Office market report Luxembourg

Transcription

1 Office market report Luxembourg On Point 3 rd quarter 2015 Large size deals again Take-up in Q3 was again strong at 58,000 sq.m., comprising large size deals by the EIB and Arendt & Medernach. Year-todate take-up reaches 145,000 sq.m., 10% more than a year ago. Vacancy rate increased to 4.2%, vs. 3.8% previously due to several completions and second hand buildings vacated. By yearend, we expect it to fall below 4% again. Prime rents increased further in most districts due to lack of vacancy. In the CBD, prime rents are however unchanged at 45 / sq. m. / month + VAT. The investment market enjoys high liquidity, so volume continue to increase and reaches 825 Mio this year so far, nearly as much as the full year Prime yields for the best buildings in the CBD tightened by 25 bps to 5.25%.

2 2 On Point Luxembourg Office market report Q Foreword Q3 was an excellent quarter, occupiers breathe as well because there are a few more products on the market, though with higher rents. A very hot market, without overheating as new projects start to become concrete. Angélique Sabron Head of Agency Luxembourg Key figures Letting Market M 2015 Take-up (cumulative) in 000 sq. m * 145 Stock in Mio. sq. m Completions (cumulative) in 000 sq. m Vacancy in 000 sq. m Vacancy Rate in % Prime Rent in /sq. m. /month Capital Market Investment volume total in Mio (**) Prime Yield Band in % (typical 3/6/9) Q4 2015e 2016e 2017e Future Supply, Speculative ( 000 sq. m. ) Future Supply, Non Speculative ( 000 sq. m. ) Total ( 000 sq. m. ) (*) Restated (**) Incl. owner occupation, development, and land sales

3 3 On Point Luxembourg Office market report Q Letting market Large size transaction again Once again, the occupier market was very active with some large size deals. In Q3 we registered 58,000 sq.m. of transactions, 12% more than in Q but 8% lower than a year ago. As a reminder, in Q3 last year, take-up was exceptionally high with the PwC transaction (c. 27,000 sq.m.). Cumulative take-up year-todate therefore amounts to 145,000 sq.m., 10% more than a year ago. As we previously announced, the European Investment Bank (EIB) continues to expand in the Kirchberg and took 10,768 sq.m. in the Monnet 3. Another EU institution, the ESM (European Stability Mechanism), increased its footprint in the Kirchberg with 1,023 sq.m.. All together, the contribution of EU institutions to take-up this year to date is 27%, vs. on average 8% the preceding 10 years. On the corporate side, law firm Arendt & Medernach joined its brand new 14,500 sq.m. headquarters in the Kirchberg and in Leudelange, the local developer Tralux prelet 2,222 sq.m. in the L2 project it co-develops with Codic. The high deal flow we witnessed in the Kirchberg brings the contribution of this district to 59% in Q3, vs. 11% for the CBD, 6% for the Station and 5% in Bertrange. Take-up by business sector 100% 80% 60% 40% 20% 0% M ,800 sq.m. vacant in Luxembourg During the last quarters the risk of overheating of the occupiers market due to restricted vacancy was real, now due to several mid-size completions the market breathe a bit. Over the last three months, in the Kirchberg several buildings were speculatively completed for a total of 6,400 sq.m.: the Vega, the Deneb and Altair buildings are now available for occupation as well as the refurbished Pneu building. In the CBD (Merl), the White Pearl has just been completed and offers 8,454 sq.m. of quality offices. Total speculative completions over the quarter amounted to 19,200 sq.m. During last quarter, some second hand buildings were vacated in the CBD and Station districts for a total of c. 8,500 sq.m. Occupiers have therefore a slightly wider choice. The vacancy rate in Luxembourg as a whole increased a bit to 4.2%, vs. 3.8%. in Q2, and covering 155,800 sq.m. In the CBD, 3.6% is vacant vs. 2.8% previously, in the Station 3.4% (vs. 2.3%), and in the Kirchberg 1.2% vs. 0.9%. In the decentralised as a whole, 6.2% is vacant, vs. 6.4% previously, 3.8% being vacant in La Cloche d or and 9.8% in Bertrange. The vacancy rate in the Periphery is stable as well at 9.9%. LARGEST SPECULATIVE PROJECTS (>4,000 sq m) DISTRICT BUILDING AREA PLANNING KIRCHBERG LIGHTHOUSE ONE 14,500 Q CBD CARREFOUR 13,000 Q LEUDELANGE L2 11,000 Q CLOCHE D OR DYAPASON 13,000 Q CBD ROYAL HAMILIUS 10, KIRCHBERG KPC 5,200 Q LEUDELANGE TRIOLOGIE 5,000 Q STATION WALLIS 4,098 Q Vacancy rate by district (%) Banking and Finance Insurance + Pension Funds Business Services TMT Manufacturing+Construction Public Administration EU Other Source: JLL Research 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CBD Kirchberg Station Dece Peri Esch Q Q Q Q Q3 15 Source : JLL Research

