M A R K E T B E AT
BRUSSELS Office Q2 2020 Economic Overview YoY Chg
12-Mo. Forecast
YTD Take-Up (sq m)
Following the heavy economic blow caused by the coronavirus-related lockdown, indicators and surveys confirm activity is now rebounding. In particular, surging expectations in both business and consumer confidence surveys support the view that recovery is underway. Oxford Economics’ GDP growth forecast indicated that the Belgian economy will contract by 8.7% this year followed by a rebound in 2021 where a 7.1% growth is expected. However, subsequent growth (up to mid-2022) will be much more gradual as higher unemployment (forecasted at 6.6% for 2020), subdued external demand, delayed investment plans and a limited fiscal response due to the return of the political deadlock, will slow the recovery.
7.60%
Letting Activity
Vacancy Rate
Letting activity during Q2 reached 78,000 sq m (62 transactions), bringing the total for the first half of the year to 128,000 sq m. Indeed, this is one of the weakest semesters ever recorded. As a reminder, activity in the letting market was expected to decrease following a remarkable take-up level in 2019, but the weak activity was strongly amplified by the COVID-19 outbreak and the subsequent lockdown measures. The take-up level this semester was boosted by the expected move of the OIB (EU Commission) in The One (30,000 sq m), and by the pre-letting of ING Bank in the Commerce 46 (14,200 sq m). Prime rents have not been affected by the economic downturn and remain at 320€/sq m/year. The weighted average rents, on the other hand are higher at around 190 €/sq m/year. The vacancy rate for the overall market is still at a low 7.60% but a slight uptick is expected due to the delivery of some new office schemes.
128,000
€320
Prime rent (€/sq m/year)
Investment Activity
ECONOMIC INDICATORS Q2 2020 YoY Chg
12-Mo. Forecast
-8.7% GDP Growth Belgium
6.3% Unemployment Rate Belgium
0.4% Consumer Price Index (% change) Source: Oxford Economics 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.
The first half of the year saw the highest investment volume ever recorded on the Brussels office market with EUR 2.4 bn invested. Indeed, this includes the historical transaction of the Finance Tower (sold for around EUR 1.3 bn). Nevertheless, H1 2020 recorded 45 transactions, the highest number of deals ever recorded in a single semester. Most of the transactions were launched before the outbreak and closed during the first quarter of the year, still reflecting the strong momentum observed over the last couple of years. The effect of the outbreak on the investment market has mainly been felt during Q2 which recorded 16 transactions and a total of 340 MEUR, including the sale of the Silver Tower for more than 200 MEUR. Prime yields did not change since last quarter and are at 4.0% following a high demand and strong activity before COVID-19. The long term prime yield saw a slight compression to 3.50%.
Outlook Take-up activity is still forecasted to be weak in the coming quarters despite some large transactions in the pipeline. Rental levels could change in some submarkets but the prime rent should remain unchanged at 320€/sq m/year (Leopold district). There are still numerous transactions in the investment pipeline but the activity might slow down as banks are being more prudent with loans which could lead to a higher cost and lower LTV, resulting in a slight rise of the prime yield. QUARTERLY TAKE-UP (in SQ M)
INVESTMENT VOLUME (MEUR, LHS) AND PRIME YIELD (RHS)
600.000
3.000
7,00%
500.000
2.500
6,00%
400.000
2.000
300.000
1.500
200.000
1.000
100.000
500
0
0 2010
2011 2012 2013 2014 Q1
Q2
2015 2016 2017 2018 Q3
Q4
2019 2020
5,00% 4,00% 3,00% 2,00% 1,00% 0,00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 Volume Prime Yield