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Office Market Report 2016 Luxembourg Letting Market Overview YTD 2016 Take-up Q4: Take-up 2016: Transaction Q4: Transaction YTD: Average size : Vacancy rate YTD: Total stock YTD : m² offices delivered 2016: 48.485 m² 216.060 m² 54 233 927 m² 5,39% 3.851.845 m² 113.049 m² (- 36,9 % Year Over Year) (- 30 % YOY) (- 30,8 % YOY) (- 11,4 % YOY) (+ 6,7 % YOY) (+ 4,36 % YOY) 2 Office Market Districts City (Core) City (others) City - Periphery Periphery 3 Luxembourg Stock Distribution 2% 1% 5% 2% 27% 2% 2% 1% 2% 22% 2% 1% 10% 1% 11% 2% City (Core) 2% City (others) City - Periphery Periphery 5% Source: INOWAI Research 4 Deal Distribution & Outlook Deal Distribution 19 % of deals below 100 m² 41 % of deals below 200 m² 72 % of deals below 500 m² 83 % of deals below the average transaction size of 927 m² 15 % of deals over 1.000 m² Median size : 286 m² +5% Average 927 m² 60 51 50 44 + 80 % 40 30 27 21 25 20 13 7 10 10 14 10 4 3 4 0 OFFICE MARKET OUTLOOK Take-up is expected to reach around 180.000m². New deliveries 2017 : 61.000 m² of new offices should be delivered this year, 28% of these new surfaces are however already pre-let. Vacancy rate is expected to remain stable around 5%. Rental levels are expected to remain stable. Prime rent reached 50 € in the CBD in 2016. Source: INOWAI Research 5 Office Market Stock & Vacancy rate Office Market 2016 District CITY Stock sqm Kirchberg CBD Cloche d'Or Station Belair / Merl Limpertsberg Hamm Kalchesbrück Total: CITY - PERIPHERY Airport Strassen Bertrange/Bourmicht Leudelange Howald Total: PERIPHERY Belval Capellen Munsbach Windhof Esch-sur-Alzette Contern Total: Total Stock % 1.063.500 831.514 408.600 387.600 91.500 86.500 49.000 33.000 2.951.214 171.355 86.650 82.000 73.556 62.600 476.161 188.245 75.035 60.100 40.600 32.600 27.890 424.470 27,61% 21,59% 10,61% 10,06% 2,38% 2,25% 1,27% 0,86% 76,62% 4,45% 2,25% 2,13% 1,91% 1,63% 12,36% 4,89% 1,95% 1,56% 1,05% 0,85% 0,72% 11,02% 3.851.845 + Sub-letting : Source: INOWAI Research Vacancy sqm Vacancy rate % 24.828 26.663 21.343 24.318 11.643 2.626 2.104 2.943 116.468 6.280 15.218 8.813 4.355 19.690 54.356 7.475 11.069 11.380 282 2.753 3.666 36.625 2,33% 3,21% 5,22% 6,27% 12,72% 3,04% 4,29% 8,92% 3,95% 3,66% 17,56% 10,75% 5,92% 31,45% 11,42% 3,97% 14,75% 18,94% 0,69% 8,44% 13,14% 8,63% 207.449 14.644 5,39% 0,38% 6 Office Market Take-up & Vacancy rate Take Up Vacancy rate % ‘000 m² 9,0 300 7,5 250 -30% 6,0 200 4,5 150 100 3,0 50 1,5 0 0,0 2006 Source: INOWAI Research 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 7 Take-up 2016 Main Transactions (> 1000 m²) 1/2 District Tenant m² Kirchberg Kirchberg Kirchberg Cloche d'Or Airport CBD Kirchberg Kirchberg BGL BNP Paribas* RTL* Commission Européenne* BDO* DekaBank Girozentrale Luxembourg SGBT Vistra Luxembourg Amazon Commerzbank International SA/Julius Baer BGL - Service IT* EFG Bank Luxembourg Banque J. SAFRA Sarrazin* PWC KPMG Eri Bancaire Globality Health Enovos Kleyr Grasso* 28.000 22.000 Kirchberg Other Periphery CBD CBD Howald Kirchberg Cloche d'Or Munsbach Strassen Strassen 15.000 10.600 8.924 5.608 4.475 4.374 4.190 4.185 4.134 3.476 3.200 3.060 2.731 2.627 2.620 2.562 *Built to suit owner/occupier