Flanders Office Market

Transcription

1 Research Report Flanders Office Market Winter 217

2 - 2 - Research Report Flanders Office Market Winter 217 Introduction 217 is an absolute top year for overall take up in Flanders. This record is thanks to the outperforming Antwerp market in which a major deal with the Police was realized. Besides Antwerp, take up was also high in Ghent and Hasselt. Also the number of deals is rising in most cities. Business centers remain booming and are almost fully occupied. It remains difficult to find a choice for new space above 25 m². We are expecting problems in the middle term for Antwerp and on the shorter term for Ghent with a vacancy rate of 4.13%, if there are no new speculative developments. Prime rents are stable and have risen in Antwerp thanks to the new properties coming on the market. The larger new office projects built in Antwerp and some smaller new buildings in Ghent are quickly absorbed, which confirms the good condition of the Flanders office market. Corda Campus Architect: Eld Landlord: Corda Campus Cover photo: Zuiderpoort Copyright: Georges De Kinder Architect: Architektenbureau Ferre Verbaenen / Xavier Donck & Partners. Landlord: ADIA (sold to Ares in December 217) Ralph Schellen* HEAD OF OFFICE AGENCY FLANDERS *Allres bvba

3 - 3 - Research Report Flanders Office Market Winter 217 Summary Stock Flanders Big 5 Q3 217: 4.5 million sq.m. Leuven 1% Hasselt 4% Mechelen 1% Antwerp 47% Ghent 29% Take-Up Flanders 212-9/217 sq.m M 17 Antwerp Ghent Hasselt Leuven Mechelen Aalst Brugge

4 - 4 - Research Report Flanders Office Market Winter , sq.m. Take-up in Flanders in 9M % y-o-y / 69% above 5 year average (9 months period) Vacancy rate across main cities of Flanders Q3 217 Ghent Mechelen Leuven 4.13% (Q1 217 = 8.34%) 1.9% (Q1 217 = 12.1%) (Q1 217 = 5.55%) 1.1% Antwerp Hasselt 9.4% 12.% (Q1 217 = 1.92%) (Q1 217 = 11.2%) Prime rents across main cities of Flanders Q3 217 Antwerp Hasselt % y-o-y Outlook: positive Unchanged Outlook: positive Unchanged Outlook: stable Mechelen Leuven Aalst 14 Unchanged Outlook: positive Ghent 15 Unchanged Outlook: stable 15 Unchanged Outlook: stable

5 - 5 - Research Report Flanders Office Market Winter 217 Antwerp Up to record high with mega deals Occupier activity Q3 217 came in at a record high for Antwerp with the long awaited transaction by the Police of Antwerp being materialized. The police acquired a built-to-suit project of 5, sq.m. in the Post X (Ring district) with completion date 22. This mega deal, one of the largest ever in Antwerp, contributed to boost take-up to 79,341 sq.m. in Q3 and to 131,594 sq.m. in the nine month period, The preceding record transaction was Alcatel in 22 with 37, sq.m. in the Kievit building next to the Central Station. The Post X project proves very successful with several other mid-size transactions like Proximus (5,896 sq.m.) and EY (4,74 sq.m.), as well as The Link with Meetdistrict (5,261 sq.m.), Astrea Law (1,853 sq.m.) and Uitgeverij Plantyn (1,811 sq.m.). The transaction pipeline and deals closed early Q4 suggest a take-up over the full year of around 15, sq.m., ie an all-time high. The transaction by the Police largely explains this outperformance, though if we exclude it 217 would be excellent anyway compared to the 5 year average take-up of 88, sq.m. The average deal size consequently increased to a 15 years high of 892 sq.m., up 61% y-o-y and 67% above the 5 year average (annual figures). In the Ring district only, the average deal size was 3,539 sq.m. in the nine months period. As a result of the multiple lettings in the Post X and The Link the share of the Ring district is at a record high of 57%, followed by the Centre with 25%, the Periphery with 13% and the Port with 5%. 218 is likely to be much quieter with a flow of midsize transactions from corporates, we however believe there is an important replacement demand potential from corporates currently located in obsolete, energy inefficient properties. This is especially true for corporates located in some segments of the Centre where there are recurring traffic congestions issues Take-up (sq.m.) M 17 Corp Administra9ons Average deal size

