Mega deals, but less deals

Transcription

1 Office Pulse Spring 2014 market report Brussels The Belgian Logistics Market - Quarterly Update 3rd quarter 2016 Mega deals, but less deals

2 - 2 - On Point Brussels Office Market Q Opinion More ambition is needed for Brussels 2016 will probably be a good year in terms of take-up volume, we may see a total of more than 400,000 sq.m. transacted over the year. In a recent perspective, we consider this is a more normal level of take-up than the 300,000 sq.m. seen in 2015, which was historically low. There are many reasons for an occupier to move: accessibility, footprint expansion or reduction, M&A, opportunity at an attractive price, cost efficiency (energy consumption, for example) etc. One of the most important in many European or global cities is corporate image. Associating a client, an employer, a supplier or more simply a business relation to a building is part of today s corporate image. We as an agent observe that it is increasingly difficult for an occupier seeking to rejuvenate its corporate image to find an existing property that aligns with this objective. As you will read in this report, the non-precommited development pipeline is currently modest, there is only a few contemporary development projects in the North and European districts, as well as refurbishment projects in the Pentagon, all with a completion date toward Next decade s development pipeline is still to be invented: Brussels needs new projects, with good multimodal access, the latest energy efficiency techniques, a diversified mix of uses and attractive architecture. To make this possible, ambition and confidence are needed. Therefore the creation - and now opening - of the Docks Bruxsel shopping center, is the example to follow. Pierre-Paul Verelst Head of Research JLL BeLux Photo cover: Mobius. Developer: Immobel. Architect: Assar. Copyright Photo: Pixelab.

3 - 3 - On Point Brussels Office Market Q Letting Market 8 deals of more than 10,000 sq.m. Take-Up by Sector M16 In Q3 we recorded 78,000 sq.m. of occupier transactions, 3% less than a year ago, in 70 deals, down vs. 76 a year ago and vs. 78 in Q2. Over the nine month period, there is a good mix of corporate / administration / Europe deals at respectively 50%, 36% and 13%, international administrations taking the remaining 2%. The largest recent transaction was the sale to Allianz of the Mobius I tower project in the North district. This 26,600 sq.m. property will be developed by Immobel, and as part of the deal the current headquarters of Allianz in the Pentagon will be redeveloped into a mixed use residential / retail / office project. In the Pentagon, we recorded another large size transaction by local administrations: Brussels Capital Region took c. 10,000 sq.m. in the C de Ligne to host its Security and Prevention service M15 9M16 Corp EU Intl. Admin. Local Admin is therefore clearly the year of large size deals (> 10,000 sq.m.), with 8 so far, vs. 2 in 2015 and 4 on average over the period. Take-Up by District M16 Higher take-up volume but less transactions In 2016 to date, total take-up amounts to 345,000 sq.m., 53% higher than a year ago and exceeding the full year 2015 by 15%. The hidden reality is that this year so far, there were only 235 transactions, ie 15% less than a year ago and a two decades low. What is missing is no longer the large size transactions that all came together over the last months, but the normal flow of mid-size corporate transactions. The terror attacks in March are one of the explanations of this lack of occupier transactions, but also the limited high quality properties available on the market. Some occupiers especially those using more than 5,000 sq.m. prefer to renegotiate their leases, unfortunately this market is not transparent. CBD dominates Consequent to the lower mid-size corporate deal flow and the multiple mega deals by administrations, the proportion of non CBD locations (Periphery + Decentralised) generally favoured by many corporates decreased to 25%, vs. 61% a year ago and 55% over the full The Pentagon is by far the most demanded with 40% of the volume and an average deal size of 4,380 sq.m., vs. 1,462 sq.m. for the whole market, as well as the European district with 20%, both submarkets being driven by mega deals. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% M16 Decentralised Eur District Louise North Pentagon Periphery South C de Ligne Pentagon Landlord: Breevast / Immobel Jaspers-Eyers Architects

