Market report Q1 2018

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Office & Capital Markets market report
First quarter 2018

Upload Market report Q1 2018

Take-up

The first quarter of 2018 stands out from the same period a year earlier, with a quieter start. This is 43,317m ² of offices that were taken in occupancy this quarter against 76.611m ² in Q1 2017. This 43% decline in power, is nonetheless to be relativized because it can be explained by two factors. First of all, Q1 2017 was marked by two large rentals with EIB signatures in Kirchberg for 13,800m², as well as ING Bank in the Gare district for 12,675m². These two signatures alone accounted for more than 35% of the total take-up of Q1 2017. In a second step, this can be explained by the relative decline of the average catch in occupancy,  585 m² against 1.049 m² last year.

In terms of market dynamics, this quarter remains in last year’s trend with 74 signatures this quarter versus 73 in Q1 2017.

This beginning of the year 2018 has the peculiarity of having seen the largest transactions (in terms of volume) be made in the outskirts of Luxembourg city. Leudelange represents 21% of the total volume this quarter with ± 8,950 m², followed by Strassen with ± 7,100 m². The CBD comes on the 3rd step of the podium with all the same 4,770 m² rented for 18 transactions, making it again the most popular sector in front of Strassen district Station and Kirchberg.

Significant transactions for the quarter were to benefit the Foyer Group in Leudelange (and subsidiaries) for 7.878 m², the Tada-Web company with 3.975 m² in the Southlane Tower II tower in Esch Belval or the Luxemburg state, very active, with 3.657 m² in the Edison building in Strassen. In these conditions, one can ask the question of whether these transactions on the periphery are due to the growing lack of space on historical sectors (cf: Vacancy, hereafter) or in search of a lower rent in ‘away from the center. In the same way, one wonders if this trend will become the norm or if it is a more “opportunistic” decision on the part of tenants.

Prime Rent

The prime rent is € 50 / m² / month at the CBD and is expected to remain stable, as are rents in the Kirchberg or Gare district at € 35 / m² / month.

Stock 

At the end of Q1 2018, the m² of office space stood at 3,947,660 m². 70% of this area is divided between the areas of Kirchberg, CBD, Cloche d’Or and the Gare district.

Given the stable and continuous growth of this stock as well as the deliveries planned for 2018, and notably the Alter Domus and Deloitte headquarters at La Cloche d’Or for 22,000 m², the bar of 4,000,000 m² of office space will be crossed this year.

Vacancy rate 

The vacancy rate remains below 5% and has reached its lowest level since 2009 at 4.92%. However, there is a marked contrast between the different sectors of the Grand Duchy, whether they are in the territory of the city of Luxembourg or in more or less close periphery. In fact, neighborhoods like Kirchberg, CBD and Gare have their holiday rates at 1.18%, 2.12% and 3.28% respectively. Cloche d’Or, a district whose development is most marked at the moment, has a vacancy of 7.74%, while the peripheral areas have a vacancy of between ± 5% and ± 19%.

Capital Markets 

At the end of this first quarter, the Capital Markets trading market saw a volume of almost € 189 million. It is a quieter start than the first quarter of 2017 during which 304M € had been recorded. This apparent decline is due mainly to the scarcity of goods on the market. In the same way, this amount in Q1 2018 does not take into account the investments currently being negotiated and which will end during the year. 2/3 of this amount (6 transactions) concerns existing buildings while the remaining third concerns new or redevelopment projects.

Among these transactions, we particularly note a 5,000 m² redevelopment project in Strassen, the acquisition by Maple Knoll of the E-Building office building (± 11,000 m²) in Munsbach, as well as the redevelopment of a mixed office building. / residential “G40” Bourbon Plateau (1.875m²) by Eaglestone.

Finally, the prime yield “city” remains stable at 4.25%, as well as at the periphery at 6.50%.

For further information:
Laurence Brix, Marketing Manager – 26 43 07 07 – lbrix@inowai.com