Q3-2019 | Office Brussels Market Snapshot | Belgium

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BRUSSELS

Office Market Snapshot Third Quarter | 2019

MARKET INDICATORS

Overview

Market Outlook Prime Rents:

Prime rents remained at 320 €/sq m/year and are expected to remain stable in the coming months.

Prime Yields:

Prime yields are still at 4.15% but could see a further compression. LT prime yields compressed to 3.55%.

Supply:

Overall vacancy rate remains low. Pipeline is relatively large, yet strong pre-letting activity is limiting the availabilities entering the market.

Belgian GDP is set to grow by 1.2% this year and 1.1% in 2020. Private consumption should remain relatively dynamic, but the outlook for exports and investment remains clouded due to global trade tensions, Brexit concerns and recession risks in Germany. The unemployment rate stands around 5.7% and should remain around this level. Inflation is expected at 1.7% this year and forecasted to decelerate to 1.5% in 2020.

Demand:

Take-up in Q3 was in line with the quarterly average. Demand in Q4 is also forecasted to remain in line with the average.

Occupier focus

Prime Office rents – September 2019 LOCATION

€ SQ M YR

US$ SQ FT YR

Brussels (Leopold)

320

33.6

Brussels (Centre)

275

Brussels (Decentralised)

185

GROWTH % 1YR 5YR CAGR 4.9

3.1

28.8

5.8

5.5

19.4

-2.6

0.0

185

19.4

0.0

3.6

155

16.3

0.0

n/a

CURRENT Q

LAST Q

LAST Y

10 YEAR HIGH LOW

Brussels (Leopold)

4.15

4.15

4.30

6.30

4.15

Brussels (Centre)

4.30

4.40

4.80

6.50

4.40

Brussels (Decentralised)

6.75

7.00

7.25

8.10

6.80

7.00

7.25

7.25

8.25

6.70

6.75

6.75

6.75

n/a

n/a

Brussels (Periphery North – Airport) Brussels (Periphery South – Walloon Brabant)

Prime Office yields – September 2019 LOCATION (FIGURES ARE GROSS, %)

Brussels (Periphery North – Airport) Brussels (Periphery South – Walloon Brabant) NOTE: The above yields are for typical 3/6/9 leases.

With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property.

Recent performance Yield - Prime Rental Growth - Country Average

8.00%

15.0%

7.00%

10.0%

6.00%

5.0%

5.00% 4.00%

0.0%

3.00%

-5.0% Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19

Rental growth (y/y)

Yields

Yield - Country Average Rental Growth - Prime

With a take-up of approximately 105,000 sq m (78 deals), demand during Q3 was in line with the historical quarterly average. The total take-up YTD amounts to 447,000 sq m (263 transactions) and is one of the best aggregated first three quarters ever recorded. The take-up in Q3 was more or less evenly split between the public and the corporate sector. The co-working sector recorded close to 14,000 sq m in five deals. The largest transaction this quarter was the 37,000 sq m preletting by the Brussels Capital Region in the Silver Tower followed by the 6,400 sq m letting by Infrabel in the South Crystal. Prime rents remained at the record level of 320 €/sq m/year due to the strong demand for qualitative office spaces. Weighted average rents, too, were relatively stable at 167 €/sq m/year. The vacancy rate for the Brussels market remained quite stable and still stands around 7.7%.

Investment focus An investment volume of approximately 583 MEUR was recorded during the third quarter of the year. This brings the total investment volume YTD to EUR 1.51 bn. In fact, this is the highest investment volume for the first three quarters since 2000. The largest transactions include the sale of the TDO to Genii Capital for approximately 148 MEUR, the sale of the Mondrian to CBRE GI for 131.5 MEUR and the acquisition of the Marnix 13-17 by Amundi for 102 MEUR. Prime yields remained at 4.15% this quarter. Nevertheless, there is still a strong demand for office assets which could lead to a further yield compression in the coming months. Long-term prime yields saw a compression to 3.55% following the sale of the Mondrian.

Outlook

Despite some large letting transactions still expected (mainly involving the public sector), the activity during the end of the year and throughout 2020 is expected to substantially slow down compared to the take-up recorded during the first half of 2019. Prime rental levels are expected to remain stable at 320€/sq m/year throughout the year. The investment pipeline remains quite significant with numerous assets on the market and expected to be closed before the end of the year. As such, 2019 could potentially be the strongest year in terms of investment volumes since 2002. cushmanwakefield.com


BRUSSELS

Office Market Snapshot Third Quarter | 2019

BUILT STOCK

AVAILABILITY

VACANCY RATE**

TAKE-UP Q3 19

TAKE-UP 2019 (YTD)

2019 – 2022 UNDER CONSTRUCTION

(SQ.M)

(SQ.M)

(%)

(SQ.M)

(SQ.M)

(SQ.M)

Brussels (Leopold)

3,340,000

172,000

5.2%

11,200

52,400

35,900

Brussels (Centre)

2,317,000

72,000

3.1%

9,500

66,500

249,500

Brussels (North)

1,378,000

42,000

3.1%

44,300

123,500

321,800

Brussels (Louise)

907,000

43,000

4.7%

8,600

32,700

3,500

Brussels (Midi)

606,000

25,500

4.2%

7,600

12,500

-

Brussels (Decentralised)

2,771,000

299,000

10.8%

12,500

54,500

12,000

Brussels (Periphery)

2,117,000

383,000

18.1%

10,800

104,500

64,500

Brussels (Overall)

13,436,000

1,036,000

7.7%

104,500

446,600

687,200

LOCATION

Source: Cushman & Wakefield

Key Occupier Transactions PROPERTY

SUBMARKET

TENANT

SIZE

TRANSACTION

(SQ.M)

TYPE

37,000

Pre-Letting

Silver Tower

North

Brussels Capital Region

ZIN Project

North

SilverSquare

5,000

Pre-Letting

Central Gate

Centre

SilverSquare

4,460

Letting

Van Osslaan 1

West

Colas Belgium

2,700

Letting

Trone 100

Leopold

Polyclinic

2,370

Letting

Platinum

Louise

Louis Vuitton

2,189

Letting

SUBMARKET

SELLER / BUYER

Source: Cushman & Wakefield

Key Investment Transactions PROPERTY

YIELD

PRICE € MILLIONS

The Selection – TDO

Louise

AXA REIM / Genii Capital

4.85%

148

Mondrian

Leopold

Union Investment / CBRE GI

3.52%

131.5

Marnix 13-17

Leopold

Global Asset Capital / Amundi AM

4.15%

102

Souverain 23-25

Leopold

Cofinimmo / Cores, Urbicoon, Foresite

N/A

50

The Selection – Quatre Bras

Centre

AXA REIM / Real IS

5.05%

33.3

The Selection – Jean Jacobs

Centre

AXA REIM / Real IS

5.05%

31.6

Source: Cushman & Wakefield, Real Capital Analytics

This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. ©2019 Cushman & Wakefield LLP. All rights reserved.

Cédric Van Meerbeeck Head of Research Belgium & Luxembourg Avenue des Arts 56, 1000 Brussels Tel: +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com cushmanwakefield.com