Office market report Luxembourg On Point st quarter 0 Stabilisation Take-up in Q 0 was,8 sq.m., up 0% year-on-year. Excluding a large deal outside the traditional districts, the takeup was unchanged. Vacancy rate stabilised at 5%. From Q 0 we expect it to rise again and trend back to 6% by year-end.. Prime rents were unchanged in the at / sq. m. / month + VAT. The investment market was focused on offices with 5 8 Mio transacted in three deals in the. Prime yields were stable at 5.75% but are under downward pressure as core opportunities are scarce.
On Point Luxembourg Office Market Report Q 0 Foreword Never has reputation of the Grand Duchy been so well observed as a stable country. Indeed, while letting activity in the extended definition of the Luxembourg office market increased by 0% compared to a year ago, the take-up in the traditional districts was almost identical at c. 8,000 sq.m. Various types of activities have contributed to the occupiers market, notably E-commerce, transport, financial, and business services sector. Major moves are already known this year with the occupation by PwC of its new Headquarter located in the Cloche d'or area, as well as KPMG who will migrate to area. As a result their large well located premises will come back on the market as second hand space, some of which having already found new occupiers. Availability tends therefore to stabilize (76,000 sq.m are still available for occupation, representing 5% of the total stock). For large occupants wishing to settle in the city in new buildings, options are very limited. IEK / Eolis:,87 sq.m. partially let to a e-commerce company Angélique Sabron Head of Office Agency Luxembourg
On Point Luxembourg Office Market Report Q 0 Macroeconomic situation GDP in Luxembourg grew at a faster pace than other EU countries in the last quarter of : while the EU 7 average was a growth of %, Luxembourg outperformed with.%. The Statec maintained its GDP growth forecast for 0 at.7%, again outperforming the Eurozone that is expected to record.0% growth only. In March 0 the unemployment rate stabilized at 7.%, partly thanks to job schemes aimed at young people and also, to some extent, the improving economic climate. Inflation in Luxembourg followed the same downward trend as in the Eurozone and recorded a year low in March, at 0.8%, though in January it jumped a bit to.5% probably due to the prospect of a VAT hike in 05. (Sources: Statec-Conjoncture Flash Conjoncture /) 0/ / Note de Economic indicators Luxembourg Annual variations in % except where otherwise indicated 985-0 0 0e GDP growth (in volume) Unemployment rate (% of working population). -0...7. 6. 7. 7. Consumer price index..7.5.5 Resident population: 59,680 / Cross-border workers: 55,07 (0/0/0) of Luxembourg took,50 sq.m. Route de Thionville. The contributed to 5.6% of the take-up. In the, an ecommerce company took,87 sq.m. in the IEK Eolis, this being the only deal in that district. Outside the traditional districts of Luxembourg, in Grevenmacher, a 5,08 sq.m letting in the Potaschberg Office Park was signed to a tenant kept confidential. Excluding this transaction, take-up was stable compared to a year ago. Banking and Finance contributed to 0% of the take-up in Q, Business Services accounting for the same proportion. Transport & Logistics represented 7.7% of the deals. Take-up by business sector 00% 90% 80% 70% 60% 50% 0% 0% 0% 0% 0% 00 005 006 007 008 009 00 0 0 Q Banking and Finance Insurance + Pension Funds Business Services TMT Manufacturing+Construction Public Administration EU Other Source: JLL Research Source: Statec (forecasts December ) market Take-up up 0%... thanks to a deal outside the traditional districts 0 began on a robust mode, with an increase of 0% year-onyear of the take-up. In Q 0 occupiers transactions amounted to,7 sq.m. vs. 7,7 sq.m. a year ago. The number of transactions is also substantially higher: 7 vs. 6 in Q. The average size of transactions was up 6.7% to 6 sq.m. vs. sq.m. a year ago. Seven transactions exceeded,000 sq.m. The Periphery lead the letting market in Q 0 with 6.% of the take-up. 57% of the take-up in this district was in the Airport area, driven by the letting of,9 sq.m. to Cargolux Airlines in the Dailados building. In Munsbach EY took,508 sq.m. The Station district followed with.% thanks to the extension by,50 sq.m. of the footprint of Société Générale in the Central Plaza (SG took 9,6 sq.m. in Q 0 and now occupies roughly the entire building). Again in the Station district, the State For the rest of the year, given the completion of the new HQ of PwC in La Cloche d Or and KPMG in the, we expect that the take-up will reach at least 75,000 sq.m. Vacancy rate stabilises There was,00 sq.m. completed in Q 0, a non-speculative development in Belval (Esch). Vacancy tends to stabilise, at the end of March there was only 76,000 sq.m. vacant left, ie 5% of total stock. This is roughly unchanged compared to the 5.% of Q. In the the vacancy increased a bit to.9% vs. % months ago, while in the Station district it tightened to.5% vs..%. In the the vacancy rate came in at.6% vs..7% in Q. Vacancy was unchanged at 8% in the Decentralised. Within this district, there is 5.8% vacant in the Cloche d Or (+0 bps quarter-on-quarter), 9.7% in Bertrange (=), 5.% in Strassen (-60 bps) and.5% in Hamm (- 0 bps). There is only 0.7% vacant in Howald. Noticeably, vacancy declined in the Periphery to.% vs..% months ago, primarily thanks to lettings in the Airport area.
