Brussels Office Market

Transcription

1 Research Report Brussels Office Market Q1 2018

2 - 2 - Research Report Brussels Office Market Q Introduction Mobility, again In the latest update of its City Mobility Index, Deloitte reviewed the position of Brussels at the level of road infrastructure, public transport offering and affordability, safety, air quality, etc. For an office occupier, mobility has been important for a long time, but the deterioration of traffic congestion observed in Brussels the last 2-3 years makes it critical. The main conclusion of the study was that Brussels has a somewhat pro-active mobility environment, but with some barriers and clearly with substantial efforts to do to become a Future of Mobility Global Leader. As main strengths Brussels has an existing multimodal network with all forms of public transport represented and increasing alignment among stakeholders on the needs for change in mobility. Challenges are unfortunately numerous, not the least being the culture of private car commuting (company cars remains a very usual part of wages and salaries). Next to that, with multiple municipal / regional / federal authorities and public transport agencies, Belgium s complex governmental and institutional framework hinders the development of a coherent strategy. It is what some media call the institutional lasagne of Brussels, sometimes with overlapping interests and often at the origin of overly slow and costly decision making. The most obvious casualty is the stalled RER project which is finally, after a long pause, showing signs of advancing again. Shared mobility, the promotion of alternative ways of transport (safe cycle paths) and the extension of the metro, tram and rail networks are the solution. Acceleration of the implementation by simplifying procedures and removing political choke points are key. Eliminating parking spaces in Brussels and making company cars less attractive without providing an attractive alternative will just make Brussels less attractive as a business location. Cover photo: Spectrum, Pentagon Architect: Jaspers-Eyers Landlord / developer: Ghelamco Copyright Gabari Pierre-Paul Verelst Head of Research Belux

3 - 3 - Research Report Brussels Office Market Q Occupier market Leasing activity slightly down Occupier activity has been quieter than usual for a first quarter, we recorded a transaction volume of 83,180 sq.m., ie 2.6% lower than a year ago. On a 5-year perspective take-up in Q is 4.6% short of the average. Corporates contributed to 80% of take-up, among others driven by Plastics Omnium that took 12,000 sq.m. in the Mercure Centre (Decentralised) as well as by co-working space operators. Local administrations made two representative deals: 9,816 sq.m. taken by the Federation Wallonie- Bruxelles in the Green Island (North District) and 4,413 sq.m. taken by Brussels Capital Region in the Alhambra (Pentagon). The average deal size decreased in Q to 840 sq.m. vs. 1,047 sq.m. a year ago and vs. 1,072 sq.m. on average the last 5 years. So far, no transaction has been recorded by European Institutions but several are due in the near future, among which the EFTA, the EEAS, and the Commission. More is coming, early this year the European Commission launched a public tender for a new conference centre in Brussels CBD with a planned surface of 24,000 sq.m. More spectacular is the recent request for project for the redevelopment of the Loi 130 (European district, 45,000 sq.m. owned by the European Commission) requiring 170,000 sq.m. Such a project is not expected before the end of next decade. Co-working, 2018 seen as strong as 2017 Co-working space operators added 8,815 sq.m. to take-up in Q1, driven by local players Fosbury and Sons in the Seven project of Baltisse and Downtown (North district) and Welkin & Meraki in The One of Atenor (European District). Welkin & Meraki will shortly take a second premises and Spaces a third centre, both in Brussels CBD. Performance of the various co-working space and business centres in Brussels diverges depending on the location, for example Tribes in the Passport building (Brussels Airport) is fully occupied by Brussels Airport Company, Borealis as well as buffer space for other occupiers of the building. Going forward in view of the pipeline of transactions and market indication the take-up by flexible space operators could be as strong as in 2017, ie north of 30,000 sq.m. Green Island (North) Landlord: IRET Architect: Jaspers-Eyers

4 - 4 - Research Report Brussels Office Market Q Take-up (sq.m) Take-up by sector Q Local Admin. 19% Local Admin. 32% Intl. Admin 1% Corp 80% Intl. Admin EU 3% 0% Corp 65% Representative transactions Q District Building Age Class Surface Operation Occupier Decentralised Mercure Centre Old 12,000 sq.m. Letting Plastics Omnium North Port 16 Modern 9,800 sq.m. Letting Federation Wallonie- Bruxelles North Seven Project 5,235 sq.m. Letting Fosbury & Sons Pentagon Alhambra New 4,443 sq.m. Letting Brussels Capital Region EUR The One Under construction 3,600 sq.m. Letting Welkin & Meraki

