BELGIUM
Office Market Snapshot Fourth Quarter | 2018
Overview
MARKET INDICATORS
Annual GDP growth in Belgium weakened to 1.4% in 2018 and, despite rising geo-political uncertainties, is forecasted to slightly increase in 2019 to 1.5%. The unemployment rate was at 6.3% in Q4 and is expected to remain at this level throughout 2019. Interest rates are also expected to remain unchanged, at least up to the end of 2019 as announced by the ECB.
Market Outlook Prime Rents:
Slight increase expected in main markets in 2019.
Prime Yields:
Prime yields are set to sharpen in key markets in Flanders.
Supply:
The pipeline, speculative and otherwise will pick up nicely in 2019 and will be evenly balanced between both regions. Markets with strong pipelines should provide potential to sustain strong demand, elsewhere, the dynamic should soften.
Demand:
Occupier focus
Prime Office rents – December 2018 LOCATION
€ SQ.M YR
US$ SQ.FT YR
GROWTH % 1YR 5YR CAGR
Antwerp (Singel)
155
16.4
0.0
2.8
Liege
150
15.9
3.4
4.6
Ghent
150
15.9
0.0
0.7
Mechelen
145
15.4
0.0
0.7
Leuven
150
15.9
7.1
0.7
Namur
160
16.9
3.2
0.6
Charleroi
135
14.3
3.8
2.4
CURRENT Q
LAST Q
LAST Y
10 YEAR HIGH LOW
Antwerp (Singel)
6.25
6.25
6.25
7.50
6.25
Liege
6.75
6.75
6.75
8.75
6.75
Ghent
6.15
6.25
6.25
8.25
6.15
Prime Office yields – December 2018 LOCATION (FIGURES ARE GROSS, %)
NOTE: The above yields are for typical 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.
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%
déc-08 déc-10 déc-12 déc-14 déc-16 déc-18
Rental growth (y/y)
Yields
All Flanders markets peaked in Q4, thanks to some big deals led by Antwerp with 69,000 sq m (including a 33,000 sq m purchase by KdG Hogeschool in an exchange of buildings carried out with Tans Group), Leuven (including a 27,000 sq m development for VIB) and Mechelen (including a 24,000 sq m development for Galapagos). The largest deal in Wallonia was a 3,300 sq m purchase by Euresys in Liège. We note that demand has been especially driven by a seemingly buoyant private sector, with ICT and R&D occupier doing particularly well. There have been no changes to prime rents in Q4 – Namur has the highest among regional markets with EUR 160/sq m/year; in Flanders, the highest is Antwerp with EUR 155/sq m/year.
Investment focus
Recent performance Yield - Country Average Rental Growth - Prime
Demand rebounded in style in Q4 after a lacklustre Q3 to total a record quarter as take-up amounted to 165,000 sq m. This is mainly attributed to a record quarter in Flanders (156,000 sq m); Wallonia recorded 9,000 sq m.
Q4 investment volumes were one of the all-time highs with EUR 142 million recorded thanks to a handful of deals in the EUR 2050 milllion bracket. Alinso’s purchase of The Crescent and several units of Axxes for EUR 48 million in Ghent right at the end of the year was the largest deal in 2018.
Outlook
The outlook is mainly positive for markets such as Antwerp, Ghent and Liège, it is difficult to exclude peripheral markets such as Mechelen from pulling large developments out of the hat as was the case with Galapagos in Q4. It is not unreasonable to expect sustained investment volumes in 2019 amid increased interest from investors. We forecast prime yield to sharpen in key markets as a result.
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