Q3 2021 | Regional Office Marketbeat | Belgium

M A R K E T B E AT

BELGIUM REGIONAL Office Q3 2021

12-Mo. Forecast

YoY Chg

Belgian economic growth returning as expected to pre crisis level.

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.

217K Take-up sq m (YTD)

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.

165 Prime rent, (EUR/sq m/year)

5.25%

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.

Prime yield (3/6/9 lease)

Predicting the return to the office.

According to Cushman & Wakefield’s Predicting the return to the office report1, in Europe 40% of the workforce had returned to the office as of September, and it is expected that the majority will return in early 2022 with potential positive impact on 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% 2021 Unemployment Rate

1.68% Consumer Price Index Source: Moody’s Analytics, BNB, Eurostat , September 2021

EVOLUTION RATE OF EMPLOYMENT BY SECTOR

GDP GROWTH AND UNEMPLOYMENT RATE 10%

6%

8%

4%

6% 2%

4% 2%

0%

0%

-2%

-2%

-4%

-4% 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.

-6%

-6%

2016

2017

2018

2019

2020

2021

-8% 2015

2016

2017

2018

GDP Growth Source: Moody’s Analytics, September 2021

2019

2020

2021

2022

Unemployment Rate

2023

Financial and insurance activities Public administration Scientific activities Other activities Source: Moody’s Analytics, September 2021

2022

2023

M A R K E T B E AT

BELGIUM REGIONAL Office Q3 2021 Large Grade A spaces boost Flanders’ office recovery.

Gauging from take-up figures, it would appear the pandemic did not hit Flanders office markets as hard as it has elsewhere. Indeed, a respectable figure of 44,000 sq m in Q3 adds to the confidence ensuing from Flanders’ best H1 on record in terms of take-up. As a result, 2021 levels after Q3 are superior to a complicated 2020.

Digging deeper into these figures reveals more than a handful of transactions over 1,000 sq m, almost all of which related to Grade A spaces. Chief among these was an 11,000 sq m pre-letting by Dematic in the Campus West project in Antwerp over several phases – a strong vote of confidence for the peripheral Linkeroever district. This is followed by a 5,600 sq m pre-letting by co-working operator Silversquare in the Antwerp Tower, currently under construction, and where the office component has just been acquired by Befimmo. In Ghent, it’s still full speed ahead for Banimmo’s Networks Gent project, with another pre-letting this quarter – in this instance, more than 3,000 sq m for IT company iO.

FLANDERS TAKE-UP PER DISTRICT, 000s SQ M

400 300 200 100 0 2017 Antwerp

2018

2019

Ghent

2020

Mechelen

Q1-Q3 2021 Leuven

FLANDERS NEW DEVELOPMENTS AND PIPELINE, 000s SQ M

300

Strong Flanders pipeline over next two years can ensure healthy dynamic.

As is often the case in Flanders, the above transactions indicate high demand for well-located Grade A spaces. This explains the increased pipeline of buildings which will be added to the stock over the next couple of years, many of these spaces already have found their future occupiers, but a healthy number of available spaces can ensure market turnover in the medium term.

Indeed, many occupiers are rethinking their workplace strategies post-pandemic, and even if this can signify a reduction in the spaces they occupy, well thought-out (e.g., ventilation, layout, etc.) new builds will be crucial in this regard.

200 100

0

Antwerp

Ghent

Mechelen

Leuven

Pipeline Flanders

FLANDERS RENTS, EUR/SQ M/YEAR

Stable prime rents in Flanders with possible increases ahead.

The most expensive prime rents in Flanders are still found in Antwerp and Ghent, both level on EUR 165/sq m/year. There are some indications that these levels may increase in a not-so-distant future on the back of strong demand for qualitative spaces. Indeed, the developers of certain projects under development are considering going well beyond current prime rental levels.

Average weighed rents return to pre-pandemic levels (EUR 128/sq m/year) establishing a return to normality in Flanders.

180 160 140 120 100 2017 2018 Antwerp Leuven Flanders average

2019

2020 Q3 2021 Ghent Mechelen

M A R K E T B E AT

BELGIUM REGIONAL Office Q3 2021 Quiet Q3 in Wallonia led by Charleroi, and a key occupier.

Overall take-up for Wallonia in Q3 amounted to 7,500 sq m, bringing the current 2021 total to more than 43,000 sq m. As indicated in the take-up chart, there is substantial ground to be made up by the end of the year in order to be close to the level encountered in 2020.

The Charleroi office market led activity in Q3 with more than 3,000 sq m thanks to a 2,900 sq m pre-letting by the Forem, which will install some co-working facilities in the FGTB’s old offices, Boulevard Emile Devreux 3638, currently undergoing redevelopment by Immo Moury. The Forem was a key driver of market activity this quarter, having also extended by 2,400 sq m in Namur Office Park (Namur).

Aside from the above it was a quiet Q3, with very few other deals recorded. In total after three quarters, 28 deals have been recorded in Wallonia, against 35 at the same point in 2020. This reduction in the number of deals clearly explains the decrease in activity, which would have been more severe were it not for key large deals such as Ethias’ 15,000 sq m pre-letting earlier this year. Nevertheless, this comes as no surprise, as the Walloon governement, an important occupier on this market, completed moves related to its new occupier strategy last year, leaving a vacuum in terms of demand from the public sector.

