Large deals provide boosts

Transcription

1 PROPERTY TIMES Large deals provide boosts Walloon Offices Q3 216 October 216 Contents Economic climate 2 Belgian regional office markets 4 Liège 6 Namur 7 Charleroi 8 Walloon Brabant 9 Although it underwent a decrease in Q3, regional office activity amounted to 57, sq m, which is exactly in line with the five-year average (Figure 1). In Flanders, the total was 34, sq m, while Wallonia recorded its best quarter since the end of 212 with 23, sq m. Indeed, Liège (13, sq m) was the most important contributor to regional office market activity thanks to deals involving the public sector. It is rare occurrence that a Walloon market leads regional office market activity. Two thirds of take-up in regional markets took place in Grade C buildings, which signals that occupiers have to settle for lesser grades in several markets due to lack of concrete pipelines. Some much required speculative construction is underway in Liège a 15, sq m development by Ardent Group which will be delivered in 218. The prime rent remains at EUR 15/sq m/year and is present in Antwerp and Ghent as previously, although this rent has also recently been recorded in Mechelen. Namur now presents a lower prime rent. Average rents in Q3 were in the EUR 115/sq m/year to EUR 13/sq m/year bracket, in spite of the dominance of Grade C take-up. Author Shane O Neill Senior Research Analyst Research Belgium shane.oneill@cushwake.com Contacts Cédric Van Meerbeeck Head of Research Belgium & Luxembourg cedric.vanmeerbeeck@cushwake.com Figure 1 Take-up in Belgian regional office markets (LHS) and regional annual rolling take-up (RHS), sq m 1, 8, 6, 4, 2, 3, 24, 18, 12, 6, Elisabeth Troni Head of EMEA Research & Insight +44 () elisabeth.troni@cushwake.com Flanders total Flanders rolling annual Wallonia total Wallonia rolling annual cushmanwakefield.com PROPERTY TIMES 1

2 Walloon Offices Q3 216 Economic climate Belgium s economy to keep growing at a moderate pace. After two years of moderate growth, global activity should slightly pick up in 217, driven by the United States and the emerging economies. However, economic growth in the Eurozone should remain moderate, partially because the Brexit decision has materialised, creating more uncertainties. The impact of this decision will depend on different economic and political factors. In Europe, several confidence indicators fell significantly in August, but currently remain at a relatively high level. In the short term, uncertainties should hit the British economy in particular, but inevitably weigh on the GDP growth of the whole euro area, which, on the basis of recent consensus forecasts, should slow down from 1.5% in 216 to 1.3% in 217. In 216, the Belgian economy should grow by 1.4% for the second year in a row, which is largely due to unexpectedly high GDP growth in the second quarter (.5% after.2% in the first quarter). The negative macroeconomic impact of the attacks at the end of March was largely compensated by dynamic domestic and foreign demand. Owing to a less favourable international context, subdued, but stable, growth of.3% per quarter is expected in the subsequent quarters. This would mean a slight deceleration in economic growth to 1.2% in 217 on an annual basis. In the longer term, Belgian GDP growth is expected to stand at around 1.5% per year by 22, below the pre-crisis level of 2.3% (Figure 2). The medium-term outlook for Brussels is relatively muted, with average GDP growth for the period matching the national rate, but continuing to lag behind the European city average. In the longer term, inflation in the Eurozone is forecasted to grow significantly to reach 1.6% to 1.8%. The evolution of consumer price index in Belgium should follow the Eurozone evolution (Figure 4). Figure 2 GDP growth 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% -1.% Source: Oxford Economics, Federal Planning Bureau, September 216 Figure 3 Belgium Eurozone Consumer and business confidence indices Strong decrease of the confidence indices. Consumer confidence Business confidence Consumer and Business confidence indices recorded strong downward movement since August, following restructuration announcements in the industry and financial and insurance sectors and fears of an increase of the unemployment rate (Figure 3). Inflation expected to reach 2% in 216, compared to very low.3% in the Eurozone. Belgian inflation was at very low level in 213 and 214 largely as a result of the decline in oil prices. Even if oil prices gradually increase, gas and electricity price quotations are projected to be down compared to last year. As a result, inflation should reach 2% in 216. In 217, inflation is expected to decrease to 1.6% due to several factors that compensate each other partially, core inflation should decline as a result of labour cost reduction measures. Source: National Bank of Belgium, September 216 Figure 4 Consumer price index 4.% 3.5% 3.% 2.5% 2.% 1.5% 1.%.5%.% Belgium Eurozone Source: Eurostat, Federal Planning Bureau, September 216 cushmanwakefield.com PROPERTY TIMES 2

