M A R K E T B E AT
BRUSSELS Office Q3 2021
YoY Chg
12-Mo. Forecast
247,368
Belgian economic growth returning to pre-crisis level as expected . Economic growth is set to increase to 5.54% which means that the GDP is around pre-crisis levels, after which growth levels will stabilise to 2.64% in 2022 and 2.85% in 2023.
YTD Take-Up (sq m)
7.72% €320
The unemployment rate peaked at 6.17% in the third quarter and should be expected to decline in the last quarter of 2021 and stabilise around 5.74% in 2022 and 2023. In most private sectors, employment grew substantially in 2021, including up to 4.5% for R&D sector representing 4,000 new jobs. However, the banking & insurance sector continues to reduce its workforce reaching 44.5k jobs by the end of 2023.
3.70%
Core inflation in Belgium stands at 1.68% in Q3 2021 as recently forecast. It is projected at 1.12% in 2022 and 0.70% in 2023.
Vacancy Rate
Prime rent (€/sq m/year)
Prime yield
Predicting the return to the office. According to Cushman & Wakefield’s Predicting the return to the office report1, 40% of the workforce in Europe had returned to the office as of September, and it is expected that the majority will return in early 2022 with potential positive ramifications for the office occupational market.
ECONOMIC INDICATORS Q3 2021 YoY Chg
12-Mo. Forecast
1. https://www.cushmanwakefield.com/en/insights/predicting-the-return-to-the-office
5.54% 2021 GDP Growth
6.17%
8%
1.68%
4%
Source:Moody’s Analytics, BNB, Eurostat, September 2021 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.
5%
10%
2021 Unemployment rate
Consumer Price Index
EVOLUTION RATE OF EMPLOYMENT BY SECTOR
GDP GROWTH AND UNEMPLOYMENT RATE
4% 3%
6%
2% 1%
2%
0%
0%
-1%
-2%
-2%
-4%
-3% -4%
-6%
-5% -8%
2016 2015
2016
2017
2018
GDP Growth
2019
2020
2021
2022
Unemployment Rate
2023
2017
2018
2019
2020
2021
2022
Financial and insurance activities
Public administration
Scientific activities
Other activities
2023
M A R K E T B E AT
BRUSSELS Office Q3 2021 TAKE-UP BY QUARTER (000S SQ M)
Demand during Q3 was in line with Q2. 600
In Q3, 68,000 sq m of take-up was recorded on the Brussels office market. This is a slight decrease on the previous quarter, however there were as many transactions as in Q3 2020. Occupiers are mainly in a wait-and-see position, combined with the fact that there are still a good number of big deals to close by the end of the year. We expect that 2021 will outperform 2020 with the total in the region of 350,000 sq m.
500 400 300 200 100
KU Leuven contributes 30% of the activity in one transaction.
0 2015
KU Leuven (Catholic University of Leuven) confirmed the acquisition of the 21,000 sq m Pacheco Building, project located on Boulevard Pacheco 44. This represents 35% of Q3 total take-up in only one transaction.
2016
2017 Q1
2018 Q2
Q3
2019
2020
2021
Q4
NUMBER OF Q1-Q3 TAKE-UP DEALS BY OFFICE SIZE (SQ M) 350
The National Bank of Belgium and Nagelmakers complete the podium with close to 6,000 sq m in the Arenberg (Centre district) and a 3,700 sq m pre-letting in Monteco (Leopold district) respectively.
300 250 200
Small transactions drive the market.
150 100
So far this year, there have been as many transactions as in Q1-Q3 2020, but this figure remains lower than in previous years. Excluding large public transactions, the current total take-up is down by 16,000 sq m compared to last year. This can be explained by a higher share of small transactions. For Q3 2021, 80% of deals have been realised for surfaces inferior to 1,000 sq m. Specifically, there has been an 85% increase in the number of transactions in the 500-1,000 sq m range compared to Q3 2020.
50 0 2015 0-500
2016 500-1000
2017
2018
1000-2500
2019
2500-5000
2020
5000-10000
2021 10000+
PUBLIC AND PRIVATE TAKE-UP (000S SQ M) 600
500
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.
400 300 200 100 0
2015
2016
2017
2018
Private
Public
2019
2020
2021
M A R K E T B E AT
BRUSSELS Office Q3 2021 Important pipeline under construction for 2022, 77% currently pre-let.
OFFICE PIPELINE (000s sq m) 200
An important re-/development pipeline is taking shape for the coming years. For the end of 2021 alone, 56,000 sq m will enter the market, with 15,000 sq m on a speculative basis. In the longer term, another 70,000 sq m are under construction and still available, and building permits have been delivered for 330,000 sq m.
150
100
50
In Q3 2021, 82% 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 2021
2022 Pre-let
Vacancy rate on the rise for 2022.
VACANCY RATE (%)
At the end of Q3, the vacancy rate stands at 7.72%, a slight decrease compared to Q2 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%.