4 - 4 - On Point Brussels Office Market Q Vacancy goes further down We recorded only two speculative completions in the CBD in the last three months for a total of c. 9,000 sq.m: Befimmo s Brederode I (Pentagon, 3,000 sq.m. still available) and Alides Oxygen (European district, 5,819 sq.m. 30% of which being let at the end of the quarter. This low level of new supply has been largely offset by occupier demand, hence vacancy continues to narrow. Vacancy rate M16 20,0% 18,0% 16,0% 14,0% 12,0% 10,0% 8,0% As of 30/9, vacancy in Brussels was 1.2 million sq.m., 19,000 sq.m. less than 3 months ago, of which only 9% is new (less than 5 years old). Concentrating on the CBD districts, vacancy is estimated at 377,000 sq.m., with only 55,000 sq.m. being new. In the light of occupiers preference for new building, there is clearly a shortage. 6,0% 4,0% 2,0% 0,0% Q3 16 Total Brussels CBD Outside CBD The vacancy rate is estimated at 9.2% for the total Brussels, vs. 9.4% in Q2 and 9.6% a year ago. For the CBD, we estimate the vacancy rate at 4.5% vs. 4.6% 3 months ago and 5.5% a year ago. These levels are the lowest since Contrasting to the CBD, the oversupply in the Periphery hardly changed: 22.2% is vacant covering nearly half a million sq.m., vs. 22.4% in Q2 and 21.6% a year ago). No large speculative completions expected before 2018 Development pipeline With regards to future supply, 17,000 sq.m. will be speculatively completed in Q4 2016, namely the refurbishment of the Alhambra (11,000 sq.m., Pentagon) and a refurbished unit of the Pegasus Park (6,000 sq.m., Periphery). Next year the total completion pipeline is estimated at 306,000 sq.m., of which only 75,000 sq.m. is speculative with for example Cofinimmo s Belliard 40 (17,700 sq.m.) in the European district and Codic s Passport (13,000 sq.m. still available) in the Periphery M 16 Q4 16e 2017e 2018e Completions Future Compl. Spec Future Compl. Non Spec Passport Brussels Airport Developer: Codic Jaspers-Eyers Architects

5 - 5 - On Point Brussels Office Market Q Slight increase of average rents Rental analysis M16 Prime rents in Brussels as a whole were unchanged at 275 / sq.m. / year, a level applicable to the European district, with no change in other districts either. In the Pentagon, prime rents are 235 / sq.m. / y, in the South 205 / sq.m. / year, in the Decentralised 190 / sq.m. / year, in the Louise district 225 / sq.m. / year. In the Periphery, prime face rents are unchanged at 165 / sq.m. / y. Top quartile rents in Brussels as a whole however increased 3.0% on a yearly basis to 209 / sq.m./ y and weighted average rents increased by 7.9% y-o-y to 164/ sq.m. / y. This impressive increase should be treated with caution since there is a reduction of 12% in the number of transactions between the periods of comparison. Average rents increased by 1.5% on an annual basis, to 150 / sq.m. / year. Economic rents started to moderately increase in CBD locations especially the European district with less incentives being consented on new projects. At this stage, no increase has been witnessed in prime rents in all districts, the latest move was in Q1 this year, the lower vacancy in new buildings in CBD locations suggest upward pressure on top quartile rents Q3 16 Prime Rent Top Quartile Rent Weighted Average Rent Although figures look good so far, the Brussels search-engine sputters. There is clearly a lack of mid-size deals (1.500 to m²). Erik Verbruggen Head of Office Agency Belgium

6 - 6 - On Point Brussels Office Market Q Investment Market Belgium Investment volume Q3 was marked by a third deal above 100 Mln, this time in the retail sector, probably followed by another one in Q4. Volume year-to-date reaches 2.4 bn, 25% lower than a year ago but 19% above the 5 year average for a nine month period. Subtracting the value of the Celsius portfolio ( 825 Mln) from the volume of 2015, 2016 may be close to last year in terms of volume with 3.5 bn, and certainly way above the 5 year average of 2.8 bn. The sector breakdown returned to a more classic 50% of offices and 24% of retail, the next asset classes being more atypical with 9% of hotels, 8% of retirement homes and 7% of industrial. The last 2% is student houses. The liquidity of the Hotel market has indeed sharply improved in the last two years, during the summer JLL advised the sale to Pandox already well present in Belgium of the Hilton Grand Place for 55 Mln. Belgian investors dominated the capital markets activity with 49% of the volume, they are challenged by Asian investors with 16% and German investors with 12%. Germans are particularly active in the core segment. Investment volume M months Q4 Investment volume by buyer nationality 9M16 Asia 16% Other 8% Belgium 49% France 9% UK 3% USA 2% Germany 13% At this stage, we do not witness an impact of the Brexit on the appetite of investors for core products Jean-Philip Vroninks Head of Capital Markets BeLux