6 - 6 - Research Report Flanders Office Market Winter 217 Noticeable transactions last 6 months District Building Age Class Surface Operation Tenant Ring Post X Project 5, sq.m. Acquisition Police Antwerp Ring Post X Building III Under construction Ring The Link Under construction Ring Post X Building IV Under construction Ring Post X Building V Under construction Ring The Link Under construction 5,896 sq.m. Letting Proximus 5,261 sq.m. Letting MeetDistrict 4,74 sq.m. Letting EY 2,538 sq.m. Letting Cool Blue 1,853 sq.m. Letting Astrea Law Vacancy and future supply The developments at risk in Berchem, The Link and Post X are real success stories that prompted the developer of Post X IRET to launch the last phases at risk. At the same time, The Link project of Ghelamco (26,5 sq.m. planned for Q1 218) is also 51% prelet. When of Grade A quality with excellent location, new projects are rapidly absorbed by occupier demand since there was until recently a quality shortage in Antwerp. In total, there is currently 67, sq.m. speculative projects in progress in Antwerp, nearly 3, sq.m. of which in the last phases of the Post X. in transforming them into apartments as Antwerp population is growing, and housing is currently undersupplied, especially for units corresponding to current standards of comfort. The latter trend also motivates the city to favour residential developments in the trendy t Eilandje area close to the Port and the Museum aan de Stroom. Buildings left by the Police of Antwerp, like the Oudaan in the Centre, will most likely be transformed into a mixed residential project and not inflate vacancy when the new headquarters in Post X will be completed. The properties that are vacated are in some cases sold to residential developers that could make good deals Rental values Prime rents were unchanged vs. Q1 at 15 / sq.m. / year so far, an increase to 155 / sq.m. / year is a strong likelihood. A good illustration is the 27% increase year-on-year of weighted average rents, at 144 / sq.m. / year, although top quartile rents increased by only 2% over the same period. The occupier market is now more balanced between landlords and tenants, incentives for the best quality properties are minimal.

7 - 7 - Research Report Flanders Office Market Winter 217 Ghent Robust occupier activity pressures vacancy to 5 year low Occupier activity Several mid-size transactions boost take-up 217 in the nine months period to close to the full year 216 level: we recorded a transaction volume of 38,57 sq.m., up 24% y-o-y, close to the 5 year average (full year figures) of 39,263 sq.m. The average deal size of 514 sq.m. exceeds the 5 year average by 6%. Ghent is mainly a corporate market with 95% of the yearly transaction volume, 217 is no exception with 94% to date. The market is concentrated on the Centre and the South districts that contributed to respectively 55% and 43%, the rest being equally split between the North and the East. In the same period last year the Centre dominated by far with 65%, the South followed with 19% and the East with 16%. Among the recent transactions, Eastman Chemical took 1,72 sq.m. in the Technologiepark in Zwijnaarde (South) and the Viso school took 1,52 sq.m. on Woodrow Wilsonplein (Centre). Take-Up (Sq.m.) M 17 Corp Administrations Average deal size

