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Brussels Office

MarketView
Q1 2013 CBRE Research

2013 GDP 2014 GDP UNEMPLOYMENT EXPORTS BUSINESS CONSUMER


0% 0.9% 7.6% (2012) 0.4% CONFIDENCE CONFIDENCE

ECONOMIC UNCERTAINTY CONTINUES TO DELAY


DECISION-TAKING

Chart 1: Economic growth & inflation in Belgium


Quick Stats
6%
Q1 2013 QoQ
Take up 95,169 m² i 4%
Availability 11.00% i
2%
0%
Quick Links
-2%
-4%
• Potential economic recovery
for the end of the year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

• Few large deals lift an GDP Growth Inflation


otherwise quiet first 3 months
Source: Belgostat
• Speculative development
restricted to top locations A reasonably quiet first 3 months can predicted for the euro area, with GDP
be reported for the Brussels office growth for 2013 at 0.3% and 1.2% in
• CBD office markets are back market. Take-up was supported by a 2014.
at historical void levels number of large deals, while office
investment is rising. Amid a number of large corporates
• Competitive voids keep rents announcing layoffs and restructurations,
down for existing space Business and consumer unemployment has risen from 7.2% in
confidence move sideways 2012 to 8.1% in February 2013. On the
• 182 million euro invested in Despite much improved financial back of declining energy prices and
Brussels offices conditions, business and consumer lower price growth on services, inflation
confidence are still lagging behind. in Belgium has decelerated from 2.7 % in
While households are uncertain about October 2012 to 1.4 % in February
employment prospects, companies face 2013. For 2014, estimates indicate an
demand uncertainty. This climate acts as expected inflation of 1.7%.
a major brake both on consumption and
on investment. Budgetary measures for 2013?
At the end of March 2013, the Belgian
Potential economic recovery for debt ratio amounted to 99.6 % of GDP,
the end of the year with the 2012 budget deficit at 3.9 %.
While economic activity has stagnatd For 2013, a budget target has been set
over recent months, a gradual recovery of 1.8%. too much budgetary discipline is
is expected to gain momentum towards hindering economic growth.
the end of the year and in 2014.
Belgium is expected to slightly
outperform the average GDP growth
DEMAND
Q1 2013

A QUIET FIRST 3 MONTHS


CBRE Research | Brussels Offices MarketView

Chart 2: Take-up Chart 3: Type of occupants (Q1 2013)

700,000 m²
600,000 m² Business Services
500,000 m² Computers/Hi-Tech 23%
400,000 m² CSL
300,000 m²
Financial Services 4% 51%
200,000 m²
MIE
100,000 m² 11%
Professional
0 m² 2%
2006 2007 2008 2009 2010 2011 2012 2013 Public Sector 7% 2%
Q4 Q3 Q2 Q1
Source: CBRE Source: CBRE

95,169 M² OF Economic uncertainty continues to


delay decision-taking by especially
40,000 m² Meeûs 8. This older
building is currently occupied by the
OFFICE LETTINGS the corporate sector. Despite a European Commission, who will soon
number of larger deals, office space leave to occupy the new Espace Orban
WERE SIGNED IN demand was subdued at the start of building. After a renovation of the
BRUSSELS IN THE 2013. Meeûs 8, the European Parliament will
occupy the building as from 2014.
FIRST QUARTER OF Few large deals lift an otherwise
quiet first 3 months Corporate demand remains
2013 Letting and sales transactions focused on cost reductions
amounted to 95,169 m² in the first
quarter of 2013. However, as much as Occupiers remain cautious and will
51,000 m² can be attributed to just 2 continue to be so until there is
deals. more clarity in the macro-economic
position. Demand is still being
Outside the Brussels Capital Region, primarily driven by cost reductions, with
Deloitte agreed terms on a 34,000 m² nearly no expansionary
preletting, in the new Gateway office based requirements.
project on the site of the National
Airport in Zaventem. Deloitte Kodak will lease 2,200 m² in the
committed to a long-term lease to Keiberg district in the Airport district to
house 2,000 members of staff. replace their 7,019 m² headquarters in
La Hulpe. While Kodak is a rather
In the Leopold District, the European drastic example, corporates remain
Commission agreed upon a 17,000 focused on space rationalisation and
m² lease in the Loi 15. costs reduction when moving to a new
location.
The European Parliament recently
announced the preletting of the
2
Q1 2013
CBRE Research | Brussels Offices MarketView
Table 1: Notable transactions in Q1 2013