5 - 5 - Research Report Brussels Office Market Q Vacancy: stability overall, new 17 y low in the CBD A first set of speculative completions was recorded in Q1 for a total of c.15,000 sq.m. being mainlythe non-prelet parts of Cofinimmo s Belliard 40 and Leasinvest s Tree Square, both located in the European district. Completions in the CBD were however partly offset by conversions, during the quarter we recorded 9,500 sq.m. of vacant stock removals in the CBD, for example the Porte de Hal 5-8 (retirement home project, 4,152 sq.m. in the South district). Vacancy therefore hardly changed on a quarterly basis and came in at 8.3% globally (vs. 8.2% in Q and vs. 9.0% a year ago), but decreased substantially to a new 17 year low of 4.1% in the CBD (was 4.4% 3 months ago and 4.7% 12 months ago). We however recorded an increase of 50 bps outside the CBD to 15.2% related to c. 13,000 sq.m. vacated by KPMG in the Decentralised North East as well as several properties in Zaventem becoming vacant. Again, conversions mitigated the increase of vacancy with c. 7,500 sq.m. of the Antares building (Decentralised South East) sold to a residential developer. Vacancy by age class Vacancy rate Modern 33% New 6% Old 61% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 15.2% 8.3% 4.1% Q1 18 Brussels Total CBD Outside CBD Massive completions expected in 2019, vacancy seen rising The coming three quarters of the year will add 61,000 sq.m. of new supply, the three largest being The One of Atenor (European District, 24,750 sq.m. left), Greenhouse BXL of Intervest (Periphery, 16,950 sq.m.) and the City Docks of Atenor (Decentralised, 9,165 sq.m.). Others are new units in the Axis Parc in Mont Saint Guibert and in the Nivaxis in Nivelles, both in the Periphery South East. An increase of vacancy is consequently seen from H2 2018, and more strongly in 2019 because of the combination of a substantial volume of speculative completions and second hand office space becoming available. Speculative completions next year are estimated at 155,000 sq.m., a large part located in the North district, the largest of which being the Manhattan (c. 40,000 sq.m., 10% prelet, 10% more to be confirmed shortly). Other projects planned for next year in the North are the refurbished Seven (formerly known as Polaris) of Baltisse and Downtown that will offer 13,000 sq.m. (38% prelet to Fosbury & Sons), the refurbished Phoenix of Baloise (17,000 sq.m.) and the Gare Maritime of Extensa on the Tour & Taxis site (c. 30,000 sq.m, part of a mixed retail / office / leisure project).

6 - 6 - Research Report Brussels Office Market Q Rental values increase again Prime rents in Brussels increased by another 5% q-o-q to 315 / sq.m. / year, higher levels being obtained for surfaces below 1,000 sq.m. in the Regent Park (Boulevard du Regent, at the crossing of the European District and the Pentagon) and the Tree Square (European district). Compared to a year ago, prime rents have thus increased by 14.5%. Upward pressure is also recorded in the North district, from 215 / sq.m. / year prime rents increased to 225 / sq.m. in Q1 2018, based on transactions recorded in the Manhattan project at the edge of the district facing the Pentagon. In other districts no change has been recorded so far, 245 / sq.m. / year remains valid in the Pentagon and Louise, 190 / sq.m. / year in the Decentralised, 205 / sqm / year in the South, 165/ sq.m. / year in the Periphery and 205 / sq.m. / year in the Airport. Illustrative of upward pressure is the 3.9% increase q-o-q of top-quartile rents in Brussels as a whole to / sq.m. / year and the 2% increase of weighted average rents to / sq.m. / year. Average rents of all districts together and regardless of quality increased by 2.4% q-o-q to 155 / sq.m. / year. A further increase is anticipated in top-quartile rents with more transactions pending in the new projects, though as far as prime rents are concerned the upside is now limited, most of the projects trade at rents similar to the new benchmarks. In our view the upside in rental values will come to an end in 2019 in view of the substantial increase of vacancy related to completions. Rental analysis Rental analysis / sq.m. / year Q1 18 Prime Rent Top Quartile Rent Weighted Average Rent