8 - 8 - Research Report Flanders Office Market Winter 217 Top 3 transactions last 6 months District Building Age Class Surface Operation Tenant South South Centre Take-Off Office Park Veld 7 Technologiepark 21 (Zwijnaarde) Woodrow Wilsonplein Under 5,3 sq.m. Letting EY construction Old 1,72 sq.m. Letting Eastman Chemical Old 1,522 sq.m. Letting VISO Vacancy and future supply Currently 55,469 sq.m. is immediately vacant in Ghent, out of a stock of 1.34 million sq.m. 5% of the vacancy is located in the South district, 39% in the Centre, 7% in the North and 4% in the East. 53% of total vacancy is old and not renovated, 16% is modern, and 31% is new. In relative terms, vacancy in Ghent is therefore more recent than the other Flemish cities and this can be a competitive advantage compared to the other cities. Vacancy rate as of 3/9/217 was 4.13%, vs. 5.55% 6 months ago as the few new projects are absorbed by leasing activity while at the same time the new development activity is slow to react to demand. Except for the Zuiderpoort, transactions in excess of 2,5 sq.m. are almost only possible with prelettings. To illustrate, in the South in the Take-Off business park behind Flanders Expo a second drop building has recently been launched next to its twin, occupied by Planet Group. Totaling also 3,4 sq.m., it has been rapidly prelet to Bostoen, Cape IP Law and Decupere & Partners. A total of 28,5 sq.m. speculative is under construction/ renovation or in project toward 219. Early Q4 217 the refurbished Watt-The-Firms property in Ghent downtown has been delivered and offers c. 1,3 sq.m. co-working spaces in a trendy loft-style dedicated for growing creative companies. By the end of 218, a new unit of the MG Business Center will be completed. This property of 5,541 sq.m. is located next to the Ghent St Pieters station. ING will host its new headquarters on the same site in a 17, sq.m. (Diamond building) planned for the end of 219 with an important speculative part still to be defined. Longer term there is up to 1, sq.m. development potential in the Take-Off and Tetris business parks located in the South at immediate proximity of the E4 highway. EY and Deloitte have both their new headquarters in these projects. Rental values So far prime rents are unchanged at 155 / sq.m. / year, the highest of Flanders, and might still increase in the near term in the new projects that trade at higher rents. Average rents are estimated at 121 / sq.m. / year (5 year period) for all age classes, and at 143 / sq.m. / year for new properties (existing or under construction / renovation).

9 - 9 - Research Report Flanders Office Market Winter 217 Leuven Mid-size transactions drag vacancy down Occupier activity Leuven performed very well in 216 with a take-up of 21,236 sq.m., 139% higher than in 215 and 2% above the 5 year average. 9% of the take-up was realized by corporates, which is above the 5 year average of 73%. 216 was also a good year in terms of deal count as we recorded 37 transactions, which is nearly twice the average of 2 deals a year over the last five years. The average deal size was consequently lower at 574 sq.m. vs. 1,115 sq.m. the preceding 5 years. In 217 to date, we recorded 17 transactions for a total of 14,6 sq.m. and the average deal size increased to 858 sq.m. thanks to the letting to Aveve of nearly 4, sq.m. in the Ubicenter (Centre) and the sale to AE Architects of a property of 6,6 sq.m. in Heverlee. Take-Up (Sq.m.) M 17 Corp Administrations Average deal size

10 - 1 - Research Report Flanders Office Market Winter 217 Top 3 transactions last 6 months District Building Age Class Surface Operation Tenant Heverlee Interleuven, 74 Refurbishment 6,67 sq.m. Acquisition AE Architects Centre Ubicenter Modern 3,688 sq.m. Letting Aveve Centre Vander Elst New 757 sq.m. Letting Dentsply Implants Vacancy and future supply With the large transaction recorded in the Ubicenter vacancy has dropped to a 4 years low of 1.1% as of Q3 217, but looking in details it is predominantly located in the periphery whilst in the centre it is moderate. As of 3/9, 43,811 sq.m. was vacant, of which 73% in the Periphery (29% in Haasrode and 31% in Heverlee, and the rest in Herent, Wijgmaal and Wilsele). 11,916 sq.m. is vacant in the Centre, 25% of which in the Ubicenter. There is no speculative development ongoing and given the proximity to the Brussels Periphery that has substantial oversupply, no new project is in the pipeline. On the demand side, Leuven retains an appeal for technology and start-up companies related to the university world, such type of occupier being more likely to look for co-working space or business centers, a type of property that is currently scarce in Leuven. We see vacancy slightly declining further but it is likely to remain relatively high at around 9-1% in the near future. Rental values Prime rents range between 125 and 15 / sq.m. / year in the Centre. Important discounts apply in peripheral locations like Haasrode and Heverlee. Rents have been stable for about 3 years and are expected to remain at the same level for at least the next 12 months.