Date Address Submarket m² EUR/m²

03/2013 1060 Bruxelles, Avenue Fonsny 43 (South Center Steel) South 1,146 m² 200 euro/m² Letting Alstom

03/2013 1040 Bruxelles, rue de la Loi 15 Leopold 17,000 m² 200 euro/m² Letting EU Commission

03/2013 1000 Bruxelles, Marché aux Poulets 32 Centre 1,520 m² 155 euro/m² Letting Fit For Free

02/2013 1930 Zaventem, Excelsiorlaan 87 Periphery (Airport) 2,200 m² 55 euro/m² Letting Kodak

02/2013 1400 Nivelles, Rue Jean Monnet 12 (Portes de l'Europe) Periphery (South) 1,438 m² 150 euro/m² Letting Nicols

02/2013 1080 Bruxelles, Rue Rotterdam 1 North 1,386 m² - Sale Generations ASBL

02/2013 1070 Bruxelles, Route de Lennik 451 (The Crescent) Decentralised (South-West) 2,300 m² 145 euro/m² Letting Northgate Arinso

02/2013 1620 Drogenbos, Humaniteitslaan 241 Periphery (South) 2,209 m² 115 euro/m² Letting Tyco

01/2013 1930 Zaventem, Brussels Airport (Gateway) Periphery (Airport) 34,000 m² 145 euro/m² Preletting Deloitte

01/2013 1040 Bruxelles, Rue de Trèves 59 (Trèves Building) Leopold 1,040 m² 175 euro/m² Letting Croix Rouge EU

01/2013 1000 Bruxelles, Rue des Colonies 11 (Parc Atrium) Centre 1,550 m² 220 euro/m² Letting Hunton & Williams

01/2013 1000 Bruxelles, Avenue de Cortenbergh 172 (Newcort) Leopold 1,139 m² 245 euro/m² Letting Shambho Belgium

Source: CBRE

Gateway (Zaventem) Loi 15 (Leopold Area) Meeûs 8 (Leopold Area)

3
DEVELOPMENT
Q1 2013

SPECULATIVE DEVELOPMENT ONLY AT PRIME LOCATIONS


CBRE Research | Brussels Offices MarketView

Chart 4: Development pipeline

700,000 m²
600,000 m²
500,000 m²
400,000 m²
300,000 m²
200,000 m²
100,000 m²
0 m²
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011 2012e 2013e 2014e 2015e
Non-Speculative Speculative Committed Completed
Source: CBRE

OFFICE Developers and landlords remain


cautious about launching
In the North Area, 9,649 m² remains
available in the 29,000 m² Up-Site
DEVELOPMENT development projects at risk in project expected later this year.
today’s market, with occupier
IS MARKING ITS demand under pressure. In the City-centre, only the renovation
LOWEST POINT IN Development activity remains
of the Régence 4 (6,825 m²) is
expected this year. Axa is about to
AT LEAST 15 YEARS subdued launch the reconstruction of its
Developers and landlords remain Treurenberg office building (10,325
cautious about launching development m²) for an expected completion in
projects at risk in today’s market, with 2015. Allfin has started renovation
occupier demand under pressure. works on the 4.185 m² Rigoletto office
Nonetheless, readily available new buiilding within the 45,000 m²
office space is gradually decreasing, as Chambon cluster, which will be largely
about half of all office demand is reconverted into residenital space.
focused towards this segment.
In the Louise district, E-Lite (7,274 m²)
Speculative development is the only remaining project with some
restricted to top locations 5,000 m² still being marketed.
Only a few speculative projects are
currently under construction, with
developers reluctant to break ground at
less than optimal locations.