Source: INOWAI Research 8 Take-up 2016 Main Transactions (> 1000 m²) 2/2 District Tenant m² Hamm Ministère de la Santé 2.452 Station VILLE DE Luxembourg* 2.400 Cloche d'Or SwissLife CBD Munsbach China Everbright Bank 2.180 1.906 Immobilière Vauban 1.643 Belair/Merl CSSF Belair/Merl Kirchberg Hogan Lovells (Luxembourg) LLP 1.557 1.533 DLA PIPER 1.500 Esch-Belval Banque Pictet 1.461 Belair/Merl Station Vitis Life 1.434 Banque Carnegie Luxembourg 1.375 Station GazpromBank 1.290 Capellen Electrolux Luxembourg Leudelange BIONEXT SA 1.256 1.139 Kirchberg GSK Stockmann + Kollegen 1.112 Bertrange/Helfent My Stock 1.100 Other Periphery PolyOne SA 1.089 *Built to suit owner/occupier Source: INOWAI Research 9 Take-up 2016 Activity & Districts Split by District/m² Split by activity/m² Kirchberg 40% Others 5% Esch-Belval 1% Capellen 1% Leudelange 1% Hamm 2% Howald 2% Munsbach 2% Banking & Finance 48% Others 1% [POURCENTAGE] CBD 15% Belair/Merl 3% Strassen 3% Other Periphery 4% Source: INOWAI Research Airport 5% Station 7% Cloche d'Or 9% Industry 2% Fiduciary & accounting 3% Admin. & Pub. Serv. 3% IT & Telecom 16% N.S. Insurance Law Firm 4% 4% 5% Serv. for comp. 7% EU 7% 10 Rental Bands New Buildings €/ m²/ month (excl. VAT ) CBD Kirchberg Station Limpertsberg Merl Belair Cloche d'Or Strassen Airport Leudel. Howald Bourmicht Capellen Bertrange Kalchesbr. Hamm Belval Munsbach Windhof Contern 16 € 18 € 20 € Source: INOWAI Research 22 € 24 € 26 € 28 € 30 € 32 € 34 € 36 € 38 € 40 € 42 € 44 € 46 € 48 € 50 € 11 Rent Time Series €/ m²/ month excl. VAT 43 € CBD 40 € 37 € 34 € Station 31 € Kirchberg 28 € Cloche d’or 25 € City Periphery 22 € Periphery 19 € 16 € 2001 2002 Source: INOWAI Research 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12 Total Stock Evolution Stock 3.800 3.500 3.200 2.900 2.600 2.300 2.000 1.700 ‘000 m² 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 13 Capital Market Overview 2016 Investment transactions YTD 2016: ± 1.352,4 €m Standing investments: 1.062,4 €m Development: 203,5 €m Occupier / Owner: 86,5 €m Number of transactions YTD 2016: 42 Standing investments : 23 Occupier / Owner : 16 Development : 3 Split by district/volume CBD 24% Hamm 1% Other Periphery 1% Leudelange 1% Limpertsberg 3% Station 19% Belair / Merl 3% Howald 5% Capellen / Windhof 5% Bertrange / Bourmicht 18% Strassen 7% Kirchberg 14% Split by # of deals CBD 33% Station 14% Prime Yields : City : 4,35% (2015 : 4,35%) Periphery : 7,00% (2015 : 7%) Strassen 10% Hamm 2% Leudelange 2% Howald 2% Bertrange / Bourmicht 2% Esch 5% Kirchberg 7% Other Periphery Limpertsberg 5% 5% Capellen / Windhof 5% Belair / Merl 7% 14 Capital Market Deal distribution 5% 14% 3% 7% 24% 18% 3% 1% 29% 5% City (Core) City (others) City - Periphery 1% Periphery Volume >98% 15 Capital Market Investment Volume Evolution 2016 M€ 3.000 2.500 2.000 1.500 1.000 500 0 2004 Source: INOWAI Research 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 16 Capital Market Prime Yield Evolution Prime Yield City % Prime Yield Periphery 7,50 7,25 7,00 6,75 6,75 6,75 6,85 5,25 5,25 7 7 7 4,35 4,35 2015 2016 6,5 6,50 6,25 6,75 6,85 6,5 6,00 6,25 6 6,08 5,75 5,50 6,13 5,75 5,63 6 5,757 5,5 5,25 5,00 5 4,75 4,50 4,25 4,00 3,75 3,50 2005 Source: INOWAI Research 2006 2007 2008 2009 2010 2011 2012 2013 2014 17 NOTES Capital Market Investors in Luxembourg GERMANY: AIK, Allianz, Commerz Real, DEGI, Deka Immobilien, Hannover Leasing, HansaInvest, HSBC Trinkhaus, Triuva Immobilien, KanAm, Pramerica REI, Real IS, SEB Immobilien, UBS RE, Union Investment BELGIUM: AG Real Estate, Befimmo, Fidentia, KBC RE, Leasinvest, Retail Estates, Groupe Quares, Ethias, Ogeo UK: Aerium, Aviva Investors, Rockspring HOLLAND: Breevast FRANCE: AXA REIM, CNP, Monceau Assurances, Amundi AUSTRIA: Eco-Business Immobilien AG, Signa US: Blackstone, Morgan Stanley, Starwood, ARC ABU DHABI ADIA Investment Authority 19 Developments Main Market Players LUXEMBOURG ALAG, Avensis, CM Participation, CDC, Everop, Felix Giorgetti, Ikogest, Immobilière Konrath, Royal Properties, T-Comalux, Tracol, Valeres, The Wagner Group, Schuler, Solum Real Estate BELGIUM Allfin, Atenor Group, Banimmo, BesixRED, CLE/CFE, CIP, CODIC, Gilbo Construct, Immobel, Matexi, Pylos, Thomas & Piron GERMANY Baumeister Haus, Somaco HOLLAND Breevast FRANCE Vinci Immobilier SWEDEN Dawimo 20 Master Plan 2016-2030 Luxembourg-City and Esch/Belval CBD, PLACE DE L’ETOILE, 2019-2025: 10 000 m² office, 18 000 sqm retail, 17 000m² residential CBD, ROYAL-HAMILIUS, 2017-2019: 10 000 m² office, 12 000 m² retail, 16 000m² residential KIRCHBERG, INFINITY, 2017-2019: 6 800m² office, 6 500 m² retail, 20 000m² residential CLOCHE D’OR, BAN DE GASPERICH, 2016-2030: 490 000 m² office, 80 000 m² retail, 120 000 m² retail STATION, LUXEMBOURG-CENTRAL, 2025: 113 000-199 000 m² office, 6 000 – 73 000 m² retail STATION, ACIÉRIE-INDUSTRIE (PAUL WURTH), 2025: 215 000 m² office, 47 000 m² retail STATION, PORTE DE HOLLERICH, 2030: 500 000 m² office, 150 000 m² retail AIRPORT, FINDEL, 2025-2030: 50 000 m² office, hotel, 4 100 parking spaces ESCH, BELVAL, 2015-2030: 253 000 m² office, 35 000 m² retail 21 Macro economic zoom Total Population (Jan 2016): Luxembourg-City: ≈ 576 249 ≈ 110 500 Esch-sur-Alzette: ≈ 33 940 Wage-earners (Nov 2016): ≈ 397 321 Cross-border commuters(Sept 2016 ) ≈179 016 50% F, 25% D, 25% B Unemployment rate (Nov 2016): Inflation rate (Nov 2016): ≈ 6,2% Growth rate 2015: Growth rate forecast 2016: Growth rate forecast 2017: ≈ 3,5% ≈ 3,7% ≈ 4,2% GDP Growth 8% 6% 4% 2% ≈ 0,5% GDP per capita (€) Lux (2016): GDP per capita (€) Euro Zone-19 (2016): GDP per capita (PPS) Lux (2016): GDP per capita (PPS) Euro Zone-19 (2016 ): 0% -2% ≈ 80 800 ≈ 29 200 ≈ 264 ≈ 106 -4% Luxembourg EU-18 Source Statec Luxembourg Rankings Luxembourg : • Only 0,0017% of the Earth’s surface • Only 0,0073% of the World’s population The Grand Duchy is one of only nine countries worldwide to hold a AAA rating by all three major credit rating agencies Ranking TOP 100 of the world best development perspectives (contor / manager magazin) Labor productivity per hour (the conference board) European micro cities with economic potential (fdi magazine) Global Innovation Index (INSEAD) Ranked Out of Year 1 100 2010 1 43 2013 1 253 2012 9 141 2015 Ranking Ranked Out of 19 186 2016 European Smart Cities (TUWIEN) 1 77 2014 Fundamental Health Indicator (The Lisbon Council) 3 21 2015 14 86 2016 Global Talent Competitiveness (INSEAD) 3 93 2015 Open