3 Walloon Offices Q3 216 Job creation still expected to peak in 216, despite important restructuration announced recently. In spite of a trend decrease in employment in the manufacturing industry (namely the decision of Caterpillar to stop its activity, implying the loss of around 5, jobs globally) and in the financial and insurance sector (namely the recent decision of ING to suppress around 3,2 jobs in Belgium up to 221), total domestic employment is expected to increase by 1% and.7% respectively in 216 and 217, i.e. a net increase of almost 77, jobs over these two years. However, public employment in 217 is projected to be down by 9 persons compared to 215. In the medium term, job creation should remain positive up to 22, though at a decreasing rate (Figure 5). In Wallonia, job creation is expected to grow by 1.2% in 216, notably thanks to new public sector jobs stemming from the Sixth Reform of the State. which should keep borrowing costs in the Eurozone at low levels. Figure 5 Employment growth by region 2.% 1.5% 1.%.5%.% -.5% -1.% Brussels Flanders Wallonia Source: Oxford Economics, National Bank of Belgium, September 216 Unemployment to decrease at a slow pace, currently at 11.6% in Wallonia. Despite recent negative news, a downward revision of unemployment in 216 and 217 has been adopted. The number of the unemployed is expected to decrease by 36, persons in total over the period. The unemployment rate is thus expected to go down from 8.5% in 215 to 8.2% in 217 globally in Belgium. Unemployment remains however one of the biggest issues of the Brussels-Capital Region, awaited at a high 18.2% at the end of 216, compared to 4.9% in Flanders and 11.6% in Wallonia. Further decreases are expected in the three regions of the country as the tax shift reform that reduces firms labour costs should contribute to a drop in the unemployment rate up to 22. The unemployment rate should stand at around 17% at the end of 22 in Brussels while reaching 4% in Flanders and 1.5% in Wallonia (Figure 6). High debt levels and budgetary constraints are the biggest risk for Belgium economy. Risks to Belgium s economy will remain broadly steady in the coming years. The highest risk remains the high public debt levels which continue to pose downside risks to the outlook. A more severe global economic slowdown originating, for example, from China or Brexit, would weigh on Belgian growth. Meanwhile, another economic shock could depress demand and thus investment, resulting in the economy becoming stuck in a prolonged period of stagnation. A rise in borrowing costs could necessitate politically difficult spending cuts or generate unsustainable debt dynamics. To an extent, concerns have been eased by the ECB s implementation of sovereign QE Figure 6 Unemployment rate 2% 15% 1% 5% % Source: Oxford Economics, National Bank of Belgium, September 216 Table 1 Risk warnings INDEX RISK COMMENTS GDP Growth Inflation Current account balance Government balance Government debt External debt Brussels Flanders Wallonia Belgium Source: Oxford Economics, September 216 Belgium economy running a bit faster than potential CPI has bounced back above the Eurozone average Positive, but Belgium losing export competitiveness Deficit in line with EU target in 215 One of the highest as % of the GDP in Eurozone Highly indebted but in national currency cushmanwakefield.com PROPERTY TIMES 3

4 Walloon Offices Q3 216 Belgian regional office markets Best quarter in Wallonia since 212 brings regional activity to its average level. Although it underwent a decrease in Q3, regional office activity amounted to 57, sq m, which is exactly in line with the fiveyear average (Figure 7). In Flanders, the total was 34, sq m, while Wallonia recorded its best quarter since the end of 212 with 23, sq m. Thanks to a couple of large deals in Liège which were directly attributable to the Sixth Reform of the State, the public sector was the most influential type of occupier. Indeed, Liège (13, sq m) was the most important contributor to regional office market activity thanks to these deals, a rare occurrence for a Walloon market. Liège was ahead of Antwerp (11,5 sq m) and Leuven (1, sq m). Almost two thirds of take-up took place in Grade C buildings, which signals that occupiers have to settle for lesser grades in several markets due to lack of concrete pipelines (Figure 8). Figure 7 Take-up in Belgian regional office markets (LHS) and regional annual rolling take-up (RHS), sq m 1, 8, 6, 4, 2, Figure 8 Flanders total Flanders rolling annual 3, 24, 18, 12, 6, Take-up distribution by building grade, Belgian regional office markets, Q3 216 Wallonia total Wallonia rolling annual Availability in old buildings main outlet for activity due to lack of speculative developments. Unknown 4% A 21% Take-up in new buildings is certain to pick up in Antwerp from 217 when 35, sq m will be delivered speculatively. This situation does not however extend to the majority of markets where there are few speculative developments in the pipeline and/or few available spaces in Grade A buildings. C 55% 57, sq m B 2% Upwards of 3, sq m have been delivered in Q3 in Antwerp, Liège and Charleroi. These deliveries were almost exclusively committed. Stable prime rent. The prime rent remains at EUR 15/sq m/year and is present in Antwerp and Ghent as previously, although this rent has also recently been recorded in Mechelen. Namur now presents a lower prime rent (Figure 9). Average rents in Q3 were in the EUR 115/sq m/year to EUR 13/sq m/year bracket, in spite of the dominance of Grade C take-up. Figure 9 Belgian regional office prime rents, EUR/sq m/year Q3 216 Leuven Antwerp Ghent Mechelen Namur Liège Charleroi cushmanwakefield.com PROPERTY TIMES 4