4 '000 sq.m. 4 On Point Luxembourg Office market report Q Prime rents evolution ( / sq.m. / month) KPC Kirchberg 5,200 sq.m. Available in Q Landlord : EY In Q only one speculative completion is expected: 5,200 sq.m. in the KPC building in Kirchberg, EY s new headquarters. We therefore believe that vacancy will fall back to below 4% again, probably around 3.75%. In 2016, more speculative completions are in the pipeline: up to 66,500 sq.m. will be delivered, including the Lighthouse ONE (Kirchberg: 14,500 sq.m.), the Carrefour I&II (CBD: 13,000 sq.m.) and the Wallis (Station: 4,000 sq.m.. A portion may be prelet, however, and vacancy may then increase again above 4%. Completions, Pipeline and Vacancy % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q3 15 Source : JLL Research CBD Station Kirchberg Decentralised Periphery Esch Hot market in Luxembourg: rental values go further up In view of the low vacancy and the slow flow of speculative completions, prime rents continue to increase in most districts. In the CBD, 45 / sq.m. / month (+vat) remains, however several floors in the Royal20 and Royal Grace and commercialised at 50 and over. In the Kirchberg, prime rents are confirmed at 34 / sq.m. / month (+vat), while in the Station district prime rents increased by 3% to 35 / sq.m. / month. The drop of vacancy in La Cloche d Or pushed asking rents higher: the best products now trade at 29.5 / sq.m. / month (+vat) vs. 28 previously. Finally prime rents in the Periphery, and more specifically the Airport, are unchanged at 25 / sq.m. / year. In Leudelange, new projects trade at / sq.m. / year, a 24% increase year-on-year. Completions F C Spec. F C Non Spec. Vacancy Rate Source : JLL Research

5 5 On Point Luxembourg Office market report Q Investment market The best quarter of the year Q3 was the best quarter of 2015 so far, confirming the excellent momentum in the flow of property investments in Luxembourg. Over the last 3 months we registered 360 Mio of transactions, 112% more than in Q and 94% more than a year ago. Once again it was led by offices ( 298 Mio) with core transactions like the sale to US investors Starwood and Rynda of the Vertigo building in La Cloche d Or and the sale to a French institutional investor of the White Pearl in the CBD for an estimated amount of 55 Mio (JLL estimate). Besides several opportunistic and value-added transactions were closed such as the sale to Giorgetti of the Airport Center for 50 Mio. We also registered c. 57 Mio of land sales and 5 Mio of unit shop sales. The investor base is more international than ever, the Middle East contributed to 33% of the volume, followed by the USA with 23%, local investors with 21%, Belgium with 11%, France with 7% and Germany with 5%. Yields are down to 5.25% Yields for prime buildings providing a secure mid-term cash flow declined by 25 bps to 5.25%. For prime investments with long term leases and small lot sizes, yields can be substantially below this. This implies that capital values continue to increase as rents for the best buildings are also going up. High liquidity Volume year-to-date is already nearly as high as the full year 2014 at 825 Mio. Liquidity is high in most of the districts and the transaction pipeline suggests that volume over the full year 2015 will materially exceed 1 bn. Investment Volume by M 2015 ( Mio) M 15 Source: JLL Research Investment Volume by origin of money (%) 100% 90% Middle East 80% USA 70% France 60% Other 50% Netherlands 40% Italy 30% Germany 20% Belgium 10% Luxembourg 0% M 15 Source: JLL Research Prime Yield evolution (6/9yr lease) 6.20% 6.00% 5.80% 5.60% 5.40% 5.20% 5.00% 4.80% Q3 15 Source: JLL Research

6 6 On Point Luxembourg Office market report Q 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. Our Research & Advisory service also prepares micro-location studies for landlords and investors 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 Largest Letting Transactions in Luxembourg 2015 to date YEAR QTR SUBDISTRICT OPERATION BUILDING AGE AREA (sq.m) TENANT KIRCHBERG Letting ARENDT HOUSE New 15,400 ARENDT & MEDERNACH CLOCHE D OR Letting ARIANE Old 13,624 EUROPEAN COMMISSION CLOCHE D OR Letting LACCOLITH Modern 11,291 EUROPEAN COMMISSION KIRCHBERG Letting MONNET, 3 Modern 10,768 EUROPEAN INVESTMENT BANK CBD Letting AIRE New 4,906 BBH BERTRANGE Letting ATRIUM BP VITRUM New 3,750 KNEIP COMMUNICATION AIRPORT Letting AEROGOLF CENTER Modern 3,316 FERRERO CBD Letting GLACIS New 2,756 CAPITA LEUDELANGE Preletting L2 Project 2,222 TRALUX BERTRANGE Letting ATRIUM BP EXTIMUS New 2,150 GUARDIAN EUROPE SARL Major Office Investment Transactions in Luxembourg 2015 to date YEAR QTR DISTRICT BUILDING SURFACE PRICE ( Mio) SELLER BUYER CBD Royal Hamilius 35,000 Conf. Codic Confidential Cloche d Or Vertigo 24,000 Conf. Irish Life Starwood / Rynda Kirchberg Deutsche Bank 11, IVG Moor Park Capital CBD Royal20 4, Leasinvest Private CBD White Pearl 8, Sogimme French investor Periphery Airport Center 17, AIG Giorgetti Station M2 6, Mavin Project IVG CBD Royal 30 4, Landesbank Berlin Private Cloche d Or Schnadt 10 4, KanAm Baltisse Source: JLL Research, based on publicly available data

7 7 On Point Luxembourg Office market report Q Map of the Luxembourg Office Market

8 8 On Point Luxembourg Office market report 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 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. 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..

9 JLL Office - Luxembourg Atrium Business Park 41 rue du Puits Romain L-8070 Bertrange LUXEMBOURG Tel : Contact Romain Muller Angélique Sabron Jean-Philip Vroninks (*) Pierre-Paul Verelst Managing Director Luxembourg Head of Agency Luxembourg Head of Capital Markets BeLux Head of Research Belux (0) (0) Romain.Muller@eu.jll.com Angelique.Sabron@eu.jll.com Jean-Philip.Vroninks@eu.jll.com Pierre-Paul.Verelst@eu.jll.com (*) Sprl / Bvba 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.