12%
2023 Available
2024
2025
10% 8%
6% 4%
Fluctuating prime rents according to districts. General increase awaited in the coming years.
2% 0% 2015 2016 2017 2018 2019 2020 Q3 21Q4 21 2022 2023 2024 2025
Most districts preserved their prime rents in Q3 except the North district. This area saw a decrease in its prime rent from €230/sq m/year in Q2 to €225/sq m/year. A further decrease to €220/sq m/year in the North district is expected by the end of the year due to significant speculative competition and current availability. In the Decentralised districts, prime rents rose to €200/sq m/year thanks to different transactions recorded in the Royal Belge which is set to become a new iconic mixed-use development by 2023.
PRIME RENTS (in €/sq m/year) 350 300 250
In the Periphery, new developments such as The Wings tend to drive the rents upward. 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.
200 150
CBD
Decentralised
Periphery
M A R K E T B E AT
BRUSSELS Office Q3 2021
Slow Q3 on the investment market. Investors stay more selective. In Q3, 270 MEUR has been invested in the Brussels office market, which is below the historical quarterly average. The most important transaction was the sale of the New Espace Orban by Aberdeen Asset Management to AXA Investment Managers for 122 MEUR representing 45% of the total invested volume during Q3. This brings the total investment volume YTD to EUR 1.17 bn.
OFFICE INVESTMENT VOLUMES BY QUARTER (MEUR) 4.000 3.500
3.000
Investors’ interest in core assets in H1 is confirmed in Q3. Of the five transactions recorded in Q3, two of them were (LT) core investments. These two transactions represent 78% of invested volume.
2.500 2.000 1.500
Prime yield stabilise to 3.70%.
1.000 500
In H1, a compression of the prime yields was recorded to a record low of 3.70%. In Q3, the prime yields stabilised at 3.70% but it is expected that in 2022 the prime yield will drop to 3.60% for products with 3/6/9 leases due to intense competition for core assets. The long-term prime yield stands at 3.20% in Q3 2021 and is expected to drop to 3.15% as soon as next year.
0 2015
2016
2017
Q1
2018
Q2
Q3
2019
2020
2021
Q4
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 3.60% up to the end of 2023. PRIME OFFICE YIELDS IN BRUSSELS (%)
The return to the office in Q1 2022. On a final note, a majority of companies in Europe have earmarked September or October for a concerted move back to in-office working. Those that have taken a longer view have cited January 2022 as the targeted timing. This will vary by country based on factors such as continued growth in vaccination levels, and opportunities to take a third booster vaccine.
6% 5% 4%
3% 2% 1%
It is clear that workspace and work culture will continue to change in the future and hybrid work will become the norm. However, an important return to the office is expected.
0% -1%
Prime
LT Prime
10y. Bond
M A R K E T B E AT
BRUSSELS Office Q3 2021 MARKET STATISTICS UNDER CONSTRUCTION (SQM)
PRIME RENT (€/sq m/year)
PRIME YIELD
62,339
88,794
€320
3.70%
53,875
157,643
€260
3.90%
741
10,359
91,505
€225
4.90%
5.27%
3,746
12,070
-
€275
4.10%
17,780
2.93%
240
240
5,000
€195
5.25%
2,603,056
288,726
11.09%
4,661
37,672
50,000
€200
6.25%
2,176,873
383,244
17.61%
13,254
70,813
93,967
€175
6.0%
13,638,709
1,052,713
7.75%
60,366
247,368
486,909
€320
3.70%
STOCK (SQM)
AVAILABILITY (SQM)
VACANCY RATE
Q3 2021 TAKE-UP
TAKE-UP 2021 YTD
Brussels (Leopold)
3,369,521
112,294
3.33%
10,184
Brussels (Centre)
2,362,466
91,695
3.88%
27,540
Brussels (North)
1,645,608
112,870
6.86%
Brussels (Louise)
875,282
46,124
Brussels (Midi)
605,903
Brussels (Decentralised) Brussels (Periphery)
SUBMARKET
Brussels (Overall)
KEY LEASE TRANSACTIONS Q3 2021 PROPERTY
SUBMARKET
TENANT
SQ M
TYPE
Centre
KU Leuven
21,000
Purchase
Pacheco Building Arenberg 7
Centre
BNB – NBB
6,000
Letting
Monteco
Leopold
Nagelmackers
3,674
Letting
CÉDRIC VAN MEERBEECK Head of Research and Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@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 Q3 2021 PROPERTY
SUBMARKET
SELLER / BUYER
Volume (in MEUR)
Yield
122
3.44%
Leopold
Aberdeen Asset Management / AXA Investment Managers
Watson & Crick Hill Business Park
Periphery
Liegeois Group / Kadans Science Partner
100
4.70%
Siemens Business Park
Periphery
Global Estate Group / Prologis
36
7.95%
Leopold
Sabam / IMMOBEL
23
-
New Espace Orban
Rue d’Arlon 75-77
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