Low take-up but high investment in Brussels office market

Tim Harrup

The annual press conference held by real estate advisor JLL yesterday looked at the situation of the Brussels office market. Some contrasts were clear, but the main message, outlined by Jean-Philip Vroninks at the outset, was that in terms of take-up, this year is virtually at an all time low, with the current level of 270,000 m² not expected to rise above 300,000 m² by the end of the year. There is much uncertainty among major companies due to Covid-19, he explained, and big decisions may well continue to be put off for several more months.

On the plus side, major transactions have nevertheless taken place, and vacancy is still at a low 7.4%. Looking at transactions, JLL pointed to the IT tower on the Avenue Louise and Manhattan in the North district, both of which found occupiers for some of their space at high (or even record) rents. Touring has taken some space in Quatuor, while the European institutions have accounted for the whole of the 30,000 m² of ‘The One’. ING bank is to move into Commerce 46 and the EEAS into Belmont.

Moving to vacancy, the overall figure of 7.4%, while a touch higher than last year, is considerably down on both the ten year and five year averages (9.6% and 8.5% respectively). In concrete terms, the almost one million square meters of available space is made up of 291,000 in the CBD and 681,000 outside of it. Almost half of the available space in the CBD and just over two thirds outside of it, are made up of ‘old’ buildings which are no longer to the taste of occupiers. Around d 120,000 m² of speculative development is expected in the CBD over the next two years.

What are occupiers looking for? JLL sees the situation like this: High BREEAM scores have been for some years the default-option for developers. Occupiers have a closer eye on ESG (Environment Social and Governance) and are ready to pay more for top quality properties. Net zero carbon (buildings that are not only highly energy efficient but also fully powered from on-site and / or off-site renewable energy sources) may soon be the new normal. And finally, health credentials will become mainstream as the pandemic raises the stakes on employee wellbeing (air quality, HVAC, etc). The WELL certification may become as essential as a BREEAM rating.

In terms of location, CBD is the winner as the most accessible and with every daily function of life available within walking distance: work, learn, live, eat, entertain. Secondary locations without immediate connections to train and metro in Brussels will suffer the most. Iconic mixed renovations like the former Royale Belge HQ (Souverain) may however thrive. Even the periphery can be a winner, where buildings close to the airport are well positioned given their connections to public transport.

Where rental levels are concerned, the prime figure in the European district is unchanged at € 315/m²/year. The Louise and North districts, however, have seen rents rise and now stand at € 275/m²/year, on a par with the Pentagon. The decentralized and peripheral districts are at € 285 and € 265 respectively.

Finally, conversion from offices to residential is an ongoing trend, with international investors being attracted to the potential Brussels has to offer. Total investment in offices of around 3.3 billion Euros is a record, but when the ‘deal of the year’ (i.e. the Finance Tower) is taken out of the equation, investment is in line with the five year average. Again, this can be considered a positive reality given the year we are just ending…JLL also sees a more nuanced attraction from corporate for home-working in the second lockdown (compared to the first) and says that flex working operators are less active than before.