7 - 7 - On Point Brussels Office Market Q bn Prime office yields Offices 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% Q3 16 Brussels Office 6/9 Lease CBD Brussels Office 6/9 Lease Non CBD Brussels Office LT Lease The office sector proved more active than last year, in Q3 we recorded 363 Mln of transactions, 8% more than in Q2 and 41% more than a year ago. Volume year-to-date is 36% higher than a year ago at 1.2 bn. JLL closed the sale to Real IS of the South City in the South district, for 72 Mln and corresponding to a yield of 3.9%. This is a single tenant property let to the SMALS (local administration) with a 20 year lease. In the Core+ category, Cofinimmo acquired a portfolio of 4 properties in the European district and Decentralised for 58 Mln, the selling party was Northstar Realty Europe and the yield 6.4%. In the last days of the quarter, a private investor from the Middle East acquired Banimmo s Alma Court in the Periphery for an estimated amount of 30 Mln. Prime office yields stabilized at 4.75% in the European district, and compressed by 25bps in the Pentagon and the Decentralized to respectively 5.25% and 6.5% as well as compressed by 15 bps in the Louise district to 5.75%. In the Periphery, the risk premium remains high compared to CBD, prime properties trade between 7.75% and 8.25%. For long term leases to creditworthy tenants (9 years or more) prime yields stabilized at 4%, potentially compressing again to 3.75%. South City South District Seller: Integrale / Ogeo Buyer: Real IS

8 - 8 - On Point Brussels Office Market Q Mln 198 Mln Retail The retail volume recovered from a quiet H1 with a mega deal in Brussels Uptown, ie Brussels premium and luxury retail quarter. Prowinko sold the emblematic Toison d Or high street development, hosting the Apple Store, Marks & Spencer and Zara Home. It was acquired for 180 Mln by the Groupe Hibert, a private local investor already owning many shops in the area. This transaction was closed at an unprecedented low yield of 3.5% for such a volume in the retail segment. As a result, volume nearly doubled quarter-on-quarter to 305 Mln, which is however 75% below a year ago, but Q was earmarked by the Celsius portfolio transaction. Year-to-date, retail volume is down 65% to 581 Mln, but 38% above the 5 year average deducting the Celsius portfolio. Industrial Industrial investment volume was quiet in Q3, with 63 Mln transacted, down 38% on Q2 but up 211% year-on-year. Volume year-to-date is estimated at 198 Mln, 9% lower than a year ago, of which 19% is owner occupation deals. 55% of the quarterly and nine month volume was logistics, with for example the sale & leaseback to WDP of Distrilog s site in Londerzeel (Flemish Brabant) for a value of 20 Mln. Prime logistics yields follow the same trend as all asset classes and compressed by 25 bps to 6.25%, however prime semi-industrial yields are unchanged at 7.25%, this market segment is actually more owner-occupier driven, with limited investor interest, especially from international buyers. Prime retail yields are unchanged so far at 3.75% for high street, 4.25% for shopping centers and 5.75% for retail warehousing. Outlook is stable. As far as high street shops are concerned, super prime locations trade at even lower yields, like for the Toison d Or. NEW: Invest in Belgium: a guide for property investment EY, a global leader in assurance, tax, transaction and advisory services, and JLL joined forces to produce a guide for property investment in Belgium. This brochure is aimed at being a reference manual designed for investors who are new to our market. It provides an overview of the Belgian property market, as well as explains key tax issues when investing in Belgian real estate and the acquisition process. Please visit our website