11 Research Report Flanders Office Market Winter 217 Mechelen Quieter year with small size transactions Occupier activity Since the outperformance of ,81 sq.m. takenup, 43% above the 5 year average the occupier market has been much quieter with 1 transactions so far, for a total of 3,825 sq.m. The average deal size was 383 sq.m. over the nine months period vs. 913 sq.m. on average the last 5 years. Take-Up (Sq.m.) M 17 Corp Administrations Average deal size

12 Research Report Flanders Office Market Winter 217 Top 3 transactions last 6 months District Building Age Class Surface Operation Tenant Periphery Centre Periphery Stephenson Plaza B Wayenborgstraat 27 Mechelen Campus Modern 65 sq.m. Letting De Lage Landen Old 559 sq.m. Letting Blaklader Old 538 sq.m. Letting Tecan Benelux Vacancy and future supply Immediate vacancy in Mechelen is estimated at 49,977 sq.m., of which 5% is old, 4% is modern and 1% is new. Void is largely concentrated on the business parks in the periphery, 59% is located outside the city centre. The vacancy rate has restarted rising to 1.9% vs. 9.2% at the end of 216 with additional second hand space having become vacant in the last six months. So far there is no speculative completions recorded in 217: in Q4 217 the new headquarters of Nipro (c. 8, sq.m.) will be delivered, but developers are riskaverse and the several projects in design phase like the MG Two Tower (18,67 sq.m. near the station) and Zuidpoort Building G (6, sq.m. near the station, next to Sanoma) are not likely to be started at risk. Another project in the pipeline next to the station that might be developed in 219 is the loft style building Het Zegel, offering c. 7,5 sq.m. Rental values Prime rents range between 125 and 14 / sq.m. / year and are stable for now. New projects near the station trade at higher values, an increase is therefore likely in the medium term, potentially to 15 / sq.m. / year, in line with Antwerp and Leuven. In the business parks along the E19, rents are between 1 and 125 / sq.m. / year.

13 Research Report Flanders Office Market Winter 217 Hasselt Record year 217 Occupier activity Hasselt is the fifth office market in Flanders with a stock estimated at 18, sq.m. It has a recurring flow of transactions concentrated on the Herkenrodesingel (Ring) which attracts all of the big names like Proximus, EY, Baloise, KPMG and more. 217 is a record year in volume terms with two prelettings in the redevelopment of the Concentra site located Herkenrodesingel (Heros Business Park), by Media Huis (Het Belang Van Limburg) and Carglass. 19,112 sq.m. has been transacted so far, nearly five time as much as the average yearly take-up of 4,1 sq.m. The average deal size this year is 6, sq.m. vs. 912 sq.m. on average the last 5 years. Take-Up (Sq.m.) M

14 Research Report Flanders Office Market Winter 217 Top 3 transactions last 9 months District Building Age Class Surface Operation Tenant Ring Ring Herkenrodesingel, 1 Herkenrodesingel, 1 Under construction Under construction 7,294 sq.m. Pre-letting Media Huis 4,524 sq.m. Pre-letting Carglass Centre Martelarenlaan 5 Old 378 sq.m. Letting Adecco Vacancy and future supply Immediate vacancy in Hasselt is estimated at 21,7 sq.m. in 17 properties, with a concentration on old buildings (76%). Vacancies in new buildings represents 18% of the total and modern buildings 7%. Future supply consists of two additional units of the Corda Campus (15, sq.m. in total, scheduled for 218), and 5,921 sq.m. in the Centennial project at the station (design phase). The vacancy rate is estimated at 12%, slightly rising vs. 11% end of 216. Rental values Prime rents are stable at / sq.m. / year. Mediahuis Hasselt Developer: Futurn

15 Research Report Flanders Office Market Winter 217 Other cities Quiet year 217 Occupier activity Outside the big 5 cities, Aalst, Kortrijk and Bruges are reasonably active markets, but as smaller cities have an irregular transaction flow. Until recently there was a quality shortage in the regional cities, occupiers like administrations and corporates were located in several old properties, sometimes obsolete. We observe that these regional occupiers now tend to centralize their services in single locations with high quality criteria, including in terms of mobility. The new projects launched on excellent locations like for example the Nieuw Brugge on the Bruges station are success stories, likely to be reiterated in future projects given the important potential demand. Top 5 transactions last 12 months District Building Age Class Surface Operation Tenant Brecht Vaartdijk, 15 New 2,6 sq.m. Letting Politie Voorkempen Kapellen Energielaan, 16 Old 1,912 sq.m. Acquisition Mantraco (Schelde- Natie) Kluisbergen Ronde Van New 1,4 sq.m. Acquisition Evan Construct Vlaanderenstraat 12c Schilde Turnhoutsebaan Old 1,1 sq.m. Acquisition Immo TSK 1 Niel Tunnelweg, 2 Old 1,42 sq.m. Acquisition Staxs

