Office market report Luxembourg

Transcription

1 Office market report Luxembourg On Point 2 nd quarter 2016 A 10 year high first semester Take-up in Q2 was unchanged on a yearly basis at 51,000 sq.m. but lifted volume in H1 40% higher y-o-y to 122,000 sq.m. thanks to the record high Q1. Considering the transaction pipeline, takeup volume over the full year may once again exceed 200,000 sq.m. Vacancy rate increased further to 5.3%, vs. 4.6% in Q due to speculative completions in the CBD and Capellen, as well as buildings vacated in Howald and the Station. Prime rents stabilised at 45 / sq. m. / month (+ vat), unchanged on a quarterly and yearly basis. The investment market was boosted by a huge land sale in the CBD and mid to large size transactions: volume year-to-date is estimated at 532 Mln, up 14% y-o-y. Prime yields compressed further by 25 bps to 4.75%, a new record low.

2 2 On Point Luxembourg Office market report Q Foreword BrEXIT = LuxIN? Even if we thought that this would never happen, here we are. In this period of floating, the after BrEXIT and its anthology of questions. Luxembourg is now officially in the battle to attract British companies, I am sure that our serious stability will be an added value in this competition. Angélique Sabron Head of Agency Luxembourg Key figures Letting Market H H Take-up (cumulative) in 000 sq. m. 196 * Stock in Mio. sq. m Completions (cumulative) in 000 sq. m Vacancy in 000 sq. m Vacancy Rate in % Prime Rent in /sq. m. /month Capital Market Investment volume total in Mio (**) Prime Yield Band in % (typical 3/6/9) H2 16e 2017e 2018e Future Supply, Speculative ( 000 sq. m. ) Future Supply, Non Speculative ( 000 sq. m. ) Total ( 000 sq. m. ) (*) Restated (**) Incl. owner occupation, development, and land sales

3 3 On Point Luxembourg Office market report Q Letting market The best first semester of the decade With a combined transaction volume of 51,000 sq.m. recorded in Q2 (unchanged vs. Q2 2015), the take up in H1 edged up to 122,000 sq.m. equating to a yearly increase of 40% and representing the best first semester of the decade. In view of the pipeline of transactions (RTL taking c. 14,000 sq.m.) take-up over the full year may approach 200,000 sq.m. An additional large size transaction has been recorded by the letting to BDO of the Air building in La Cloche d Or (10,600 sq.m.). Banks continued to prove very healthy as illustrated by the preletting to Société Générale Bank & Trust of 5,608 sq.m. in the refurbished Carrefour building (CBD). Also in the CBD, the Bank J.Safra Sarasin acquired the Park Lane (3,476 sq.m.). Year to date, this sector contributed to 41% of take-up, vs. 20% in 2015 and the highest level of the decade. This year so far, corporates lead by far the market, with a limited number of deals by administrations (6,000 sq.m.) and no deal by the EU or embassies. Take-up by sector (sq.m.) The Kirchberg dominates the occupier market In H the Kirchberg contributed to 32% of take-up and in a long term view (2011 H1 2016) it dominates by far the Luxembourg office market also with 32% of the transacted volume. The Kirchberg is perceived as the place to be by large corporates, European institutions and banks. The recently announced plans of ArcelorMittal to establish its new headquarters in that district are a clear illustration. Works on the new tramway network have recently started. The opening of the section between the Red Bridge at the crossing of the CBD and Kirchberg and LuxExpo (eastern extremity of the Kirchberg) is scheduled for mid-2017, the project is a major enhancement of the district s attractivity to tenants. CBD and decentralised (particularly Cloche d Or) follow with respectively 22% and 25% in H1, and 20% and 21% since The Periphery offers abundant space at substantial rental discounts vs. central districts and contributed to 10% in H1, vs. 14% the last 5.5 years. The good mobility infrastructure of the Station district supports the letting activity, and this area represented 8% of take-up in H1 as well as on the 2011 H1 16 period. Esch & Others contributed to 3.8%, vs. 5%. Take-up by size district 2011 H , , , ,000 50, H % 14% CBD 20% 21% 5% 8% Decentralised Esch & Others Station Kirchberg Periphery Corporates Local Admin. EU Intl. Admin. Luxembourg is well positioned to attract financial institutions from London Given its expertise in that segment, Luxembourg is well positioned to attract banks and financial institutions leaving London amidst the Brexit should the European passport been lost. Competition with Dublin, Paris, Amsterdam and Frankfurt is however very strong. The effect on European institutions is not obvious, the several institutions based in Luxembourg (European Investment Bank, Court of Justice, Court of Auditors and the local antennas of the European Commission and the European Parliament) may at some point be affected, though some UK jobs may be replaced by other nations. Vacancy increases again Confirming the trend started in Q1, vacancy increased again in Q2 with c. 31,000 sq.m. additional space becoming available, of which a 6,000 sq.m. new completion in Capellen (Auf der Hireknopf) and in the CBD (Royal 20, 3,462 sq.m.), 13,000 sq.m. freed in the H2O (Howald, Decentralised) and c. 11,000 sq.m. now available in Le Dôme (Station district). Total available space in Luxembourg came in at 208,749 sq.m., equating to a vacancy rate of 5.3%, vs. 4.6% in Q1. In the CBD, vacancy was roughly unchanged at 4.6%, while in the Station district it jumped to 4.5% vs. 2.2% 3 months ago. In Kirchberg, vacancy declined a bit to 2.1% vs. 2.3% in Q1. In the Decentralised, vacancy increased substantially to 9.1% vs. 7.3% and in the Periphery vacancy also increased to 9.1% as well vs. 8.3%. A slight increase was also recorded in Esch / Belval to 9.3% vs. 8.9% 3 months ago.

