Q3 2023 | Industrial Marketbeat | Belgium

BELGIUM / Industrial Q3 2023

Mitigated economic outlook in 2023 but a more robust 2024 awaited YoY Chg

12-Mo. Forecast

YoY Chg

12-Mo. Forecast

139 (L) 288 (SI) Take-up (Q3 2023) (000s sq m)

Given the global economic condition, Belgium’s economy is in for a slow ride for 2023 and early 2024. A range of factors, including high core prices, tighter borrowing conditions, still-low consumer sentiment, and business competitiveness weigh and will continue to weigh on growth. The GDP experienced a modest 0.1% quarter-onquarter growth, and the projected annualized growth is estimated at 0.91%. The Belgian economy is anticipated to undergo a gradual expansion, with a projected GDP growth of approximately 1.7% in 2024 and exceeding 2.5% in 2025. Nevertheless, there is a higher-than-anticipated public deficit in Belgium, amounting to an additional EUR 1.2 billion in 2024. Given the recent surge in interest rates and the upcoming 2024 elections, this deficit could potentially impede the Belgian recovery.

Without a doubt, inflation has been the most significant driver of economic conditions. After reaching a peak of 12% last year, the ECB has had to persist in tightening its policy. In September, the ECB implemented its tenth consecutive rate hike, bringing rates to 4%, marking the highest level since euro launch. As a consequence, Belgium’s inflation rate took several steps back in the past months. As of September, the consumer price index decelerates from 4.09% to 2.39% in September, this is the lowest level since July 2021.

67€ (L) 67€ (SI) Prime rent (EUR/sq m/year)

YoY Chg

12-Mo. Forecast

4.90% (L) 6.60% (SI) Prime yield (%, 3/6/9 lease)

Meanwhile, in 2023, the unemployment rate remains under 6%, but it is projected to rise to 7% by the close of 2024, and further to 7.2% in 2025. From the start of 2023, business courts have declared 7,163 bankruptcies, marking a 9.5% increase compared to the corresponding period last year, albeit 5.3% lower than in 2019. Job losses in 2023 have totalled 20,090, reflecting a 30.4% surge from the figures in 2022.

The forecast for the industry & manufacturing and transportation & communication has slightly worsened again compared to the first half of 2023. The semi-industrial and logistic market will continue to face challenges as the European Business Confidence Index has dropped once more and is still under pressure. Stabilization is only expected as from 2024, where pre-pandemic levels will become the norm again.

L: Logistics / SI: Semi-industrial

Economic Indicators Q3 2023 YoY Chg

12-Mo. Forecast

0.91%

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

Inflation 10%

10%

8%

5%

2023 Manufacturing (M) and Transport (T) GVA Growth

6%

0%

4.06%

4%

-5%

2%

-10%

Q3 2023 GDP Growth

- 3.1% (M) 0.6% (T)

2023 Consumer Price Index

2018 Sources: Moody’s Analytics, BNB, Eurostat, Federal Planning Bureau, September 2023 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.

0% 2018

2019

2020

2021

2022

2023

2024

2025

2019

2020 2021 2022 2023 2024 GDP Growth Manufacturing GVA growth Transportation and storage GVA growth

2025

BELGIUM / Industrial Q3 2023

Stabilizing semi-industrial take-up…

Take-up, SQ M

The semi-industrial take-up has witnessed its strongest quarter in 2023 so far in terms of take-up. Nearly 290,000 sq m was recorded in the third quarter, totalling the take-up towards 800,500 sq m for 2023.

3.000.000

The semi-industrial sector is characterised by smaller volumes which is reflected in the number of deals in smaller properties. More than 90% of the 510 transactions recorded consists of properties smaller than 5,000 sq m and over 50%of the total transactions are recorded in properties under 500 sq m.

1.500.000

2.500.000 2.000.000

1.000.000 500.000 0

Those smaller entities are ideal for SMEs that need a physical workplace but for which they are too small for warehouse of an office. Next to the smaller surfaces, occupants prefer multifunctional properties so the surface can used efficiently.

Approximately 40,000 companies see the light of day in Belgium, so the demand is set to increase further in the upcoming years. The prime rent for semi-industrial properties has increased to 68 EUR/sq m/year while the average weighted rents have stabilized at 48 EUR/sq m/year.

2018

2019

2020

Logistics

2021

2022

Q3 2023

Semi-Industrial

Semi-Industrial Rents, EUR/SQ M/YEAR 80 70 60

50

Strong demand despite slower take-up…

The logistic take-up recorded for the third quarter stands at 139,250 sq m, totalling 2023 at 353,900 sq m for 2023 so far. Of the six transactions recorded this quarter, five of them are for large surfaces (+10,000 sq m). For 2023, there are 16 transactions recorded of which 12 are above 10,000 sq m. This confirms that the demand for large properties has not changed and remains constrained.

Although the take-up level remains slow, the demand has hardly changed. The availability in logistic properties remain limited. Most of the occupiers are owner occupier and together with the land scarcity, the rent price growth should continue.

The logistic prime rent has increased towards 68 EUR/sq m/year, coming from 67 EUR/sq m/year. The average weighted has remained stable at 47 EUR/sq m/year.

In most European markets, the rent prices are starting to slow down in some markets. The same trend can be witnessed in Belgium.