16 Research Report Flanders Office Market Winter 217 Capital Markets Investment volume: 217 will be a good vintage The investment market has been comparatively quiet this year so far with a volume estimated at 681 Mln vs. 724 Mln the same period last year and 96 Mln on average for the past 5 years (9 months period). The bias results from the lower transaction size at 13.9 Mln vs Mln on average the last five years. Compared to 216, it is in line. JLL however expects that the volume by year end will approach 1 bn with the finalization of the sale of the Logicor portfolio (Logistics) and the sale of the Zuiderpoort office building in Gent that has been closed early December. 217 will therefore be a fairly good vintage for property investment in Flanders, considering that the average volume of the past 5 years is 1.2 bn and reminding that 215 was exceptional with 2bn. As of the end of Q3 217 the Industrial assets dominate with a share of 43.5%, which is way above the average of 17.6% recorded annually over the past 5 years. Retail assets rank second with a share of 34.7% vs. 41.5% on average the last 5 years. The office segment is particularly quiet this year so far with a contribution of 11.1% vs. 23.8% on average the last 5 years. Retirement homes contributed to 8.% and the remaining 2.7% is mixed & others. There is no hotel transaction this year in Flanders. Over the nine months period Belgian investors are by far the largest contributors with 8%, followed by France with 11% and Germany with 9%, but considering the forthcoming sales of the Logicor portfolio and the Zuiderpoort to international investors (China for Logicor) the end-of-year pie will show more diversity of investor s origin. Volume Flanders by Type of Use 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 14% 16% 17% 21% 44% 24% 21% 11% 41% 34% 35% M17 Retail Office Industrial Retirement Homes Hotel Mixed & Other Investment Volume (all assets), Flanders Millions Millions Q1 Q2 Q3 Q4 5 y average -

17 Research Report Flanders Office Market Winter 217 Retail Portfolios are actively traded Several mid-size retail transactions were closed by private investors during the last two quarters in the high street and retail warehousing segments but the activity overall has been quiet, the relatively high volume of 241 Mln remains influenced by the sale of a part of the Bermaso portfolio to Primonial in Q1 this year (a 8 Mln deal). Another portfolio, namely the C&A portfolio has been sold end November, and will contribute to lift volume of the full year to above 3 Mln. as of Q3, and are expected to compress to 3.25% in Q4 217 as the best locations in Antwerp and Ghent are highly demanded by private investors looking to expand their portfolios. Retail warehousing yields range between 5.5% and 7.% in Flanders as a whole, with an expected further compression of 25 bps in Q Prime shopping centres are placed at 4.25%, unchanged vs. 216 but there has been such prime transaction in to prove this. Regarding yields, prime unit shops are currently 3.5% Top 3 transactions last 6 months City Building Price( Mln) Yield Seller Buyer Various High street portfolio (51 units) 8 n/a Bermaso Primonial Antwerp St Niklaas Meir 17 + Schuttershofstraat 15 A. De Boeckstraat 9 (Retail warehousing) 14.5 n/a Private Ramy Baron % Xendra Invest Private