7 - 7 - Research Report Brussels Office Market Q Capital Markets South Korea loves Brussels (Season 2) The best first quarter of Belgian history Three transactions of more than 300 Mln have been recorded during the first quarter 2018, ie two shopping centers (Woluwe Shopping in Brussels and Rive Gauche in Charleroi) as well as the Egmont I & II office complex in Brussels. The investment volume nearly tripled on a yearly basis to 1.9 bn and exceeded the 5 year average volume for a Q1 by 230%. South Korean interest in the Brussels market is outstanding with a share of 33% of total investment volume vs. 16% in the full 2017 (was 21% for Asia globally last year), the Netherlands follows with 24% in one transaction. Belgian investors rank third with 18%, the USA took 15% and the rest are UK and France. The office segment dominates with 50% vs. 44% for retail, 5% industrial and 1% Hotels. Arts 56 (European District) Sold to Befimmo Millions 4,000 3,500 3,000 Investment Volume (all assets), Belgium 2,500 2,000 1,500 1, Q1 Q2 Q3 Q4

8 - 8 - Research Report Brussels Office Market Q Volume Belgium by Type of Use 2018 Q Office: mega deals The office transaction volume soared by 140% y-o-y to 978 Mln, 166% more than the 5 year Q1 average. The average deal size of the office segment in Q1 was at an all-time high of 54 Mln, vs. 20 Mln a year ago and 23 Mln on average over the last 5 years. The largest transaction was the sale of the Egmont I & II complex in the Pentagon for 369 Mln. Both properties together total 52,878 sq.m. let long term to Belgian Federal State (administration of foreign affairs) and the leaseholds were acquired by a consortium of South Korean institutional investors. AXA IM Real Assets acquired The Passport building located on Brussels Airport, with anchor tenants KPMG, Microsoft, Etex, Tribes and Redevco. JLL advised the seller, Codic, and the price was 131 Mln. Another remarkable transaction is the acquisition by Befimmo of the Arts 56 in the European District for 116 Mln. This equates to a net yield of 4.5% which is outstanding for a multi-tenant modern property. In the value-added segment, Allianz sold its Botanic Tower to the global private equity player Partners Group which shows confidence of investors in the Brussels letting market. Passport (Brussels Airport) Sold to AXA IM Real Assets Copyright Jaspers-Eyers

9 - 9 - Research Report Brussels Office Market Q Representative office transactions Q Building Price Yield Seller Buyer Egmont I & II (Pentagon) 369 Mln 4.5% Cofinimmo South Korean consortium Passport (Airport) 131 Mln Conf. Codic AXA IM RE Arts 56 (EU District) 116 Mln 4.5% AXA IM RE Befimmo Botanic Tower (North) 79 Mln Allianz Partners Group Trio (Louise) 42 Mln Apollo M&G Real Estate Prime Yields compressed to a further 25bps to a historically low level of 4.25%, achievable in the European district as well as in the Pentagon. Properties with a long term lease and creditworthy tenant trade as low as 3.75% or even slightly below. JLL s scenario on office yields at EMEA level is flat, the current benchmarks are expected to remain stable for at least the next two years in the absence of unexpected geopolitical upheaval. 8% 7% 6% 5% 4% 3% 2% Yields 6.50% 4.25% 3.75% Q Brussels 6/9 Lease CBD Brussels 6/9 Lease Non CBD Brussels LT Lease Retail: excellent Q1 investment volume At the end of the first quarter 2018, the total volume invested in retail amounted to 852 Mln, already 37% above the volume recorded in the full year The 2018 volume was boosted by the sale of two major shopping centres. Woluwe Shopping Centre, a prime shopping centre in Belgium located in the prosperous north eastern suburbs of Brussels, was purchased by Dutch REIT Eurocommercial for 468 Mln, representing an initial yield of 4.00%. The transaction was realised by the Capital Markets team of JLL. The second shopping centre transaction involved Rive Gauche, the new 39,000 sq.m. inner city shopping in Charleroi, which was sold by developers IRET and Engelstein to CBRE Global Investors for 300 Mln, representing a yield of 4.4%. Unit shop transactions in the first quarter represented an investment volume of 75.5 Mln, mainly shops in Brussels, with two transactions on the luxury street Boulevard de Waterloo (Prada 34 Mln and Fratelli Rosetti at 10.5 Mln) and in the old city centre the flagship store of luxury chocolate maker Pierre Marcolini on the Grand Sablon was purchased by a private investor at 5.1 Mln, representing a yield of 3.9%. Other transactions were recorded in the city centres of Ghent and Antwerp and retail warehousing parks contributed 9 Mln. Prime yields remained stable at 3.25% for high streets in the first quarter and at 5.25% for retail warehousing. The shopping centre yield compressed 25 bps, to 4.00%, as a result of the sale of Woluwe Shopping Centre. The outlook is stable.

