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M A R K E T B E AT

BRUSSELS Office Q2 2021

YoY Chg

12-Mo. Forecast

Belgian economy on track to pre-crisis levels.

189,306 YTD Take-Up (sq m)

The economic growth is expected to be back on track due to the success of the vaccination campaign and the relaxing of constraining measures. Economic growth is set to increase to 5.5% which means that the GDP will be around pre-crisis levels at the end of 2021 after which growth levels will stabilise to 3.3% in 2022 and 1.6% in 2023.

7.75% Vacancy Rate

€320

Unemployment rate is forecasted at 5.8% this year and should peak in 2022 at around 6%. It is expected that a lot of temporarily unemployed people will resume work in the second half of 2021 or will be able to find new jobs. In some sectors there is even a shortage of workers and employers are having trouble filling in vacancies.

Prime rent (€/sq m/year)

3.70% Prime yield

Core inflation in Belgium is projected at 2.2% in 2021, 2.1% in 2022 and 1.8% in 2023. This is due to the fact companies are confronted with rising commodity prices which puts pressure on the 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.

ECONOMIC INDICATORS Q2 2021 YoY Chg

12-Mo. Forecast

5.5% 2021 GDP Growth

5.8%

3%

10%

2021 Unemployment rate

8%

2.2%

4%

Consumer Price Index

EXPECTED INFLATION UP UNTIL 2023

GDP GROWTH AND UNEMPLOYMENT RATE

2%

6% 2%

2% 0%

1%

-2% Source: NationalBank of Belgium, June 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.

1%

-4% -6%

0%

-8% 2015

2016

2017

2018

GDP Growth Source: NationalBank of Belgium, June 2021

2019

2020

2021

2022

2023

2015

2016

2017

2018

2019

2020

inflation

Unemployment Rate Source: NationalBank of Belgium,, June2021

2021

2022

2023


M A R K E T B E AT

BRUSSELS Office Q2 2021 Strong overall take-up in H1. In Q2, 79,000 sq m of take-up was recorded on the Brussels office market. This is around the same level as the 2020 Q2 take-up, however there is an increase in number of deals in comparison to 2020 Q2 but still a decrease compared to other years. Combined with the fact that there are still some big deals in the pipeline 2021 is still on track to outperform most recent years except 2016 & 2019.

Co-working shows resilience throughout COVID-19.

TAKE-UP BY QUARTER (000s sq m) 600 500

Ernst & Young and MeetDistrict are both moving in to the new The Wings building set to be delivered in 2023. Ernst & Young will be taking up around 15,000 sq m and MeetDistrict around 10,000 sq m. This represents 32% of total take-up in Q2.

400

Other notable transactions were the moving in of Ennismore – Working From into the Victoria tower occupying 5,500 sq m and Energyvision moving to Avenue du Laerbeek 72-74 taking up 4,000 sq m. COVID-19 has hit co-working hard, recently Fosbury & Sons had to close their space in the North district. The recent transactions from MeetDistrict and Ennismore – Working From do however show some resilience in the sector.

100

300 200

0

2015

2016

2017 Q1

2018 Q2

Q3

2019

2020

2021

Q4

Hybrid work is here to stay. Over the last couple of months, a lot of people praised the benefits of working from home, but now more than a year later some major drawbacks are starting to arise. According to a study conducted by Microsoft, remote work has isolated people not only in their personalbut also in their professional lives. Collaboration within teams increased but collaboration outside of teams decreased significantly. Teams are becoming more and more siloed and thus collaborating less with other teams which leads to a decrease in innovation.

PUBLIC AND PRIVATE TAKE-UP (000s sq m) 600 500 400 300

200 100

Research from Cushman & Wakefield confirms these arguments. It concludes that the workplace is a central place where people are enabled to do their best work. This includes creating connections between colleagues and clients. It is a place where the next generation gets mentored and where accidental run ins with colleagues at the coffee machine leads to the most innovative and creative projects.