Substantial (speculative) pipeline in Wallonia.

The pipeline for the coming years is substantial, with 290,000 sq m extra to be added to the stock by 2024, including a good deal speculatively, such as the Rivage (17,000 sq m) and Oh!rizons (23,000 sq m) buildings in Left Side Business Park, Charleroi or the office buildings around the Standard de Liège stadium (more than 10,000 sq m) in Liège. As in Flanders, a sufficient amount of new Grade A spaces can entice occupiers to leave older offices behind in favour of more efficient offices.

WALLONIA TAKE-UP PER DISTRICT, 000s SQ M

150 100 50 0 2017

2018

Liège

2019 Namur

2020

Q1-Q3 2021

Charleroi

WALLONIA NEW DEVELOPMENTS AND PIPELINE, 000s SQ M

150 100 50 0

Liège

Namur

Charleroi

Pipeline Wallonia

Stable Walloon prime rents, highest in Liège and Namur.

The highest prime rents are to be found in Liège and Namur, both EUR 160/sq m/year, while Charleroi is at EUR 145/sq m/year, having increased earlier this year.

WALLONIA RENTS, EUR/SQ M/YEAR

Wallonia’s average weighted rent is EUR 135/sq m/year but is likely higher in reality given that rents on some key Grade A deals have not been communicated.

160

180

140 120 100 2017

2018

Liège Charleroi

2019

2020

Q3 2021

Namur Wallonia average

M A R K E T B E AT

BELGIUM REGIONAL Office Q3 2021 Weaker Q3, but no lack of investment demand for regional office products.

A lowly EUR 5 million in regional office market investments was recorded in Q3 – the lowest quarterly level since mid-2018. Nevertheless, no amount has thus far been communicated on this quarter’s main transaction – Befimmo’s acquisition of the office component (5,600 sq m) of Matexi’s Antwerp Tower, currently under development. Therefore, by conservative estimates it is fair to assume the actual total invested in Q3 is closer to EUR 20 million.

ANNUAL INVESTED VOLUMES, EUR M

800

35 30 25 20 15 10 5 0

600 400 200

This brings the current total for Flanders and Wallonia office investments in 2021 to more than EUR 235 after three quarters – a level already superior to the annual total for 2018 most recently.

0

2017

2019

2020

Wallonia regional markets Flanders regional markets

With many developments nearing completion, many a keen eye will be cast by interested parties, should these products come to market. Indeed, demand on this front is not lacking.

Q1-Q3 2021

PRIME YIELDS

7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 4.00%

Q1 2017 Q2 2017 Q3 2017 Q4 2017 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

Prime yield compression is on the cards.

Prime yields continue to remain stable – 5.25% in Flanders and 6.75% in Wallonia. Compressions to a level closer to 5.15% at the very least are foreseen next year in Antwerp and Ghent. This is the result of constant pressure and strong appetite for the assets which could come to the market in the next couple of years.

2018

Prime yield Flanders

Prime yield Wallonia

M A R K E T B E AT

BELGIUM REGIONAL Office Q3 2021 MARKET STATISTICS REGION

MARKET

BUILT STOCK (SQ M)

AVAILABILITY (SQ M)

VACANCY RATE

Q3 2021 TAKE-UP

2021-2024 PIPELINE (SQ M)

PRIME RENT (EUR/SQ M/YEAR)

PRIME YIELD

Antwerp

2,210,000

232,000

10.50%

33,000

198,000

165

5.25%

Ghent

1,103,000

44,000

3.95%

5,600

119,000

165

5.25%

Leuven

564,000

n.a.

n.a.

1,300

36,000

150

6.50%

Mechelen

324,000

n.a.

n.a.

700

39,000

150

6.50%

Liège

515,000

26,000

5.06%

2,000

110,000

160

6.75%

Namur

528,000

36,000

6.79%

2,300

85,000

160

6.75%

Charleroi

486,000

11,000

2.19%

3,200

95,000

145

7.00%

Flanders

Wallonia

KEY OCCUPIER TRANSACTIONS Q3 2021 PROPERTY

MARKET

TENANT

SIZE (SQ M)

TRANSACTION TYPE

Campus West Antwerp Tower

Antwerp

Dematic

11,000

Pre-letting

Antwerp

SilverSquare

5,600

Pre-letting

Networks Gent

Ghent

iO

3,200

Pre-letting

Devreux 36-38

Charleroi

Forem

2,900

Pre-letting

Uilenbaan 90

Antwerp

Eight Lakes Group

2,400

Purchase

Namur

Forem

2,300

Extension

Namur Office Park

SHANE O’NEILL Associate Director | Research Belgium +32 2 510 08 33 shane.oneill@cushwake.com CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 cedric.vanmeerbeeck@cushwake.com

cushmanwakefield.com

*Renegotiations not included in leasing statistics

KEY SALES TRANSACTIONS Q3 2021 PROPERTY Antwerp Tower (offices)

SUBMARKET

BUYER / SELLER

SQ M

PRICE, EUR M

Antwerp

Befimmo / Matexi

5,600

n.a.

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 2018, the firm had revenue of $8.2 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.