Following the trend of the first quarter, the office space real estate market of the Grand Duchy was also very dynamic during the second quarter. Investments continue to grow at a rapid pace thanks to a flourishing economic environment. The number of rentals has also increased significantly.DOWNLOAD THE COMPLETE REPORT
The European Commission boosted the office space rental market in the second quarter of 2015 by renting nearly 25,000 m² in the Cloche d’Or district of Luxembourg. It is implementing the decision made last year to find new office spaces for the 1,650 officials who were working in the Jean Monnet building.
A total of 50,637 m² were rented during the second quarter of 2015, reaching a total of 84,390 m² for the first half of the year. Such a result represents an increase of 20% compared to the same period of 2014. The number of transactions (123) has declined compared to last year, but the average area (686 m²) is expanding substantially due to the impact of the operations led by the European Commission.
The most significant projects registered during the first half of the year concern the BBH bank in the city centre of Luxembourg with 4,906 m², the European Investment Bank (EIB) in the Kirchberg with 4,128 m², KNEIP in Bourmicht with 3,750 m², and Ferrero in the airport area with 3,316 m².
With 30% of areas rented during the first semester, the Cloche d’Or district outdistances the city centre (19%) and the Kirchberg (11%). As far as business sectors are concerned, European institutions (34%) arrive before banks (27%) and information and communication technologies (11%).
The dynamism of the office space real estate market is also reflected in the declining vacancy rate, which fell to 4.3%. This downturn was expected by professionals, considering the scale of the exceptional operations registered. The two main areas where office spaces are concentrated even have below average rates, with 1.9% for the Kirchberg and 3.2% for the city centre.
Investments: almost 700 million euros
As the growth of the Luxembourgish economy remains well above the European average, job creation and office space demand are intensifying. After achieving a 5.7% growth last year, the GDP will increase from 3.5% to 4% this year, according to estimates by experts of the National Institute for Statistics and Economic Studies of Luxembourg (STATEC), who revised their forecasts upwards and also count on an increase of over 3% next year.
These favourable economic conditions are one of the reasons why international stakeholders look to invest in the Grand Duchy. During the first half of the year, the office space real estate market recorded 9 important transactions accounting to 689.9 million euros, a level almost equivalent to that of the whole year of 2013. The city centre is well ahead of all other geographical areas in terms of both number of operations and surface area. The most recent projects include the selling of the Royal 20 to the city centre for nearly 70 million euros and the selling of the Deutsche Bank premises to the Kirchberg for a similar amount.
With the remaining transactions expected by the end of the year, the total amount of operations for 2015 will exceed 1 billion euros, as in 2014. The scarce availability of products in the area extending from the Kirchberg to the Cloche d’Or explains why stakeholders are more interested in investing in the outskirts of the city.