0

2015

2016

2017

2018

Private

Public

2019

2020

H1 2021


M A R K E T B E AT

BRUSSELS Office Q2 2021 Important pipeline under construction, 72% currently pre-let. OFFICE PIPELINE (000s sq m)

In Q2 there were multiple projects delivered but also multiple projects delayed. The most notable deliveries were the CBTC building B (7,000m²) in Louvain-la-Neuve and the 31 Central in the city center. Copernicus, which is to house the European Commission, is expected in Q3 2021. In Q1 2021 56% of the projects under construction were pre-let, now one quarter later this increased to 72%. If this trend continues the impact of the new deliveries on the vacancy rate might be weaker than expected.

250 200 150 100 50 0

Vacancy rate expected to rise. Impact will be limited in the long run. Currently however, vacancy has risen to 7.75% at the end of Q2, a slight increase compared to Q1 2021. In the short term, the vacancy rate should continue to rise, because of new office buildings arriving empty on the market, some space reductions and a wait-and-see behaviour of occupiers. By the end of 2023, the vacancy rate could reach 9.5% 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%.

2021

2022

2023 Pre-let

2024

2025

Available

VACANCY RATE (%)

12% 10%

Fluctuating prime rents according to districts. General increase awaited in the coming years.

8% 6% 4%

Most districts preserved their prime rents in Q2 except for the North- and Decentralised districts. The North district saw a decrease in its prime rent from €250/sq m per year to €230/sq m per year and the Decentralised districts saw an increase from €175/sq m per year to €200/sq m per year.

The decrease in prime rent for the North district is a mere pebble on its way to higher prime rents. The district is undergoing a major renovation. Befimmo started their long-awaited redevelopment of the exWTC I and II towers of which all 70,000 sq m are already pre-let to the Flemish Government. Proximus also announced it is renovating and repurposing their Proximus Tower instead of moving. Both projects are expected to be delivered in 2023 and 2025-26 respectively. In the Decentralised districts, prime rents increased to €200/sq m per year thanks to different transactions recorded in the iconic Royale Belge in the Decentralised South district (namely Puilaetco and Claeys & Engels) during Q1 and Emakina during Q2. In the Periphery, new developments such as the Park 7 or The Wings tend to drive the rents upward. They now stand at €175€- and could reach €185/sq m/year by the end of 2022.

2% 0%

PRIME AND AVERAGE RENTS (in € / sq m / year) 350

300 250 200 150

CBD

Decentralised

Periphery


M A R K E T B E AT

BRUSSELS Office Q2 2021 Competition rises for core assets. In Q2, 366 MEUR has been invested in the Brussels office market, which is one of the best second quarters in recent years. Only Q2 2019 significantly outperfomed Q2 2021. The most important transactions were the sale of the PwC Campus by Ghelamco and the sale of the Belliard 5-7 by Immobel to ALLIANZ Real Estate Benelux for 131 MEUR and 120 MEUR respectively, representing 69% of the total invested volume during Q2.

OFFICE INVESTMENT VOLUMES BY QUARTER (MEUR) 4000 3500

The shift from investors towards core assets in Q1 is confirmed in Q2. Of the 11 investment transactions recorded in Q2, six of them were (LT) core investments and two own occupation investments. These six (LT) core transactions represent 91% of volume invested.

3000 2500 2000 1500 1000

Prime yield lowers to a record low of 3.70%.

500 0 2015

In Q1 we saw a compression of the prime yield to a record low of 3.75%. In Q2 the prime yield continued to drop to 3.70%, the competition is as fierce as ever and it is expected that in 2022 the prime yield will continue to drop to 3.60% for a 3/6/9 lease and the long-term yield to 3%.