5 Walloon Offices Q3 216 Map 1 Office deals, Belgium, Q3 216 Take-up (sq m) 1 1. Region Urban areas Forests Major roads Kilometers Cushman & Wakefield Sources : ESRI, Teleatlas, BrusselsUrbis cushmanwakefield.com PROPERTY TIMES 5

6 Walloon Offices Q3 216 Liège Large deal involving the public sector disrupts state of things. Figure 1 Liège office take-up (LHS) and annual rolling take-up (RHS), sq m 2, 4, Liège take-up was at its highest level since the beginning of 212 with a total of 13, sq m in Q3 (Figure 1). This sets up the market for its finest year since , 1, 3, 2, Activity received a substantial boost from the public sector as Synergies Wallonie, which groups various Walloon administrative agencies under one roof, agreed a deal to let more than 9, sq m in the New Royal Avroy. The second largest deal in Q3, a 1,7 sq m letting is notable for having taken place in the Espace Fragnée, one of the only buildings on the market with Grade A spaces still available. The public sector s influence was also felt thanks to a 1,25 sq m extension by the Liège city administration in the Espace Guillemins. On the back of the New Royal Avroy letting, Grade C spaces dominated activity at a rate of 76%. New delivery in Flémalle. Mithra s 15, sq m CDMO in Flémalle was inaugurated this quarter. The development includes spaces to be shared with outside research-oriented companies. No further deliveries are expected this year. In the near term the Ernest 11, a private development by BPI on the Val Benoît site will add 13, sq m from 217. Other projects in the pipeline include the Liège Office Center (15, sq m) which will be delivered in 218 as well as E.Lyge (1, sq m) which will not go ahead speculatively. Other projects geared towards the long term that have the potential to further increase the supply include Banimmo s Bonne Fortune project (2, sq m to be developed through several buildings in Ans) as well as Fedimmo s mixed-use Paradis Express which would include 21, sq m of offices in the Guillemins area. 5, 1, Quarterly Rolling annual Figure 11 Liège office rents, EUR/sq m/year Q3 216 Prime rent Average weighted rent Map 2 Office deals in Liège, Q3 216 Take-up (sq m) 1 1. Prime rent back to normal after Espace Fragnée deal. 1. Awans Ans Herstal Following a brief blip in Q2, the prime rent returns to its level of EUR 14/sq m/year following the letting in Espace Fragnée. Grâce-Hollogne Liège The average weighted rent increases to EUR 134/sq m/year due to the lack of diversity of products offered on the Liège market. Saint-Nicolas Flémalle-Grande Seraing Chaudfontaine Main waterways Forests Industrial terrains Source : Cushman & Wakefield, Téléatlas 2 4km cushmanwakefield.com PROPERTY TIMES 6

