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Luxembourg office market in good health

Royal-Hamilius, mixed use project with luxury housing, upmarket retail shopping gallery and offices.
Design by Foster + Partners with Tetra Kayser architects. A real estate development by CODIC.
Royal-Hamilius, mixed use project with luxury housing, upmarket retail shopping gallery and offices. Design by Foster + Partners with Tetra Kayser architects. A real estate development by CODIC.

Real estate advisor CBRE has analysed the Luxembourg office market and looked forward to what 2020 might hold. It starts by saying that activity in the 4th quarter recorded a very positive 101,800 m² of take-up, bringing the annual total to 267,100 m². A robust pipeline of 4th quarter completions contributed significantly to the take-up figures. There were four deals of 10,000 m² or more in the final quarter, including Ferrero’s move to their new Airport district HQ of 29,500 m². This is the second best year ever on record and the 6th consecutive year of +200,000 m² take-up.Ferrero’s was not the only major deal in the Airport market. The Luxembourg State (Police) took the entire Findel Business Center B (14,000 m²), already occupying building A next door.

Major transcations

In the CBD, Silver Holding moved to the much anticipated Royal Hamilius (10,413 m²) building. This was the largest CBD transaction in more than a decade. And finally, the European Parliament took 10,000 m² of new space in the KAD 2 extension in Kirchberg before the end of the year. This was the first European transaction since 2017. The remainder of the 158,000 m² or so will be completed in 2020, already laying the foundations for another great year.

The pipeline for 2020 is estimated at 328,000 m², of which just one-quarter is available. In addition to the European facilities, large projects include Zenit Royal (17,000 m²) and Connection (23,000 m²). The pipeline for 2021 is estimated at 188,000 m² of which just under half remains available.

As a result of strong demand and limited completions with availabilities, vacancy fell to an extremely low 3.4%. Major market districts changed little over the previous quarter and maintained very limited availabilities (CBD, Kirchberg, Station, Cloche d’Or) + Limpertsberg. There was a slight increase in the Airport district as a result of Ferrero’s move to the new HQ.

Investment

Moving on to the investment market, 4th quarter investment of €837 million brought the annual total to the highest post-crises volume of €2.238 billion. Large, core office assets are particularly attractive to international investors seeking capital preservation. Luxembourg’s investment market continues to be the target of significant and increasing international capital. And the 2019 total is the highest annual figure in the post-crisis era.

Large volume deals of 200 million, says CBRE, have now become commonplace in the Luxembourg market. Kildare Partners’ €390 million acquisition of Helios (70,000 m²) in Q4 as well as the sale of an office and hotel portfolio to Batipart for an estimated €400 million+ are another example of this trend.
Tim Harrup
13-05-2020


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