2016

2017 Q1

2018 Q2

Q3

2019

2020

2021

Q4

Conversely to other European cities where we will observe a yield increase (between 50 and 100 bps depending on the city) in the coming 12 to 24 months, Brussels should be more resilient with a prime yield forecasted to stabilise around 3.60% up to the end of 2024. PRIME OFFICE YIELDS IN BRUSSELS (%)

COVID-19 impact on co-working. On a final note, it will be interesting to see the long-term impact of COVID-19 on the co-working sector. Having been one of the hardest hit sectors by COVID-19, co-working spaces were empty for months on end if not for more than a year. Fosbury & Sons had to close their space at Gare du Nord, but on the flipside of the coin MeetDistrict, Silversquare and Ennismore – Working From are all opening new spaces. COVID-19 may yet play a positive role in reboosting the co-working sector? It’s clear that the workspace and work culture will continue to change in the future and hybrid work will become the norm rather than the exception in most companies and that is exactly what co-working companies are aiming for.

7% 6% 5% 4% 3% 2% 1% 0% -1%

Prime

LT Prime

10y. Bond


M A R K E T B E AT

BRUSSELS Office Q2 2021 MARKET STATISTICS UNDER CONSTRUCTION (SQM)

PRIME RENT (€/sq m/year)

PRIME YIELD

52,000

83,000

€320

3.70%

26,000

197,000

€260

3.90%

9,000

9,600

187,000

€230

4.90%

4.9%

6,100

8,300

-

€275

4.10%

26,000

4.3%

-

-

5,000

€195

5.25%

2,620,000

289,000

11.0%

22,000

33,000

50,000

€200

6.25%

2,153,000

398,000

18.5%

30,000

58,000

124,000

€175

6.25%

13,540,000

1,049,000

7.75%

77,000

186,900

646,000

€320

3.70%

STOCK (SQM)

AVAILABILITY (SQM)

VACANCY RATE

Q2 2021 TAKE-UP

TAKE-UP 2021 YTD

Brussels (Leopold)

3,365,000

108,000

3.2%

4,400

Brussels (Centre)

2,363,000

110,000

4.7%

5,500

Brussels (North)

1,562,000

75,000

4.8%

Brussels (Louise)

872,000

43,000

Brussels (Midi)

605,000

Brussels (Decentralised) Brussels (Periphery)

SUBMARKET

Brussels (Overall)

KEY LEASE TRANSACTIONS Q2 2021 PROPERTY

SUBMARKET

TENANT

SQ M

TYPE

The Wings

Airport

Ernst & Young

15,000

Pre-letting

The Wings

Airport

MeetDistrict

10,000

Pre-letting

Victoria Regina Tower

North

Ennismore – Working From

5,500

Pre-letting

Avenue du Laerbeek 72-74

West

EnergyVision

4,090

Letting

*Renewals not included in leasing statistics

CÉDRIC VAN MEERBEECK Head of Research and Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com SÉBASTIEN VANDENBUSSCHE Data Analyst Research | Belgium & Luxembourg +32 474 08 36 68 sebastien.vandenbussche@cushwake.com

cushmanwakefield.com KEY INVESTMENT TRANSACTIONS Q2 2021 PROPERTY

SUBMARKET

SELLER / BUYER

Volume (in MEUR)

Yield

PwC Campus

Airport

Ghelamco Group / Confidential

131

4.70%

Belliard 5-7

Leopold

IMMOBEL / ALLIANZ Real Estate Benelux

120

3.40%

Arsenal

Leopold

UBS Real Estate / TUS Holdings

30

N/A

Centre

VASTINT Belgium / GROUPAMA Immobilier

25

3.90%

North – East

Festo Belgium SA / Kolmont Woonprojecten

25

N/A

Elite House Rue Colonel Bourg

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 51,000 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. ©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.

Profile for Cushman & Wakefield Belgium

Q2 2021 | Brussels Office Marketbeat | Belgium  

Office Brussels Marketbeat is a brief summary of the Office sector in Brussels, providing comment on recent trends as well as market data an...

Q2 2021 | Brussels Office Marketbeat | Belgium  

Office Brussels Marketbeat is a brief summary of the Office sector in Brussels, providing comment on recent trends as well as market data an...

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