7 Walloon Offices Q3 216 Namur Increase of activity (which remains under average). Although at its highest level since the beginning of 215 with a total of 1,5 sq m, Namur take-up remains below its five-year average of 2,7 sq m (Figure 12). There were a total of three deals this quarter - the largest was a 1, sq m letting by Regus in the Parc Orion. Various speculative and committed schemes in the pipeline. Following the deliveries of Hobeco s Green Park 2 and 3 buildings (both more or less 3,2 sq m) earlier this year, only Eaglestone s 5, sq m Aquilis D a turnkey development for Atradius is still to be delivered. In the longer term, IRET will redevelop the post office building near the train station as Namur Cross Point, which will include 12, sq m of offices among other functions. Eaglestone s Aquilis project could result in further take-up in the future as it could develop up to 15, sq m in total over several phases according to demand. CBC s new headquarters (more or less 1, sq m) and will likely be delivered in 217. Prime rent no longer highest of Belgian regional markets. The Namur prime rent is now longer among the highest of Belgium s regional markets following its decrease to EUR 145/sq m/year as there are no offices combining modern facilities with an outstanding location. The average rent so far this year amounts to EUR 115/sq m/year (Figure 13). Figure 12 Namur office take-up (LHS) and annual rolling take-up (RHS), sq m 14, 12, 1, 8, 6, 4, 2, Figure 13 Namur office rents, EUR/sq m/year Map 3 Quarterly Office deals in Namur, Q3 216 Take-up (sq m) 1 Rolling annual 28, 24, 2, 16, 12, 8, 4, Q3 216 Prime rent Emines Average weighted rent 5 1. Namur Main waterways Forests Industrial terrains 2 4km Source : Cushman & Wakefield, Téléatlas cushmanwakefield.com PROPERTY TIMES 7

8 Walloon Offices Q3 216 Charleroi Substantial boost from Infrabel. Charleroi take-up was at its highest level 8,4 sq m since 213 despite only two deals having taken place (Figure 14). This is achieved thanks to a large development in the centre for Infrabel s CLI (Centre Logistique Infrastructure) which will include 8, sq m of offices. This development will house 4 employees currently working in the SNCB s Hôtel des Chemins de Fer. Pipeline focused on the centre. IRET has been active on the Charleroi market this year with the deliveries of BNP Paribas Fortis 8, sq m regional head office as well as the 13, sq m RMI, delivered speculatively in April. Both schemes are located in the centre. Additionally works on the aforementioned new 8, sq m offices for Infrabel commence in 217. The long term pipeline aims to develop large-scale projects in the town centre such the Left Side Business Park which will develop 4, sq m of offices spread through four towers. This project is part of the Rivages district PRU (Projet de Remembrement Urbain) which will redevelop this obsolete Charleroi site with six mixed-use towers as part of a regeneration of the centre of Charleroi. This project could attract public sector occupiers in the context of the regionalisation of powers which is leading to large movements. Prime rent could be influenced by future deals in RMI. The prime rent remains at EUR 13/sq m/year a level which may be affected in the near future by deals in the RMI. The average rent so far this year amounts to EUR 118/sq m/year (Figure 15). Figure 14 Charleroi office take-up (LHS) and annual rolling take-up (RHS), sq m 1, 8, 6, 4, 2, Figure 15 Charleroi office rents, EUR/sq m/year Map 4 Quarterly Office deals in Charleroi, Q3 216 Rolling annual 5, 4, 3, 2, 1, Q3 216 Prime rent Average weighted rent Take-up (sq m) 1 1. Sombreffe Pont-à-Celles Mellet 1. Fleurus Chapelle-lez-Herlaimont Courcelles Jemeppe-sur-Sambre Auvelais Farciennes Anderlues Fontaine-l'Evêque Charleroi Châtelet Aiseau Montigny-le-Tilleul Lobbes Thuin Ham-sur-Heure Source : Cushman & Wakefield, Téléatlas Gerpinnes Main waterways Forests Industrial terrains Mettet 2 4km cushmanwakefield.com PROPERTY TIMES 8

