Q2 2023 | Industrial Marketbeat | Belgium

Mitigated economic outlook in 2023 but a more robust 2024 awaited

After difficult conditions throughout the year 2022, economic recovery will be only limited in 2023 with a GDP growth expected around 0.6% for the whole year. The Belgian economic outlook is thus mitigated while a more important GDP growth is expected as from 2024 and especially 2025. GDP growth is indeed forecasted around 2.6% in 2025 and 2026. However, Belgian public deficit will remain important in 2023 while public debt could continue to deepen as successive interest rates hikes also weigh on the public debt.

The Belgian political scene is becoming increasingly tense as everyone has already the different 2024 elections in mind. In this context, the Federal Government has many difficulties to finalise some important reforms which could negatively impact the entire economy and/or the attractivity of the country

The unemployment rate should rise to 6 17% this year According to the latest forecasts, it will increase further to reach 7 3% in 2026 Important disparities are still observed between regions, Flanders performing the best and Brussels the worse

After having reached historically high level last year, inflation continues to decrease slowly in Europe and in Belgium It currently stands at 5 2% in Belgium (level observed in May) compared to 6 1% in Eurozone Despite the decrease of energy prices, the inflation is still far above 2% objective of the European Central Bank, mainly due to high inflation of food prices To fight inflation, the ECB adopted a tightening of its European monetary policy with successive interest rates hikes. The 400 bps increase over the last 11 months is historic in this context As a direct result, economic growth is decelerating However, the ECB should raise its interest rates by 25bps in July to reach its objective in 2024.

The forecast for the industry & manufacturing and transportation & communication has slightly worsened compared to the first quarter. Although the less positive view, many industrial companies remain optimistic about the future and are striving that Europe gains the position as an industrial hub.

Inflation

GDP Growth, GVA Growth: Industry & Manufacturing And Transport & Communication

Stabilizing semi-industrial take-up…

The semi-industrial market recorded 287,400 sq m of take-up in the second quarter, which is the second highest level since more than a decade. The first half of 2023 has surpassed the five-year average by approximately 10%.

The second quarter for semi-industrial properties has been characterised multiple notable transactions The multinational Alibaba who has purchased its property at Liège Airport for 39,375 sq m, Tailormade Logistics and ALD Automotive occupies 23,100 sq m at Brusselsesteenweg in Asse.

Logistics markets navigating the turbulent climate…

At the first half of 2023, the take-up level for the Logistics market has remained at a low level (133,000 sq m). The take-up for the first half of 2023 remains below 45% of the fiveyear average. Although the take-up remains at the lower hand, some notable transactions were recorded in the second quarter.

The pre-letting by Kellogg’s in MG Park Malinas for 65,000 sq m and the built-to-suit preletting by BayWa r.e. Solar systems for 33,500 sq m in the Logistics Center built by Montea and Cordeel are the key pre-letting transactions in the logistics market. Capsugel has occupied 18,000 sq m at Rijksweg in Bornem and is therefore the key letting transaction for the logistics market.

Rents reaching an equilibrium?

Unsurprisingly, the rents for both semi-industrial and logistic properties have increased for the second quarter, making it the third quarter in a row Together with the demand for high quality properties and the lack of supply, the prime rents keep on increasing

The prime rent for semi-industrial properties has increased to 67 EUR/sq m/year while the average weighted rents have stabilized at 47 EUR/sq m/year.

The logistic prime rent has increased towards 67 EUR/sq m/year, coming from 62 EUR/sq m/year. The average weighted has increased from 44 EUR/sq m/year towards 47 EUR/sq m/year.

BELGIUM / Industrial Q2 2023

Prime yields slightly ascend…

The European Central Bank (ECB) has once more increased its interest rate to reach its highest level after more than 20 years. The ECB has increased for eight time its rate (with +25 bps) to reach 3.50%. This increase reflects that the cost of debt continues to increase and results in slower investment activities and ultimately, a slowdown in the economy.

The prime yields in semi-industrial and logistics markets have once more experienced a modest, yet notable increase. The semi-industrial prime yield has increased towards 6.65%, coming from 5.50% (+15bps). The logistics prime yield has increased from 4.75% towards 4.90% (+15bps) in the first half of 2023.

Government bonds (OLO-10Y) have climbed alongside the rise in the cost of debt for industrial companies. Although the spread between the interest rates and the OLO-10Y has sightly increased, investors remain cautious. The imbalance between purchasers and sellers continues and is starting to be the norm in the turbulent market.

Surge in investments volume…

At the first half of 2023, the investment volume stands at 170 MEUR for both semiindustrial and logistic properties For the second quarter of 2023, the semi-industrial investment volume stood at 94 MEUR and logistics at 42 5 MEUR

The largest and only investment transaction for logistics was the sale of the Logistics Nivelles (ex-carrefour distribution center) for 42.5 MEUR. The property was bought by Whitewood

and Tristan Capital Partners

The semi-industrial key investment transaction was the Exit-Sale and Leaseback of the exGate Group site in Hoogstraten for 30 MEUR by Van Wellen Group.

Even though the investment volume has increased with approximately 100 MEUR compared to the first quarter, the investment market remains uncertain. Together with the mismatch between purchasers and sellers, the lack of supply and the ongoing wait-and-see approach continues to put a hold on the market liquidity

Prime Industrial Yields

Belgium Industrial Interest Rates vs OLO-10Y

Annual Invest Volumes, MEUR

BELGIUM / Industrial Q2 2023

Market Statistics

Key Investment Transactions Q2 2023

Cédric VAN MEERBEECK

Head of Research & Marketing | Belgium & Luxembourg

+32 2 629 02 86 cedric.vanmeerbeeck@cushwake.com

Oscar DE GROOTE

Research Analyst | Research Belgium

+32 478 05 38 71 oscar.degroote@cushwake.com

Bart VANDERHOYDONCK

Head of Industrial Agency | Belgium

+32 510 08 09 bart.vanderhoydonck@eur.cushwake.com

Michael DESPIEGELAERE

Head of Capital Markets | Belgium & Luxembourg

+32 476 82 08 59 michael.despiegelaere@cushwake.com

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

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