4 '000 sq.m. 4 On Point Luxembourg Office market report Q Vacancy rate by district (%) Completions, Pipeline and Vacancy 15% 10% 5% 0% CBD Kirchberg Station Dece Peri Esch Q4 12 Q4 13 Q4 14 Q4 15 Q % 120 6% 100 5% 80 4% 60 3% 40 2% 20 1% 0 0% H1 16 H2 16e 2017e 2018e Completions F C Spec. F C Non Spec. Vacancy Rate Source : JLL Research Source : JLL Research LARGEST SPECULATIVE PROJECTS DISTRICT BUILDING AREA PLANNING KIRCHBERG LIGHTHOUSE ONE 14,500 Q CBD CARREFOUR 4,864 Q LEUDELANGE ALTITUDE 11,000 Q CLOCHE D OR DYAPASON 13,000 Q LEUDELANGE TRIOLOGIE 5,000 Q ESCH NAOS 8, STATION FORT WALLIS 4,100 Q CBD ROYAL GRACE 1,600 Q million sq.m. of offices in Luxembourg by year-end There is currently 353,500 sq.m. under construction in Luxembourg, of which c. 80,000 sq.m. is speculative. C. 50,000 sq.m. will be completed in H2 2016, including 18,000 sq.m. speculatively. The office stock in Luxembourg will therefore reach and exceed 4 million sq.m. by year-end. Prime rents stabilised in all districts Office rents in Luxembourg increased in 2014 and 2015 due to restricted vacancy and continuous demand, and Luxembourg became the eighth most expensive city in Western Europe. Now rents seem to have stabilised, though several projects trade at rents above current standards, especially in the CBD. In the CBD, prime rents are 45 / sq.m. / month, in the Kirchberg, prime rents are at 34 / sq.m. / month, while in the Station district prime rents are 35 / sq.m. / month. In Cloche d Or (Decentralised), the best products trade at 29.5 / sq.m. / month. Finally prime rents in the Periphery, and more specifically the Airport, are unchanged at 25 / sq.m. / month. In Leudelange, new projects trade at / sq.m. / month. These rental values are excluding vat. NAOS (Esch/Belval): 8,000 sq.m. available. Developer: Atenor. Amongst the new projects, Atenor recently announced the launch of the mixed project NAOS in Esch / Belval, comprising 14,000 sq.m. of offices and retail. 40% is prelet to IT services group ARHS and to the financial services company A3T. Beiler+François Architectes.

5 5 On Point Luxembourg Office market report Q Investment market 20%, while Belgian contributed to 14%. A Russian family office, UFG Fund, entered the market with acquisition of the Westside Village in Capellen for 35 Mln. Finally, local investors contributed to 12%. Activity boosted by a mega land sale The investment activity in Luxembourg continues to show steady growth. Volume year-to-date is up 14% to 532 Mln (estimate). The market remains dominated by the office segment (60%, vs. 62% in 2015) but it was boosted by a mega land sale that contributed to 28% of total volume. Mixed transactions contributed to 10%, illustrated by the sale of the M3 retail / office property in the Station district for 50 Mln. The purchaser is a Belgian private investor. Investment Volume by 2012 H ( Mln) Investment Volume by origin of money (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% H1 16 Middle East USA France Other UK Netherlands Italy Germany Belgium Luxembourg Yields compressing further Yields for properties with traditional lease terms compressed by an additional 25 bps and came in at 4.75%. Given real estate continues to offer a substantial yield premium to bonds with a certain degree of predictability of cash flows and in most cases a favourable exit after the holding period. Early Q2 ADIA (Abu Dhabi Investment Authority) announced the acquisition of a 20,000 sq.m. land located Place de l Etoile in the CBD for an estimated price of 150 Mln, one of the largest land transactions ever made in Luxembourg. ADIA will develop a mixed retail / office / residential project, ending a very long saga around this plot of land. Another remarkable transaction was the sale to Allianz real Estate France of the Serenity building in Strassen. It was sold by Fidentia for 76.5 Mln, and advised by JLL. The Middle East dominates the market The Middle East now lead the investment market in Luxembourg with an estimated share of 40%. French investors follow with Prime Yield evolution (6/9yr lease) 6.50% 6.00% 5.50% 5.00% 4.50% 4.00% Q2 16