18 Research Report Flanders Office Market Winter 217 Offices Subdued in 9M 17, but a mega deal in Q4 The vast majority of the transactions in amount terms is small size opportunistic deals or value added transactions. This is especially true in Antwerp with an increasing flow of acquisitions of obsolete buildings in view of a reconversion into residential or other uses. The large transactions by institutional investors are dominated by core transactions. The low volumes are mainly caused by a lack of new supply by developers: there is well a demand from investors, Belgian and to some extent international, but few opportunities are on the market. This could however change in 218 with the ongoing projects like The Link and Post X in Antwerp and the Blue Towers in Ghent that could be attractive products for investors. The end of the year is waymore active with the sale of the Zuiderpoort in Ghent to Ares Management, a US private equity firm, for 125 Mln. Prime office yields in Flanders overall are unchanged on an annual basis at 5.75% for standard 6-9 leases, reflecting our assessment of market sentiment and not closed transactions since core examples are scarce. On average in Antwerp, Ghent and Mechelen, for good locations and good quality properties fully let, a range of 5.75% to 6.5% is applicable, whereas office properties in peripheral locations trade 15 bps higher. Volume in the nine months period amounts to 73 Mln, a comparatively low level relative to 216 when volume was 225 Mln, and short of the 5 year average of 26 Mln. Top 3 transactions last 6 months City Building Price ( Mln) Yield Seller Buyer Ghent Zuiderpoort (Q4) 125 n/a ADIA Ares Management Ghent 5% AA Tower 15 n/a MG Real Estate Global Estate Group Antwerp Plantijn en Moretuslei, n/a Aareal Bank Private developer

19 Research Report Flanders Office Market Winter 217 Industrial First asset class in 217 There is an important yield premium of logistics vs. office on average 2 to 25 bps in Europe that drives investor s interest for this asset class. 217 is set to be a record year for industrial: volume so far including semiindustrial and land is 347 Mln, 59% above the full year volume of 216 and 8% above the five year average annual volume. 85% of the volume is logistics, vs. 75% on average the last 5 years and vs. 71% in 216. In view of the transactions closed early Q4 volume over the full year will be around 4 Mln and represent the first asset class in volume terms. In Q3 Leasinvest Real Estate closed the sale of its Lopolease portfolio to German fund Patrizia for 6 Mln, representing a yield of 6.5% and WDP acquired the distribution center of Estée Lauder in Westerlo for 25 Mln. Early Q4 Montea acquired the new distribution center of Decathlon in the Park De Hulst in Willebroek for a reported 31.6 Mln. Logistics yields are compressing to an unprecedented low of 6% vs. 6.25% at the end of 216 and 6.5% in 215. Additional compression is expected toward yearend to 5.75%. Top 3 transactions last 6 months City Building Price ( Mln) Yield Seller Buyer Various Lopolease portfolio 6 6.5% Leasinvest Patrizia Willebroek DC Decathlon 31.6 n/a MG Real Estate Montea Westerlo DC Estée Lauder 25 n/a Developer WDP

20 - 2 - Research Report Flanders Office Market Winter 217 Alternatives and others In the alternative asset classes, retirement homes have a recurring deal flow with B-REITs Aedifica and Care Property Invest as the most active players. 217 is a bit quieter than 216 and 215 with a volume of 56 Mln so far, vs. 168 Mln and 212 Mln in 216 and 215. In the Student Housing segment, Quares Student Housing Fund acquired a portfolio of 336 rooms, mainly in Antwerp. Prime yields by sectors Q4 215 Q4 216 Q3 217 Forecast Offices 6.25% 5.75% 5.75% = Logistics 6.5% 6.25% 6.% down Semi-industrial 7.25% 7.25% 7.25% = High Street 3.75% 3.75% 3.5% Down Retail warehousing 5.75% 5.5% 5.5% Down Shopping Centers 4.25% 4.25% 4.25% =

21 JLL Offices Belgium Avenue Marnixlaan, 23 b1 B 1 Bruxelles Brussel T 32 () F 32 () Jan Van Gentstraat 1 bus 42 B 2 Antwerpen T 32 () F 32 () JLL Contacts Jean-Philip Vroninks (*) MANAGING DIRECTOR BELUX +32 () Jean-Philip.Vroninks@eu.jll.com Ralph Schellen (***) HEAD OF OFFICE AGENCY - FLANDERS +32 () Ralph.Schellen@eu.jll.com Adrian Glatt (**) HEAD OF CAPITAL MARKETS BELUX +32 () Adrian.Glatt@eu.jll.com Pierre-Paul Verelst HEAD OF RESEARCH BELUX +32 () Pierre-Paul.Verelst@eu.jll.com 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. (*) Revron gcv (**) sprl / bvba (***) Allres bvba