2024-01-16-莱坊-Brussels_Office_Market_Report_H2_2023_5页_1mb

Brussels Office Market Summary H2 2023

Core Content

The Brussels office market in the second half of 2023 showed resilience amid a challenging economic climate, with a total take-up of 156,000 sq m, bringing the annual total to 322,000 sq m, slightly below the five-year average. The market is heavily influenced by European and international institutions, particularly the European Commission, which accounted for the two largest deals of the year. The education sector also played a significant role, with notable take-ups such as the pre-letting of 13,000 sq m by Haute École Francisco Ferrer in the Waterside building.

Key Economic Indicators

• Economic Growth: Belgium's economy grew at a quarterly rate of approximately 0.3% in Q4 2023, with an annual growth of 1.5% for 2023 and a projected average of 1.3% up to 2026.
• Inflation: Total inflation in 2023 was 2.3%, expected to temporarily rise to 4.0% in 2024 due to the withdrawal of energy support measures, but is projected to remain below 2% in 2025 and 2026.
• Employment: The employment rate in Brussels reached 68.2% in Q3 2023, up from 65.3% in Q2. The Belgian unemployment rate was 5.6% in Q3, with stable projections through 2026.
• Interest Rates: The ECB maintained its Deposit Facility rate at 4.00% in mid-December 2023. While rate cuts are anticipated in 2024, the timing remains uncertain.

Market Trends

• Take-up: The H2 2023 take-up was 156,000 sq m, with the largest deals coming from European/International institutions and the education sector.
• Vacancy Rate: The overall vacancy rate in Brussels was 7.47%, up from 7.20% in H1 2023.
• Rents: The prime office rent in Brussels was €340/sq m/year, with the average rent rising slightly to €215/sq m/year in Q4 2023. The European district continues to influence prime rents due to the presence of public bodies.
• Investment Activity: Total investment volume for 2023 was €652 million, marking the lowest level since 2012. Belgian investors accounted for over 65% of the total investment, followed by German investors at 22%.

Occupier Activity

• Top Five Deals:
  • Commerce 46 (14,200 sq m) - European Commission
  • Waterside (12,619 sq m) - Haute École Francisco Ferrer
  • Pacheco (9,428 sq m) - Wallonie-Bruxelles Enseignement
  • Core (9,250 sq m) - Université Libre de Bruxelles
  • Iris Tower (5,540 sq m) - IBPT-BIPT
• Occupier Distribution:
  • European/International institutions: 40%
  • Education: 28%
  • Services: 15%
  • Belgian public sector: 12%
  • Lobbies: 5%
  • Industry/Manufacturing and ICT: remaining categories

Deliveries and Pipeline

• H2 Deliveries: Total of 88,000 sq m, with 7 projects completed.
• Pipeline (2024-2026): Expected to reach 513,000 sq m, including 396,000 sq m launched on a speculative basis.
• ESG Focus:
  • 70% of the pipeline targets BREEAM certification.
  • 40% also aims for WELL certification.
  • Larger projects are more likely to achieve higher ESG ratings, indicating a growing emphasis on sustainability in the market.

Investment Outlook

• 2024 Prediction: A slow year is expected for the Brussels office investment market, with a focus on portfolio optimisation and refinancing.
• Investor Activity: Institutional investors are expected to return to the market as more liquidity enters, with a preference for smaller, more liquid assets.
• External Demand: Sovereign wealth funds are forecast to continue targeting best in-class real estate.

Market-Transforming Deals

• Cityforward Disposal: The sale of 21 EU buildings for €950 million is expected to close in Q1 2024.
• TPG & Intervest Offices & Warehouses (IOW): A potential deal involving the acquisition of IOW, which focuses mainly on logistics assets, could impact the market, though the effect on the office market is expected to be limited.

Conclusion

The Brussels office market in H2 2023 showed resilience despite economic headwinds. Key drivers include the continued demand from European institutions and the education sector, while the ECB's rate policy and upcoming elections are expected to influence the market in the coming year. The focus on ESG standards and the potential for institutional investment returns signal a shift towards sustainable and strategic real estate development.