6 6 On Point Luxembourg Office market report Q Largest Letting Transactions in Luxembourg last 6 months YEAR QTR SUBDISTRICT OPERATION BUILDING AGE AREA (sq.m) TENANT KIRCHBERG Owner occupier OKSIGEN New 28,300 BGL BNP PARIBAS CLOCHE D OR Letting AIR New 10,600 BDO CBD Letting CARREFOUR UR 5,608 SOCIETE GENERALE BANK & TRUST KIRCHBERG Letting ESPACE KENNEDY C Modern 4,475 VISTRA LUXEMBOURG KIRCHBERG Letting ESPACE KENNEDY D Modern 4,374 E-COMMERCE CBD Letting GRAND RUE, 56 New 4,136 EFG BANK LUXEMBOURG CBD Acquisition PARK LANE Old 3,476 BANQUE SAFRA SARASIN CLOCHE D OR Letting H2O Modern 3,200 PwC HAMM Letting BITBOURG 22 Modern 2,900 MINISTERE DE LA SANTE CLOCHE D OR Letting YRIS Modern 2,731 ERI BANCAIRE Top 10 Office Investment Transactions in Luxembourg last 12 months YEAR QTR DISTRICT BUILDING CBD CLOCHE D OR LAND PLACE DE L ETOILE AREA (sq.m) 20, (est.) PRICE ( Mln) SELLER BUYER ANDROMEDA INVESTMENT VERTIGO 24, IRISH LIFE STARWOOD / RYNDA STRASSEN SERENITY 10, FIDENTIA ALLIANZ REAL ESTATE FRANCE KIRCHBERG LB LUX 10, LB LUX AG REAL ESTATE CBD WHITE PEARL 8, SOGIMME FRENCH PRIVATE AIRPORT AIRPORT CENTER 17, AIG GIORGETTI CLOCHE D OR GOLDBELL II 10, (est.) WAGNER LFA STATION M2 6, MAVIN PROJECT TRIUVA PERIPHERY WEST SIDE VILLAGE 11, IMMOBEL UFG FUND CBD GLACIS I 4, HSBC TRINKAUS BNPP REIM, based on publicly available data ADIA

7 7 On Point Luxembourg Office market report Q Map of the Luxembourg Office Market JLL Research Advisory Services JLL time series for quarterly and submarket data are available on request, as well as rental analysis (top quartile and weighted average rents). This is a fee-based service. Our Research & Advisory service also prepares micro-location studies for landlords and investors with a focus on rental analysis, existing and future competition analysis with GIS mapping, transaction analysis and SWOT. Contact: Pierre-Paul Verelst Head of Research BeLux pierre-paul.verelst@eu.jll.com

8 8 On Point Luxembourg Office market report Q Definitions Take-up Take-Up New: Represents take-up of floorspace in new or substantially refurbished buildings of less than five years since completion. Take-Up Modern: Represents take-up of floorspace built or renovated between 5-15 years ago. Take-up Old: Represents take-up of floorspace built more than 15 years ago and not renovated. Rent Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 500 sq. m. of lettable floorspace, which excludes rents that represent a premium level paid for a small quantity of space. Top Quartile Office Rent represents the average mean value of the top (25 %) quartile of all known face rents achieved on leasing transactions completed within a market during the survey period (normally calculated annually, or quarterly on a 12 monthly rolling basis). It excludes any unrepresentative deals. Weighted Average Rent represents the average mean value of all known face rents achieved on leasing transactions completed within a market during the survey period weighted with the floorspace (normally calculated annually, or quarterly on a 12 month rolling basis). It excludes any unrepresentative deals. Prime Yield Represents the best (i.e. lowest) rack-rented yield estimated to be achievable for a notional office property of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The property should be let at the prevailing market rent to a first class tenant with an occupational lease that is standard for the local market. The prime initial net yield is quoted, i.e., the initial net income at the date of purchase, expressed as a percentage of the total purchase price, which includes acquisition costs and transfer taxes. Vacancy Vacancy represents completed floorspace offered on the open market for leasing or sale, vacant for immediate occupation on the survey date (normally at the end of each quarter period), within a market. It includes all vacant accommodation irrespective of the quality of office space or the terms on which it is offered. Vacancy excludes obsolete or mothballed office property, i.e. floorspace held vacant and not being offered for letting, usually pending redevelopment or major refurbishment. Vacancy Rate The Vacancy Rate represents immediately vacant office floorspace in all completed buildings within a market as at the survey date (normally at the end of each quarter period), expressed as a percentage of the total stock. Stock Stock represents the total amount of completed office space in buildings mainly used for office purposes within a market that is capable of occupation regardless of the type of ownership or type of building quality, as at the survey (normally at the end of each quarter period). Completions Completions represent floor-space completed during the survey period (normally annually). Completions include new development and refurbished accommodation, speculative developments, pre-let floor space and space for owner-occupation..

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