10 Research Report Brussels Office Market Q Representative retail transactions Q Building Price Yield Seller Buyer Woluwe Shopping Centre 468 Mln 4.00% Certificates IF Eurocommercial Rive Gauche SC, Charleroi 300 Mln 4.40% IRET/Engelstein CBRE Global Investors Prada, Blvd de Waterloo, Brussels 34 Mln 3.00% Pandox AB HansaInvest Industrial: good start In the first quarter of 2018, a total volume of close to 95 Mln was invested in industrial properties, of which 44% in five logistics transactions, and 56% in semi-industrial properties. The volume was the highest recorded in a first quarter since 2015 and the third best start to the year in a decade. In number of transactions both logistics and semiindustrial properties performed above their 10-y average. Belgian corporates, private investors and developers dominated the buy-side. Sellside, Belgian developers represented 32% of the volume whilst corporates contributed 25% of the volume. Demand for industrial properties and portfolios is high but the limited offer puts a brake on transaction volumes. A total of 41.4 Mln was invested in logistics in the first quarter. The largest transaction was the sale by Neovia Logistics of its former site in Lummen to Futurn Vestra, a joint venture of developer Futurn and local holding Hasco. The 55,000 sqm logistics site which is located near the intersection of the E313 and E314 will be redeveloped to SME units. Belgian REIT Intervest O&W purchased a logistics site of over 25,000 sq.m. let to Nedcargo and Facq located in Zellik, in the northwestern periphery of Brussels at a price of 13.8 Mln. Semi-industrial transactions represented 53.2 Mln, the highest volume recorded in a first quarter in the last decade. Prime logistics yields for 6/9 year leases remained stable in Q1 at historically low levels of 5.75% for logistics and 6.75% for semi-industrial properties. The near-term outlook for yields is stable. Representative industrial transactions Q City Building Surface Price Seller Buyer Transaction type Antwerpen Campus Coppens 13,700 sq.m. 20 Mln Van Roey Private Investment Lummen Bosstraat 55,000 sq.m. 14 Mln Neovia Logistics Futurn Vestra Redevelopment Zellik Nedcargo & Facq 24,234 sq.m Mln De Eik NV Intervest O&W Investment

11 Research Report Brussels Office Market Q Summary Q Q Take-Up (cumulative) ( 000 sq.m.) Take-Up (cumulative) (# deals) Stock (Mln sq.m.) Completions (cumulative) ( 000 sq.m.) Vacancy ( 000 sq.m.) 1,270 1,239 1,087 1,183 1,092 Vacancy rate 9.7% 9.4% 8.2% 9.0% 8.3% Prime Rent ( / sq.m./ y) Total Investment Volume BE (cumul, bn ) Office Investment Volume BE (cumul, bn ) Prime Yield 5.35% 4.75% 4.50% 4.75% 4.25%

12 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 Jean-Philip Vroninks (*) MANAGING DIRECTOR BELUX +32 (0) Jean-Philip.Vroninks@eu. jll.com Erik Verbruggen (**) HEAD OF OFFICE AGENCY BELGIUM +32 (0) Erik.Verbruggen@eu. jll.com Adrian Glatt (***) HEAD OF CAPITAL MARKETS BELUX +32 (0) Adrian.Glatt@eu. jll.com Pierre-Paul Verelst HEAD OF RESEARCH BELUX +32 (0) 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. (*) Re vron gc v (**) spr l / bvba (***) saga bvba