9 Walloon Offices Q3 216 Walloon Brabant Deals spread heterogeneously across territory. Take-up in Walloon Brabant increased to more than 4, sq m in Q3 (under the five-year average) on the back of a dozen deals (Figure 16). The two largest deals were in the range of 9 sq m and were located in Nivelles and the Collines de Wavre, while the totality of deals were fairly heterogeneously spread across Walloon Brabant s main poles (Waterloo, Braine-l Alleud, Wavre, Mont- Saint-Guibert as well as Nivelles) (Map 5). Figure 16 Walloon Brabant office take-up (LHS) and annual rolling take-up (RHS), sq m 25, 2, 15, 1, 5, 5, 4, 3, 2, 1, Almost 5% of take-up was located in Grade B offices, a slightly more positive situation than in the rest of Wallonia where available supply is mainly in older buildings. Quarterly Rolling annual Speculative projects required to rival neighbouring district. No deliveries have taken place in Q3 and the vacancy rate is currently 9.31%, fairly evenly spread across buildings on the Walloon Brabant territory (La Hulpe, Braine-l Alleud, Waterloo, and Wavre), with Mont-Saint-Guibert a notable exception thanks to the fully occupied Axis Parc. There are no speculative standard office projects underway to compete with neighbouring Flemish Brabant, which currently offers an attractive alternative to companies located in Brussels and Wallonia due to favourable tax conditions. New quality products are lacking in all areas of Walloon Brabant and the few products that are available are very quickly occupied This is notably the case of the Genesis in Braine-l Alleud which is currently in advanced negotiations with an occupier, having only recently been delivered. Figure 17 Walloon Brabant office prime rent, EUR/sq m/year However, niche supply geared towards research-related occupiers in the Louvain-la-Neuve area is set to increase significantly with the construction of Juxing s CBTC (China Belgium Technology Center) underway. Map 5 Office deals in Walloon Brabant, Q3 216 Asse Zaventem igem Take-up (sq m) Prime rent on par with regional markets. Ternat Dilbeek Bertem Leuven 1 5 Prime rents in Walloon Brabant are on an even footing with Regional office markets and amount to EUR 15/sq m/year (Figure 17). The average rent so far this year amounts to EUR 12/sq m/year to EUR 13/sq m/year. Halle Beersel Waterloo Tervuren Overijse Wavre Grez-Doiceau 1. Ittre Braine-l'Alleud Ottignies Walloon Brabant Mont-Saint-Guibert Nivelles Genappe Gembloux 8 16 km Source : Cushman & Wakefield, Pont-à-Celles Teleatlas Mellet Sombreffe cushmanwakefield.com PROPERTY TIMES 9

10 Walloon Offices Q3 216 Definitions Availability: Represents the total floor space in existing properties, which are physically vacant, ready for occupation and being actively marketed as known on the last day of the quarter (with a margin of error of 5%). The vacancy rate represents the total vacant floor space divided by the total stock at the survey date. Building grade: Grade A: newly developed or comprehensively refurbished to new standard, including sublet space in new/refurbished buildings not previously occupied. Grade B: buildings of good specification, floor plate efficiency and image usually but not exclusively ten years old or less. Grade C: remaining poorer quality stock. New supply: Represents the total amount of floor space that has reached practical completion as known on the last day of the quarter (including major refurbishments) regardless whether the space is occupied or still available on the market. Prime rent: Represents the attainable average prime rent that could be expected for an office unit (min. 5 sq m) commensurate with demand in each location, highest quality and specification in the best location in a market at the survey date. The rent is given as a base rent, i.e. no service charge or tax is included. Square metres: Unless stated otherwise, the square meters used in this publication refer to the Gross Leasable Area definition for Brussels. For more information, see our Insight: Office Lease Area Comparison. Stock: The office property stock is the sum of office properties which are in use and office properties standing empty at the time of analysis. The office property stock is not a static amount. Due to new-build or totally refurbished operations it increases (new supply), due to demolition, change of use or even larger refurbishments that make the space not usable for a significant amount of time, it decreases. Take-up: Represents the total office floor space known to have been either let, pre-let or developed for tenants as well as sold or pre-sold to owner-occupiers as known on the last day of the quarter. Adjacent office spaces, when known, are not included. Pure contract renewals, sales and leasebacks and sub-lettings are not included. cushmanwakefield.com PROPERTY TIMES 1

11 EMEA John Forrester Chief Executive john.forrester@cushwake.com Capital Markets Arnaud de Bergeyck Head of Capital Markets Retail arnaud.debergeyck@cushwake.com Valuation & Advisory Christophe Ackermans Head of Valuation & Advisory christophe.ackermans@cushwake.com Belgium Koen Nevens Northern Region Leader Head of Belgium & Luxembourg koen.nevens@cushwake.com Capital Markets Marc-Antoine Buysschaert Head of Capital Markets Office marc-antoine.buysschaert@cushwake.com Valuation & Advisory Kris Peetermans Head of Valuation & Advisory kris.peetermans@cushwake.com Office Agency Antoine Brusselmans Head of Office Agency antoine.brusselmans@cushwake.com Retail Agency Jean Baheux Head of Out of Town Retail jean.baheux@cushwake.com Asset Services Henry Morauw Head of Property Management henry.morauw@cushwake.com Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. The data contained in this report is based upon that collected by Cushman & Wakefield. Our prior written consent is required before this report can be reproduced in whole or in part. 216 Cushman & Wakefield. To see a full list of all our publications please go to cushmanwakefield.com or download the Research App Global Headquarters 77 West Wacker Drive 18th Floor Chicago, IL 661 USA phone fax info@cushwake.com Cushman & Wakefield Belgium Kunstlaan 56 Avenue des Arts 1 Brussels Belgium phone cushmanwakefield.com