9 - 9 - On Point Brussels Office Market Q Letting transactions last 6 months YEAR QTR DISTRICT Operation BUILDINGNAME AGE AREA TENANT PENTAGON Acquisition CENTRE 58 Project 37,000 VILLE DE BRUXELLES (ADMIN.) PENTAGON Letting PACHECO Old 30,000 SPF SANTE / FOD GEZONDHEID NORTH Acquisition MOBIUS I Project 26,600 ALLIANZ BELGIUM EUR Letting MERODE New 13,000 EUR COMMISSION EUR Letting BLACK PEARL New 11,000 EUR COMMISSION EUR Letting BELMONT Modern 11,000 EUR PARLIAMENT PENTAGON Letting CENTRAL PLAZA New 10,000 DKV / ERGO PENTAGON Letting C de LIGNE New 10,000 REGION BRUXELLES CAPITALE (PREVENTION & SECURITE) EUR Letting TERVUREN 2 Project 7,492 LOYENS & LOEFF EUR Letting MONTOYER 63 Project 6,800 EUR PARLIAMENT Office investments 2016 YEAR QTR DISTRICT Property Price (EUR Mio) SELLER BUYER NORTH ELLIPSE BUILDING 215 AG REAL ESTATE FUBON LIFE INSURANCE NORTH ASTRO TOWER 168 LURESA PATRIZIA (KOREAN CLIENTS) SOUTH SOUTH CITY 72 INTEGRALE / OGEO REAL IS LOUISE WILTCHERS OFFICE 60 AG REAL ESTATE AXA IM RE VARIOUS PORTFOLIO NORTHSTAR 58 NORTHSTAR COFINIMMO EUR BLACK PEARL 55 IMMOBEL REAL IS PERIPHERY WATSON & CRICK PARK 30 PYLOS GROUPE LIEGEOIS PERIPHERY ALMA COURT 30 BANIMMO PRIVATE MIDDLE EAST PENTAGON CHAMBON CARMEN 25 ALLFIN (IMMOBEL) CORPUS SIREO EUR NORDIC HOUSE 25 AXA REIM TRIUVA EUR ARTS ABERDEEN AXA IM RE EUR CORTENBERG SHELBOURNE DEVELOPMENT ROCKSPRING PIM

10 On Point Brussels Office Market Q Key statistics Q M 2016 Take-Up (cumulative) ('000 sq.m.) Take-Up (cumulative) (# deals) Stock (Mio sq.m.) Completions (cumulative) ('000 sq.m.) Vacancy ('000 sq.m.) 1,130 1,422 1,468 1,201 Vacancy rate 10.1% 10.4% 9.7% 9.2% Prime Rent ( / sq.m./ y) Total Investment Volume BE (cumul, bn ) Office Investment Volume BE (cumul, bn ) Prime Yield 5.80% 5.75% 5.35% 4.75% Q (**) 2017 (**) 2018 (**) Future Supply, Speculative (000 sq. m.) Future Supply, Non Speculative (000 sq. m.) Total (*) Investment volume includes investment, owner occupier and redevelopment acquisitions; excludes land sales. Data as of 30/09/2016. (**) Under construction and projects with permit. Projects with no permit, except if prelet, on 30/09/2016 excluded. JLL Research Advisory Services JLL time series for quarterly and submarket data are available on request, as well as rental analysis (top quartile and weighted average rents). This is a fee-based service. JLL Research produces on a quarterly basis detailed submarket reports about Brussels office districts. These are available on request against paying subscription. Our Research & Advisory service also prepares micro-location studies for landlords with a focus on rental analysis, existing and future competition analysis with GIS mapping, transaction analysis and SWOT. Contact: Pierre-Paul Verelst Head of Research BeLux pierre-paul.verelst@eu.jll.com

