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Brussels office market in phase-change

Above marker rents have not hampered Regent Park
Above marker rents have not hampered Regent Park

The dynamics of the Brussels office market represent the starting point for the latest JLL Brussels Office Market report at the end of the third quarter of the year. It will be remembered that some years ago this market went into a sort of self-imposed moratorium, as there was little demand for new buildings and ‘at risk’ developments were just that – too risky.

Now however, the tide seems to have turned. JLL points out that risk-taking seems to finally be paying off. Many of the projects launched at risk are success stories, and the new supply is igniting demand from corporate or administration occupiers currently using Grade B or C properties.
JLL gives several examples: Cofinimmo started its Belliard 40 (18,000 m²) project at risk. It was rapidly pre-let by several tenants and nine months after completion it is 75% occupied, although part of which by occupiers previously using space in other buildings of Cofinimmo’s portfolio.
Leasinvest completed its Tree Square project (6,500 m²) six months ago, and it is now 70% occupied. Around 45% of Extensa’s Gare Maritime project (30,000 m²) is pre-let six months before completion. The story behind the Tweed project of Macan and AG Real Estate is that it was first sold to a developer for a residential reconversion. Later, the developer sold it to Macan that designed an office project. Now, more than a year before completion it is 50% pre-let. And even the Regent Park project, delivered at the end of 2015 with well above market asking rents, is now 73% occupied.

Take-up
What does all of this mean in terms of hard figures at the end of the first three quarters of the year? JLL points out that occupier activity overall remains subdued, in the nine months period take-up amounted to 251,000 m², which is 17% lower than a year ago, mainly due to lower transaction size. The average deal size (9 months period) came in at 997 m² against 1,194 m² last year, and no mega-deals have yet been recorded.

Looking ahead, take-up over the full year 2018 is forecast to be between 300,000 and 325,000 m², some way below the 418,000 m² achieved in 2017 and the 5-year average of 384,000 m². JLL believes that 2019 will be a better year with several large size transactions in the pipeline, among others the Flemish Community (60,000 m²) the SNCB (80,000 m² to be confirmed), Brussels Capital Region (40,000 m²), the National Bank of Belgium (c. 30,000 m²) and the European Union (minimum 125,000 m² planned for the 2019-2021 period, including a new conference centre and replacement demand by the European Commission).

In terms of segmentation, the EU has contributed 10% to the total this year, international administrations 6%, Belgian administrations 14% and corporates 70%.

Happier days? Is this really the bonanza for developers, JLL asks? Probably not, it concludes, patience is still required, especially for the large size projects: up to two years may be necessary for a full occupation. If currently there is legally no minimum level of pre-let required to launch a project, in practice most developers are still cautious, but are more ready to take selective risks in the best locations.
Tim Harrup
12-11-2018


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