Market Index (ICC) 3 75 2015 16 154 2014 67 2015 Index of Economic Freedom (Heritage Foundation) Global Financial Centers (ZYEN) Best Countries for Business (Bloomberg) Year Gross domestic product (GDP) based on purchasing-power-parity (PPP) per capita- (Global Finance) 2 185 2015 ICT Development Index (ITU) 6 Quality of life study (ECA) 3 254 2012 Index of Globalization (ETH) 18 187 2016 Sustainable Governance Indicators (Bertelsmann) 8 40 2014 Global ICT Index (world economic forum) 9 143 2015 International Property Rights Index (PRA) Logistics Performance Index (World bank) 4 8 129 160 2015 2014 11 138 2014 6 61 2015 20 144 2015 Global trade enabling index (world economic forum) Global competitiveness rankings (institute for management development) Growth competitiveness index (world economic forum) 23 The Financial center More than 60,000 employees Banks: (Dec 2016) Number of banks: 141 Banks: Evolution of balance sheet vs. n°of employees* € bn '000 1,1 28 1 27,5 Employees: 26 132 0,9 27 Countries of origin: 28 0,8 26,5 0,7 26 0,6 25,5 0,5 25 Investment funds : (Nov 2016) Number of UCIs: 3 891 Net assets: 3 626 bn€ PSF: (September 2016) Balance € bn Investment funds: evolution of net assets vs. N°of funds* Number of PSF: 309 4.500 Employees: 15 079 4.000 Insurance & Re-insurance: (July 2016) Number of insurances: 91 Number of re-insurances: 216 Employees 4.000 3.500 3.500 3.000 3.000 2.500 2.500 2.000 2.000 1.500 1.500 2006 2007 2008 2009 2010 N° of Funds 2011 2012 2013 2014 2015 2016 Net assets 24 Major companies – January 2016 Company Groupe Entreprises des P&T Groupe ArcelorMittal Groupe Cactus Groupe CFL BGL BNP Paribas Groupe Dussmann Luxembourg Goodyear Dunlop Tires Operations Luxair SA Groupe PWC Fondation Hôpitaux Robert Schuman Centre Hospitalier de Luxembourg Fondation Stëftung Hëllef Doheem Groupe BIL Centre Hospitalier Emile Mayrisch Sodexo Luxembourg Servior Banque et Caisse d'Epargne de l'Etat Elisabeth Groupe Deloitte à Luxembourg Compass Group Luxembourg Nettoservice Government City of Luxembourg Line of business Post & Telecommunications Steel industry Supermarkets Railway Bank Cleaning Tyres Airlines Tax & Advisory Hospital Hospital Help and services for seniors Bank Hospital Catering & Facilities Management Housing & services for seniors & disabled Bank Social Services Tax & Advisory Catering & Restaurant Cleaning Employees 4 320 4 180 4 060 4 040 3 830 3 450 3 290 2 470 2 570 2 240 2 140 1 900 1 940 1 930 1 820 1 810 1 780 1 680 1 740 1 600 1 280 26 919 3 949 25 Headquarter of European Institutions Court of Justice of the European Communities European Court of Auditors European Commission Eurostat (part of European Commission) General Secretary of the European Parliament European Investment Bank European Investment Fund Office for Official Publications of the European Communities Translation Center for the Bodies of the European Union European Stability Mechanism (ex EFSF) … over 700 000 m² office, 190 000 m² of extensions in construction over 120 000 m² in project 26 Julien Pillot INOWAI S.A. Head of Office Agency T. + 352 26 43 07 07 48 [email protected] Marc Baertz - MRICS INOWAI S.A. Partner & Head of Valuation T. + 352 26 43 07 07 36 [email protected]