Office Market Report 2017

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22.02.2018 – PAPERJAM – Jean-Michel LALIEU

 Inowai, which will celebrate its 20th anniversary next year, held its annual conference on Wednesday in order to discuss and observe the recent market developments. These were essentially marked by the return in predominance of investors from Northern Europe and a remarkable increase in the French “family offices” during the previous year.

Meanwhile, the real estate agencies continue their developments at the pace of that of the capital of Luxembourg. “2017 was again a very positive year,” said Vincent Bechet, partner and managing director. The one billion euro investment mark has been crossed for the fourth year in a row and the activity since the beginning of this year suggests that it should be reached again without much difficulty in 2018. Particularity on the last fiscal year, the return in predominance of local investors – Luxembourg and neighboring countries – while the trend in recent years had seen Asian and Middle Eastern investors take the lead. “The difference was especially marked by a fairly strong presence of wealthy French families via family office structures,” notes Vincent Bechet. For the rest, Belgian, Luxembourgish and German historical players continued to show their interest in the Grand-Ducal office market. Another significant fact is the share of institutional players which reached 80% against a limit of 65% -70% in previous years. “These differences do not mean that the other players are not so active, but we see a very strong competition for the acquisition for commercial and office real estate. However, there is a clear lack within the market compared to the demand for investments. ”

Faced with low interest rates, real estate remains an asset that is high in demand … and that we refuse to sell if we have. “Where do you find, other than in real estate, an average return of 4.5%?” questions the head of Inowai. “Hence the rarity. You really need to put new real estate products on the market to be able to offer assets for sale. ”

 Not much update on the Royal-Hamilius project

This is a problem for Middle Eastern investors who are looking for big deals, such as the Abu Dhabi Investment Authority (Adia) who has subsequently invested in the Royal-Hamilius project and the 20,000m2 land of Place de l’Etoile. “Projects like the ones mentioned have become a rare commodity,” concludes Vincent Bechet. However, this will not prevent the real estate sector to achieve another great year, even if the commercial sector still suffers from substantial infrastructure works within the capital and mobility problems. At this level, rents – sometimes exorbitant – will gradually have to adapt to the current reality of declining revenues.