Market resilient but challenging says CBRE

Tim Harrup

At its traditional start of the year event for clients and partners, real estate advisor CBRE presented an overview of trends in major sectors of the market a few days ago in the renovated surroundings of the ‘Hôtel de La Poste’ in Tour & Taxis. The format was to show a video of a top executive in the real estate world from a major company, explaining their vision of what is happening in their sector, followed by a short presentation with slides by a CBRE executive. This ‘whistle-stop tour’ gave the audience a rapid insight into how the market and its sectors are evolving.

Looking at the market trends in general, CBRE CEO Maxime Kumpen and his team said that 2023 will be a year of change and of opportunity. Corporate confidence is high, and skilled labour is very much in demand. Cities will evolve to meet new trends and all real estate segments will have to take de-carbonization seriously. It is also the case that 2023 follows one of the most turbulent years in recent history worldwide (war in Ukraine…).

Maxime Kumpen said that we are coming out of a decade of cheap money, and the fact that it is getting expensive again will impact on yields. Banks are likely to continue to increase interest rates for the rest of this year, he stated, but inflation appears to have peaked and may be back to 2% by 2024.

Where sustainability is concerned (a relatively new but now permanent feature of the real estate landscape), Jacques Lefèvre of BPI said in his video that constructions will have to become more environmentally-friendly and that this is partly due to the fact that investors will demand this. Tax regulations will also impact on investment and tenants, stated CBRE’s Emilie Rousseaux, who also believes that ‘green building passports’ will emerge. She also pointed out a reality in Belgium: permits take so long to be granted that developers will need to plan for their new buildings to be 10% better in performance that the regulations in force at the planning stage, which may have been superseded by the time the building emerges…

On the subject of investment and capital markets, a survey by CBRE has shown that interest rates are the number one challenge, but that Brussels still remains popular because of its enduring stability and low prices compared to other cities. Low prices quite simply mean that rents have room to increase.

Finally (for this article) a look at the residential market, another ‘permanent newcomer’ to the mainstream real estate scene. Specialist HIB said that the challenge is to keep housing affordable and to upgrade existing stock. CBRE’s Pierre Goffin went on to state that while interest rates have more or less tripled, the market has the resilience to cope with higher costs. Prices are likely to remain stable in 2023, although new build prices will increase with rising construction costs. Other trends include the fact that investors are looking for build-to-rent projects and that co-living is becoming a solution for the young to find a place to rent. He also said that tenants are willing to pay a higher price for a better living experience.