Luxembourg office market suffers in first half

Tim Harrup

The Luxembourg office of real estate advisor JLL has taken the opportunity of the summer to publish an analysis of the performance of the office market in the Grand Duchy over the first half of the year. As was the case for Brussels, a decline has been recorded accompanied by a lack of large scale transactions.

JLL Luxembourg starts by pointing out that the market is operating within what it describes as a ‘delicate’ macro-economic context. The lack of mega-transactions from the State or European authorities has led to the services sector heading the list of active players, but also to a decline in the size of space taken up. As JLL goes on to say, the State and European authorities are known for the very large surface areas they occupy, with for example, the European Parliament having taken up a massive 127,000 m² in the Konrad Adenauer II building at Kirchberg a year earlier.

Sustainability is another factor which is of ever increasing importance in all office markets, and JLL has this to say: ‘Projects which have obtained BREEAM or DGNB certification and which are accessible via the new tram network will continue to prosper, as is seen by recent transactions in the centre’.

Moving on to the figures themselves, total take-up over the first half amounted to just over 116,000 m², some 57% down on the previous year. The number of transactions dropped a little from 137 to 114. This relatively modest drop, seen alongside the huge drop in total surface area, itself demonstrates the ‘smaller surface area’ reality. And this is even more glaringly obvious when the raw figures are seen: average surface area per transaction in the first half of 2021 was 2,387 m², but only 848 m² in 2022. This is not very far from being only a third of what it was a year earlier.

Prime rents have not changed, and stand at around € 620 /m² /year. As has been the case for a long time, this is approaching double the prime rent achieved in Brussels.