RATE
870,500
28,000
1.82%
Q4 2021 TAKE-UP
2021 TAKE-UP
CURENTLY UNDER CONSTRUCTION (SQM)
PRIME RENT (EUR/sq m/month)
PRIME YIELD
10,300
45,200
30,500
€52
3.40%
1,360,000
13,700
1.10%
4,300
143,000
130,000
€41
3.60%
Station
424,600
11,200
2.64%
10,000
64,000
20,200
€36
3.90%
Cloche d’Or
465,000
14,700
3.16%
8,300
18,000
80,000
€35
3.90%
Other inner districts
259,000
13,639
5.27%
1,700
9,000
14,000
€35
5.00%
Decentralised districts
465,000
43,000
9.00%
4,500
40,000
39,000
€28.5
5.50%
Periphery
590,000
59,000
9.00%
14,200
56,500
171,200
€25.5
5.75%
4,430,000
183,286
4.10%
54,000
377,000
485,000
€52
3.40%
Kirchberg
Luxembourg (Overall)
KEY LEASE TRANSACTIONS Q4 2021 PROPERTY
SUBMARKET
TENANT
Dairy House
Station
CFL
SIZE (SQ.M) TRANSACTION TYPE 8,192
Letting
Quatuor
Cloche d’Or
Vistra
4,630
Letting
Buzz
Periphery
EBRC
3,597
Letting
Well 22
Decentralised
Gen II Luxembourg Services Sarl
2,909
Letting
Glacier
CBD
EHP
2,442
Letting
SEBASTIEN BEQUET Head of Luxembourg +352 27 21 33 07 sebastien.bequet@cushwake.com BENJAMIN DEVIE Research Analyst | Belgium & Luxembourg +32 2 510 07 11 benjamin.devie@cushwake.com
*Renewals not included in leasing statistics
KEY INVESTMENT TRANSACTIONS Q4 2021
cushmanwakefield.com
SUBMARKET
SELLER / BUYER
YIELD
PRICE € MILLIONS
The Stage
Kirchberg
Batipart / Real IS
-
140
Kubik
Kirchberg
Ceetrus / Schroders
-
84.8
Prince
CBD
Eaglestone / Monceau Assurances
-
50
PROPERTY
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com
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 2020, the firm had revenue of $7.8 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.