40 30 20 10 0 2018

2019

2020

Prime

2021

2022

Q3 2023

Mobile average weighted

Logistics Rents, EUR/SQ M/YEAR 70 60 50 40 30 20 10

0 2018

2019 Prime

2020

2021

2022

Mobile average weighted

Q3 2023

BELGIUM / Industrial Q3 2023

Another increase by the ECB…

Prime Industrial Yields

Each quarter, the European Central Bank (ECB) has increased its interest rate to reach new records in the last two decades. This third quarter of 2023 is no other than the previous two. The ECB has, once again, increased its rates and this time towards 4%.

Although the inflation dropped towards 2.4% for the month of September (according to Statbel), the interest rate shall be kept at that level as long as needed. Unfortunately, it can not be excluded that the rate can still increase in the future.

8,00% 6,00% 4,00% 2,00% 0,00%

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023

-2,00%

Prime yields have once more increased slightly but noticeably in the semi-industrial and logistics industries. From 6.65%, the semi-industrial prime yield has grown to 6.70% (+5bps). In the first half of 2023, the logistics prime yield rose from 4.90% to 5.00% (+10bps).

Semi-industrial back on track, logistics lags…

The total invested amount for both semi-industrial & logistic transactions accounts to 96 MEUR in the third quarter, totalling the invested amount towards 265 MEUR for 2023 (133 MEUR in logistic - and 132 MEUR for semi-industrial properties).

Although at a slower pace for logistic properties, activity continues despite the slump in the commercial real estate market. The semi-industrial market keeps moving along steadily and appears to be stabilizing in some ways. It's extremely conceivable that the market will easily surpass the 135 MEUR per year, which represents the five-year average for the semi-industrial investment market.

Some notable investments are the sale of Balta Site in Avelgem for 30 MEUR by Mohawk International, the sale of Aarschot Logistics in Aarschot for 14 MEUR by Serris Reim and the sale of the site in Hauts Sarts in Liège for 29 MEUR by Intervest Offices & Warehouses.

Semi-industrial

OLO-10Y

Belgium Industrial Interest Rates vs OLO-10Y 6% 5% 4% 3% 2% 1% 0% -1%

Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20 Aug-20 Dec-20 Apr-21 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23

Prime yields are beginning to slow down in their outward expansion, which is consistent with the European trend, even though modest gains are starting to become the norm.

Activity is beginning to pick up again as new deliveries are anticipated, and investors continue to have a solid level of faith in the sector because, when compared to other asset classes, the return profile is very appealing.

Logistics

Loans to non-financial companies*

OLO-10Y

Annual Invest Volumes, MEUR 1.200

50

1.000

40

800

30

600 20

400

10

200

0

0 2018

2019 Logistics

* Loans under 1M EUR with long-term fixed interest (<5 years)

2020

2021

Semi-industrial

2022

Q3 2023

# deals (RHS)

BELGIUM / Industrial Q3 2023 Market Statistics STOCK (SQM)

SUBMARKET

Flanders Brussels (incl. Brabants) Wallonia

Q3 2023 TAKE-UP (SQ M)

Q1-Q3 2023 TAKE-UP (SQ M)

PRIME RENT (EUR/sq m/year)

PRIME YIELD (%)

20,229,000 (L)

119,600 (L)

289,505 (L)

62 (L)

5.00 (L)

11,578,000 (SI)

168,200 (SI)

518,000 (SI)

68 (SI)

6.70 (SI)

2,434,000 (L)

19,650 (L)

24,200 (L)

68 (L)

5.00 (L)

3,648,000 (SI)

51,000 (SI)

157,300 (SI)

68 (SI)

6.70 (SI)

3,934,000 (L)

0 (L)

39,375 (L)

55 (L)

5.05 (L)

2,882,000 (SI)

68,600 (SI)

127,000 (SI)

59 (SI)

7.10 (SI)

L: Logistics SI: Semi-Industrial

Key Lease Transactions Q3 2023 PROPERTY

BUILDING TYPE

WLP XIX WLP IX Delhaize Home Shop Center

MARKET

OCCUPIER

SIZE (SQ M)

TRANSACTION TYPE

Logistic

Limburg

Kuehne+Nagel

58,600

Letting

Logistic

East Flanders

DSV Solutions

30,000

Letting

Logistic

Flemish Brabant

Delhaize

19,650

Letting

Semi-Industrial

Mechelen-Willebroek

Care4Fleets

18,000

Letting

Logistic

East Flanders

Tailormade Logistics

13,000

Letting

KMO park De Hulst

Semi-Industrial

Mechelen-Willebroek

Hanos

13,000

Letting

Havendoklaan 19

Semi-Industrial

Flemish Brabant

Bpost

10,800

Letting

Antwerpsesteenweg 3 WLP IX

Key Investment Transactions Q3 2023 PROPERTY

BUILDING TYPE

MARKET

PURCHASER

SELLER

Price, EUR M

TRANSACTION TYPE

Balta site Avelgem

Logistic

West Flanders

Mohawk International

Balta Group

30

Investment

Aarschot Logistics

Logistic

Flemish Brabant

Serris REIM Belgium

Private/Unknown

14

Investment

Hauts Sarts 50

Logistic

Liège

Intervest O & W

Tyres Logistics Int.

29

Investment

Semi-Industrial

Flemish Brabant

Serris REIM Belgium

Tribeca Capital Partners

7

Investment

Brusselsesteenweg 346

Cédric VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 cedric.vanmeerbeeck@cushwake.com Oscar DE GROOTE Research Analyst | 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

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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.

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