11 Office Market FLASH Brussels Q TAKE-UP VACANCY & FUTURE SUPPLY Q sq.m Q sq.m Q sq.m Q Q million sq.m vacant in Brussels sq.m less than a year ago. Vacancy rate 9.2% 9.6% a year ago 8 deals > sq.m in 2016 vs. 2 in 2015 and 4 on average the last 5 years +53% sq.m UNDER CONSTRUCTION 19% SPECULATIVE 81% NEW CONSTRUCTION PRIME RENTS 275 No change but economic rents start increasing CAPITAL MARKETS BELGIUM 2.4 bn OCCUPIERS SUMMARY -25% 780 Mln less than a year ago 8th large size deal in 2016: Allianz takes 26,600 sq.m. in the Möbius Tower (North district). Take-up in Q3: 78,000 sq.m.: -3% vs. Q Less deals: 235 year to date (-13% y-o-y). Declining vacancy rate in the CBD: 4.5%, vs. 5.5% a year ago. Only 55,000 sq.m. vacant in new buildings. Quality shortage is an issue. Higher weighted average rents: +8% y-o-y to 164 /sq.m./y. Soon an increase of prime rents? 50% OFFICE TRANSACTIONS 28% a year ago 4.75% PRIME OFFICE YIELD 5.5% a year ago Pierre-Paul Verelst Head of Research BeLux T: +32 (0) M: +32 (0) Pierre-Paul.Verelst@eu.jll.com

12 On Point Brussels Office Market Q Map of the Brussels office market

13 On Point Brussels Office Market Q Definitions Take-Up Take-Up New: Represents take-up of floorspace in new or substantially refurbished buildings of less than five years since completion. Take-Up Modern: Represents take-up of floorspace built or renovated between 5-15 years ago. Take-up Old: Represents take-up of floorspace built more than 15 years ago and not renovated. Rent Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 500 sq. m. of lettable floorspace, which excludes rents that represent a premium level paid for a small quantity of space. Top Quartile Office Rent represents the average mean value of the top (25 %) quartile of all known face rents achieved on leasing transactions completed within a market during the survey period (normally calculated annually, or quarterly on a 12 monthly rolling basis). It excludes any unrepresentative deals. Weighted Average Rent represents the average mean value of all known face rents achieved on leasing transactions completed within a market during the survey period weighted with the floorspace (normally calculated annually, or quarterly on a 12 month rolling basis). It excludes any unrepresentative deals. Prime yield Vacancy Vacancy represents completed floorspace offered on the open market for leasing or sale, vacant for immediate occupation on the survey date (normally at the end of each quarter period), within a market. It includes all vacant accommodation irrespective of the quality of office space or the terms on which it is offered. Vacancy excludes obsolete or mothballed office property, i.e. floorspace held vacant and not being offered for letting, usually pending redevelopment or major refurbishment. Vacancy Rate The Vacancy Rate represents immediately vacant office floorspace in all completed buildings within a market as at the survey date (normally at the end of each quarter period), expressed as a percentage of the total stock. Stock Stock represents the total amount of completed office space in buildings mainly used for office purposes within a market that is capable of occupation regardless of the type of ownership or type of building quality, as at the survey (normally at the end of each quarter period). Completions Completions represent floor-space completed during the survey period (normally annually). Completions include new development and refurbished accommodation, speculative developments, pre-let floor space and space for owner-occupation Represents the best (i.e. lowest) rack-rented yield estimated to be achievable for a notional office property of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The property should be let at the prevailing market rent to a first class tenant with an occupational lease that is standard for the local market. The prime initial net yield is quoted, i.e., the initial net income at the date of purchase, expressed as a percentage of the total purchase price, which includes acquisition costs and transfer taxes.

14 On Point Brussels Office Market Q JLL Offices Belgium Avenue Marnixlaan, 23 b1 B 1000 Bruxelles Brussel T 32 (0) F 32 (0) Jan Van Gentstraat 1 bus 402 B 2000 Antwerpen T 32 (0) F 32 (0) JLL Contacts VINCENT H. QUERTON INTERNATIONAL DIRECTOR - CEO BENELUX +32 (0) ERIK VERBRUGGEN (*) HEAD OF OFFICE AGENCY - BELGIUM +32 (0) Erik.Verbruggen@eu.jll.com JEAN-PHILIP VRONINKS (**) HEAD OF CAPITAL MARKETS - BELUX +32 (0) Jean-Philip.Vroninks@eu.jll.com PIERRE-PAUL VERELST HEAD OF RESEARCH - BELUX +32 (0) Pierre-Paul.Verelst@eu.jll.com (*) sprl / bvba (**) Revron gcv COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them. Printing information: paper, inks, printing process, recycle directive.