Luxembourg Office Market

Transcription

1 Research Report Luxembourg Office Market Q3 2017

2 - 2 - Research Report Luxembourg Office Market Q Occupier market A quieter Q3 due to lower deal size We recorded a lower than usual transaction flow during Q3 with 26,029 sq.m. being taken-up, vs. 46,844 sq.m. a year ago and 44,570 sq.m. on average the last 5 y. The main explanation is the absence of the owner-occupier transactions that boosted the market in recent years. The average deal size was indeed 465 sq.m., vs. 783 sq.m. on average the last 5 years. 30% of the take-up volume in Q3 was done in the CBD, 28% in the Station district, 27% in the periphery, and the rest was more or less equally split between Kirchberg, Cloche d Or, Esch/Belval and City Belt. The Luxembourg Chamber of Commerce and the municipality of Luxembourg recently created an incubator with the mission of supporting start-ups in the country with coaching, financial advice, mentoring and related services. The new institution, called The House of Start- Ups, will be hosted in Le Dôme building in the station district, and occupy 4,741 sq.m. This transaction has been advised by JLL. Also representative is the pre-letting to private banking firm Hauck & Aufhäuser of 3,878 sq.m. in the refurbished Euronet Office Park in Munsbach, again with the advice of JLL. In a nine month horizon take-up remains however very strong at 172,573 sq.m., 2% above the same period last year and 34% above the 5 year average, and this suggests that over the full year 2017 take-up will exceed again 200,000 sq.m. Paradoxically, the share of banks in take-up is lower than usual at 18% vs. 38% last year and 27% on the 5 year average. In contrast, the share of the Luxembourg administrations is very high at 25% compared to 5.5% on the 5 year average. If we isolate the corporate sector banks contributed to 28%, business services to 32%, e-commerce 18% and others 22%. News from Brexit: first transactions Following the announcement of a dozen or so names moving operations from London to Luxembourg as a result of Brexit, a first set of transactions have been signed: FM Global took 1,202 sq.m. in the One-on-One in the CBD, and M&G took 728 sq.m. in the Carrefour, also in the CBD. Several of the financial institutions having selected Luxembourg for their new European hub have already been present in the country for years, like Henderson, Blackstone and AIG, so there will be no massive inflow of staff to Luxembourg as a result of Brexit. There could however be larger deals coming: Citigroup announced that in case of a hard Brexit it would select Luxembourg for its European hub for private banking clients. Luxembourg is also well positioned to host the European Banking Authority (EBA), and is in competition with Prague, Vienna, Brussels, Warsaw, Dublin, Frankfurt and Paris Take-Up (sq.m.) Other 11% 9M 17 Telecom/Post 2% Banking and Finance 18% National Adm 25% Business Services 21% Q1 Q2 Q3 Q4 EU institutions 8% E-Commerce 12% IT 3% Cover photo: WHITE PEARL Landlord Monceau Assurances

3 - 3 - Research Report Luxembourg Office Market Q Representative transactions Q District Building Age Class Surface Operation Occupier Station Le Dôme Modern 4,741 sq.m. Letting House of Start-Ups Munsbach Euronet Office Park Under refurbishment 3,878 sq.m. Letting Hauck & Aufhäuser Belval Southlane Tower III New 1,148 sq.m. Owner occupier Ginkgo Solutions Facilities CBD One-on-One New 1,202 sq.m. Letting FM Global CBD Carrefour I & II New 728 sq.m. Letting M&G International Investments Vacancy decreases again A few speculative completions are ongoing, in Q3 2,800 sq.m. was delivered in Contern (Periphery). As of the end of Q3, 4.7% was vacant in Luxembourg vs. 4.9% 3 months ago and the decline primarily results from the leasing activity in the centre as well as in the periphery while it increases in the City Belt. From 4.8% in Q2, vacancy dropped to 4.1% in the Station district as a result of transactions in Le Dôme. In the CBD the last floors available in the Carrefour building are now fully let and drag vacancy to 3.7% vs. 3.8% previously. Also a slight reduction was recorded in Kirchberg to 1.8% vs. 1.9% 3 months ago. There is no change in the Cloche d Or at 5.6% and vacancy in the City Belt increased to 8.9% vs. 8% previously due to second hand properties back in the market in Bertrange and Strassen, which is partly offset by Leudelange where vacancy is decreasing. The opposite has been recorded in the periphery (mainly Capellen) with a decrease of vacancy to 8.6% vs. 9.7% 3 months before, whereas in Belval a slight decrease to 9.4% was witnessed vs. 9.9% in Q2 In volume terms 188,081 sq.m. is vacant in Luxembourg, ie a reduction of 4,546 sq.m. 3 months ago. Of this 24% is new, 53% is modern and 23% is old. Vacancy rate by district Luxembourg total Esch Peri City Belt Cloche d'or Station Kirchberg CBD 0% 2% 4% 6% 8% 10% 12% 14% Q3 17 Q4 16 Q4 15

