2016 started well for the office property sector. At the beginning of the year the Kirchberg passed the milestone of one million square metres built. The level of investments and the number of leases augur well for this financial year in this first office market report 2016.Read the full office market report Q1 2016
With 71,340 m² leased in the first three months of 2016, the year started very well. This figure is very considerable higher than it was for the same period in 2015, and indeed it is a 111% increase, more than double. It is certainly boosted by the 28,300 m² of BNP Paribas, which took possession of a part of its new premises, but even without that transaction the level of activity is still substantially above that in the first quarter of 2015.
Overall, 73 transactions have been recorded since the start of the year in the first office market report of 2016. More than a dozen relate to an area greater than 1,000 m². In addition to BNP Paribas, the most important are: Vistra Luxembourg with 4,475 m², EFG Bank with 4,134 m² and PWC with 3,200 m².
Geographical analysis shows that almost one half of the area leased (in m²) was in Kirchberg, (49% to be precise). The city centre represents 12% m² of leased office space, ahead of the railway station district (6%) and the Cloche d’Or (5%). In terms of activity, the banking and finance sector total more than two-thirds of the square metres leased.
This positive market trend is in line with vacancy rates, which remain below 5%. The lowest rates were recorded in Kirchberg, at 1.83%, ahead of Limpertsberg (3.38%) and the city centre (3.48%). Globally, we have seen a stabilisation of vacancy rates since 2015.
The excellent results for the first quarter and the transactions to be completed in coming months indicate that, once again this year, the leasing market should achieve a level of 200,000 m², testifying to the dynamism of the Grand Duchy.
213 million euros invested in three months
The robust health of the office property market is a reflection of economic development. Last year, the employment rate rose by 2.6% in the Grand Duchy, after a rise of 2.5% in 2014. The trend translates into an increase in the number of cross-border employees, particularly from France, and it should continue this year. Government forecasts expect GDP growth of 3.4% in 2016, a level well above the average recorded between 1990 and 2014 (2.7%).
This is a favourable context for investments and construction. On that subject, more than 130,000 m² of new office space will be delivered this year, taking the stock to more than 3.9 million m². Over the first quarter, there were investments of 213.5 million euros. This result is down on the first quarter of 2015, when the sale of the Royal Hamilius complex took place. It is nonetheless extremely positive, considering the acquisition, for more than 100 million euros, of land located at the Place de l’Etoile, on the western entry to the City of Luxembourg, by the ADIA sovereign fund (Abu Dhabi Investment Authority).