In the Leopold Area for example, Black


Pearl (11.967 m²), Livingstone (18,688
m²), and Belview (6,009 m²) are all
coming online in the next 12 to 18
months.
4
Q1 2013
Map 1: Notable office projects at risk in the Brussels CBD

CBRE Research | Brussels Offices MarketView


North

4
7

5
Centre
3
Leopold
1
2

6
South

Louise

Source: CBRE

1 Belview 2 Black Pearl 3 Livingstone 4 Belair 5 Treurenberg

6 Régénce 4 7 Chambon 8 Up-Site 9 E-Lite

5
VACANCY
Q1 2013

CBD VOIDS BACK AT PRE-CRISIS LEVELS


CBRE Research | Brussels Offices MarketView

The overall office vacancy rate in


Brussels at the end of Q1 2013
This is especially the case for grade A
space, as some 45% of letting and
1,158,000 M² OF
equals 11,00%, with 1,425,032 m² sales transactions is focused on new OLDER OFFICE
of office accommodation being space, prelets and custom-builds.
officially marketed to let. Voids SPACE BEING
marginally decreased as compared
to the previous quarter at 11,10%.
Structural older voids plaguing
the out-of-town districts
MARKETED
Space and cost efficiency quests by
CBD office markets are back at corporates have resulted in negative
historical void levels absorption for mainly the out-of-town
While suburban office markets are still office districts. While this negative
plagued by elevated vacancy, most absorption has been partly offset by
CBD submarkets show vacancy rates in office reconversion in the Decentralised
between 4% and 7%. Area, it has also resulted in a higher
number of grade B and C office voids
Given the recent letting of the Loi 15 in multiple other locations.
by the European Commission, the local
vacany rate in the Leopold Area Off all office voids in the Brussels
dropped to 6,32%. market, 1,158,000 m² is considered to
be grade B or grade C. 762,000 m² of
Further absorption of voids this older office space is located in the
expected suburbs.
Given the low amount of speculative
development coming through until at
least 2015, vacancy rates in the CBD
districts are likely heading lower further.

Chart 5: Vacancy rate

14%
12%
10%
8%
6%
4%
2%
0%
2006 2007 2008 2009 2010 2011 2012 Q1
2013
Grade C Grade B Grade A

6 Source: CBRE
Q1 2013
Map 2: Office voids in the Brussels CBD

CBRE Research | Brussels Offices MarketView


North

Centre

Leopold

South

Louise Office voids in m²

Source: Brussels UrbIS/CBRE 7


RENTAL VALUES
Q1 2013

PRIME HEADLINE OFFICE RENTS IN BRUSSELS REMAINED STABLE


CBRE Research | Brussels Offices MarketView

Chart 6: Rental evolution

350 euro/m²
300 euro/m²
250 euro/m²
200 euro/m²
150 euro/m²
100 euro/m²
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013

Prime Rent 3rdQuartile Rent Economic rent

Source: CBRE

RENTAL Tenant’s looking to restructure rents


on longer leases are still successful,
This is often done on the basis of rent
renegotiations, and giving lease length
APPRECIATION and still achieve improved lease to the landlord in return. Alternatively,
terms, especially in the most using less space more efficiently is
EXPECTED AS NEW competitive office districts. another trend among corporates.
SPACE BECOMES Decreasing Grade A voids could Competitive voids keep rents
SCARCER support rents for new space down for existing space
The upcoming shortage of new space For new leases on existing out-of-town
is supporting a potentialhardening of office space, it is not uncommon to see
rents for new space in the near future. up to 2 months of rent-free per year
As an example, the few speculative secured.
schemes currently under development
are being marketed at asked rents While facial rents appear stable,
above the local prime rent. economic rents have decreased
considerably over recent years,
In the meanwhile, prime headline office especially for older office space.
rents in Brussels remain stable at 285
EUR/m². Such rents are obtainable in
the European district.