4 - 4 - Research Report Luxembourg Office Market Q Few speculative completions ahead In early Q4 The Dyapason project of Le Foyer in Cloche d Or (10,000 sq.m. vacant) will be delivered and a few others will follow shortly like the Altitude (9,200 sq.m. still vacant) and the Triologie (4,700 sq.m.) in Leudelange, as well as the Impulse in the Station district (6,500 sq.m.). Development activity has finally restarted but remains largely non speculative as 65% of the c. 436,000 sq.m. expected to be completed by 2019 is precommitted. 58,000 sq.m. will be speculatively delivered in 2018 and 68,000 sq.m. in This would in theory contribute to lift vacancy a bit higher and leave some choice to new occupiers, but in our view vacancy will remain in a range between 5 and 6% and potentially maintain upward pressure on rents. Building District Total sq.m Vacant sq.m Timing Altitude Leudelange (City Belt) 13,200 sq.m. 9,200 sq.m. Q Dyapason Cloche d Or 12,400 sq.m. 10,000 sq.m. Q Triologie Leudelange (City Belt) 4,700 sq.m. 4,700 sq.m. Q Bijou Cloche d Or 6,000 sq.m. 6,000 sq.m. Q Impulse Station 6,500 sq.m. 6,500 sq.m. Q Rental values: stabilisation at 47 / sq.m. / month, higher levels possible for small surfaces In central locations, the occupier market conditions are more in favour of landlords than tenants and there may be additional upward pressure on rents. For now, prime rents stay at 47 / sq.m. / month in the CBD but small size transactions have been signed at 50 / sq.m. / month in the Royal Grace. Stability also prevails in Kirchberg at 35 / sq.m. / month, at the same level as the Station district. No change either in Cloche d Or and the City Belt (Strassen) where prime rents are 28.5 / sq.m. / month and in the periphery where they are unchanged at 22 / sq.m. / month. In Belval, 24 / sq.m. / month is the norm for new projects. All these benchmarks exclude VAT. Illustrative of the upward trend in rental values are top quartile and weighted average rents. On a quarterly basis, top quartile increased by 2.5% to 40.4 / sq.m. / month and on a yearly basis they increased by 12.8%. The same upward trend has been observed with weighted average rents which, while stable on a quarterly basis, increased by 8.8% y-o-y to 31.0 / sqm. / month Prime rents ( /sq.m./m) Q3 17 CBD Station Kirchberg Cloche d'or City Belt Periphery Belval

5 - 5 - Research Report Luxembourg Office Market Q Capital Markets Nearly 1 bn volume after 9 months A sixth year of volume growth Investment volume year-to-date came in 52% higher year-on-year at 943 Mln, the level of 1 bn will therefore be exceeded which means the sixth consecutive year of volume growth. 88% of the volume was Offices, and the proportion of retail increased from 1% in 2016 to 10% this year. More opportunities arise in that segment, especially for high street, but relative to offices liquidity remains low and investor interest is primarily from local private investors. Core+ transactions dominate by far the investment volume with 56%, which shows the confidence of investors in secondary locations. The share of core transactions is estimated at 19%, value added at 10% and opportunistic 5%. Investors nationality is dominated by France with 38%, Luxembourg 30%, the USA 13%, UK and Belgium share 8% each and Germany takes the rest. Investment Volume ( Mln) 9M Retail 10% Industrial 1% Mixed & Other 1% M Q4 Office 88% Centre Descartes Route d Arlon (CBD) Acquired by Blue Colibri

6 - 6 - Research Report Luxembourg Office Market Q Office: more core+ deals During the third quarter we recorded two additional large size transactions with the acquisition by Allianz Real Estate France of the Vertigo, a 24,000 sq.m. multi-let property in the Cloche d Or district, for 178 Mln and the sale to LaLux and the BCEE of the Lighthouse One building in Kirchberg, let to the European Investment Bank for an estimated 120 Mln (JLL research estimate). In the core+ segment M&G acquired the Da Vinci (Airport) for 71 Mln and German private equity firm Blue Colibri acquired the Centre Descartes (CBD) for 40 Mln. In the retail segment, a private investor acquired the Grand Rue for an estimated 12 Mln. Prime office yields are maintained at 4.5% for standard lease terms, lower levels being achievable in case of long term leases or exceptional locations. JLL views the outlook for yields as stable for the whole European region, including Luxembourg, for the years 2017 and Retail yields are also under pressure: for a well located high street shop yields are at 3.5% vs. 4% a year ago. Prime office yield 6,50% 6,00% 5,50% 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% Q3 17 Top 3 office deals Q Building Price Yield Seller Buyer Vertigo (Cloche d Or) 178 Mln Conf Rynda Allianz Real Estate France Da Vinci (Airport) 71 Mln 5.8% Union Investment M&G Centre Descartes (CBD) 40 Mln (est.) Conf AG Real Estate Blue Colibri

7 - 7 - Research Report Luxembourg Office Market Q Summary M 16 9M 17 Take-Up (cumulative) ( 000 sq.m.) Take-Up (cumulative) (# deals) Stock (Mio sq.m.) Completions (cumulative) ( 000 sq.m.) Vacancy ( 000 sq.m.) Vacancy rate 4.1% 5.3% 5.4% 4.7% Prime Rent - / sq.m. / month (+vat) Total Investment Volume LUX (cumul, Mio ) 979 1, Prime Yield 5.0% 4.5% 4.75% 4.50% Q4 2017e 2018e 2019e Future supply, Speculative ( 000 sq.m.) Future supply, Non Speculative ( 000 sq.m.) Total

8 JLL Offices Luxembourg Atrium Business Park 41 Rue du Puits Romain L-8070 BertrangeLuxembourg T: JLL Contacts Romain Muller MANAGING DIRECTOR LUXEMBOURG Romain.Muller@eu. jll.com Angélique Sabron HEAD OF AGENCY LUXEMBOURG Angelique.Sabron@eu. jll.com Vincent Van Brée HEAD OF CAPITAL MARKETS LUXEMBOURG Vincent.VanBree@eu. jll.com Pierre-Paul Verelst HEAD OF RESEARCH BELUX Pierre -Paul.Verelst@eu. jll.com COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.