Corporate demand remains


focused on cost reductions
The potential to decrease rents at lease
breaks continues, with most office
occupiers continuing to focus on
reducing property-related costs.

8
INVESTMENT ACTIVITY

Q1 2013
MORE INVESTOR DEMAND FOR OFFICE SPACE

CBRE Research | Brussels Offices MarketView


182 MILLION In the first 3 months of 2013, 182
million euro was invested in
sale of the Belview office project
(5,009 m²) to German fund III. The
EURO INVESTED IN Brussels offices. Total investment latter property being a new project,
volume, including all other property and the first forward commitment
BRUSSELS OFFICES segments in Belgium, amounted to acquisition since 2007.
362 million euros in the same
period. More recently, Befimmo acquired the
Blue Tower (29,210 m²). The Blue
Investors look at Brussels office Tower is one of the three popular offie
space towers along the Avenue Louise, and
After a few years of low investment is multilet with predominantly short-
appetite for Brussels office space, term leases.
investors are slowly returning to the
market. While fiscal uncertainty Downward pressure on yields
continues to cause trouble, plenty of for best product
good quality assets are being Long-term leases trade at around 5%.
marketed. Prime office yields in the Brussels
market for standard 3/6/9 year leases
Strong demand for core assets and are at 5.75%, for the best locations.
long-term leases remains the case,
while also distressed assets seem to However the bulk of office space in the
find their way to opportunistic buyers. market continues to trade at significant
discounts, with yields up to 10%.
Notable deals in the first quarter of the
year include the sale of the City
Garden (9,351 m²) to IVG and the

Chart 7: Investment volume (all properties in Belgium)

6 bio euros Offices (Brussels)


Offices (Regions)
4 bio euros
Industrial
Retail
2 bio euros
Hotels & Leisure

0 bio euros Elderly homes


2005 2006 2007 2008 2009 2010 2011 2012 2013 Residential

Source: CBRE 9
Q1 2013

Map/Table 2: Statistics per submarket


CBRE Research | Brussels Offices MarketView

Periphery (West)

Periphery (Airport)

Decentralised (North-West)

North Decentralised (North-East)

Centre Leopold

South
Louise
Decentralised (South-West)

Decentralised (South-East)

Periphery (South)

Submarket Stock Take-up Q1 2013 Vacancy Prime yield Prime rent


Leopold 3,347,425 m² 22,289 m² 6.32% 6.25% 285 euro/m²
Centre 2,064,448 m² 4,261 m² 5.04% 6.25% 225 euro/m²
North 1,510,868 m² 1,386 m² 7.21% 6.75% 195 euro/m²
South 468,672 m² 2,186 m² 2.40% 6.25% 185 euro/m²
Louise 756,117 m² 4,904 m² 12.63% 6.25% 210 euro/m²
Decentralised (North-East) 1,110,507 m² 2,242 m² 18.96% 7.75% 155 euro/m²
Decentralised (South-East) 1,062,768 m² 2,645 m² 11.73% 7.75% 175 euro/m²
Decentralised (North-West) 265,632 m² 124 m² 19.24% 7.75% 175 euro/m²
Decentralised (South-West) 320,313 m² 4,578 m² 17.02% 7.75% 140 euro/m²

10 Periphery (Airport) 1,359,817 m² 40,407 m² 24.75% 7.75% 150 euro/m²


Periphery (West) 232,284 m² 526 m² 27.60% 7.75% 135 euro/m²
Periphery (South) 459,883 m² 9,621 m² 11.39% 7.75% 150 euro/m²
TOTAL 12,958,734 m² 95,169 m² 11.00% 6.25% 285 euro/m²
CONTACTS

Q1 2013
CBRE Research | Brussels Offices MarketView
For more information about this Local MarketView, please contact:

BELGIUM RESEARCH

Kim Verdonck
Head of Research
t: +32 2 643 33 33
e: kim.verdonck@cbre.com

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CBRE RESEARCH
This report was prepared by the CBRE Belgium Research Team which forms part of CBRE Global Research and
Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market
research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

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