On Point Luxembourg Office Market Report Q 0 As second hand buildings will be vacated during the summer and some speculative completions are scheduled, vacancy might increase from Q 0. Rents in Belval are 0. Incentives are unchanged in the central districts. Vacancy rate by district (%) Completions, Pipeline and Vacancy 5.0% 50 0.0% 8.0% 7.0% 00 '000 sq.m. 5.0% 0.0% 6.0% 5.0% 50.0% 00.0%.0% 50 5.0%.0% 0 0.0% Q 00 Station Q 0 Dece Q 0 Peri Q 0.0% Esch Q 0 Completions Source : JLL Research Speculative completions in 0 are expected at,675 sq.m, being Allfin s Aire building in the (5,0 sq. m.), the Findel Golf Park F6 (,000 sq.m.) in the Periphery, and the Campus Contern Colibri (,5 sq.m.)in the Periphery. Non speculative completions in 0 comprise 5,000 sq. m. in Belval, the new HQ of PwC in La Cloche d Or (Decentralised) and the new HQ of KPMG in the. F C Spec. F C Non Spec. Vacancy Rate Source : JLL Research More completions are awaited next year: out of a total completion pipeline of 5,7 sq.m., 66,55 sq.m. are speculative. Needless to say that given the high demand for quality space this proportion may rapidly change. LARGEST SPECULATIVE PROJECTS 0-05 (>,500 sq m) DISTRICT BUILDING AREA PLANNING KIRCH IAK,000 Q 05 PERI FINDEL GOLF F6,00 Q 0 AIRE 5,0 Q 0 ROYAL 0 (RIX) 5,00 Q 05 DECE PAGOSA,8 Q 05 STATION FORT WALLIS,096 Q 05 PERI CAMPUS CONTERN COLIBRI,5 Q 0 ONE ON ONE,079 Q 05 ROYAL GRACE,600 Q 06 Aire, Route d Esch (): 5,0 sq.m. Available in Q 0 Prime rents evolution (typical /6/9 leases) 5 0 5 8 0 Prime rent stable at in the 5 Prime rents were unchanged at / sq.m. pa in the. Prime rents also remained unchanged in the and Station Districts, at and /sq.m./month respectively. In the Decentralised areas, best rents are 8, varying from 0/sq.m./month in the East to 8/sq.m.month in the South. Prime rents are unchanged at /sq.m./month in the Periphery. 0 5 0 00 005 Source : JLL Research 006 007 008 009 00 0 0 Station Decentralised Periphery Esch Q
5 On Point Luxembourg Office Market Report Q 0 Investment market Focus on Investment Volume by Investors Type + Q 0 There were three large-size deals in the first quarter: Union Investment acquired three buildings from Aberdeen in the district, namely the K Ellipse, the K Forte and the Kubik. All together the transactions amount to 58 Mio in value and 6,00 sq.m. in surface. Compared to a year ago, this represents a minimal decrease of %. % Corporate Developers 7% Government 5% Pooled Funds Private German investors therefore represented 00% of the investment market in Q 0. Apart from this triple transaction, Baltisse (a Belgian private investor) acquired the Howald Retail Park (,500 sq.m. retail warehouses) from Pramerica and the Centre Rosenstiel (a mixed retail / offices scheme in the ) from Allianz for an undisclosed amount. % 7% % REITs 8% Institution Source: JLL Research Investment Volume by origin of money (%) Prime yields under pressure 00% Yields for prime buildings providing a secure mid-term cash flow are currently unchanged 5.75% however there is downward pressure as demand for core transactions is high and opportunities are limited. For prime investments with long term leases and small lot sizes, yields can be substantially below this. As such Luxembourg therefore follows the same downward trend as other European cities. 90% France 80% Other 70% UK 60% Nordic Regions 50% Netherlands 0% Italy 0% Ireland Jean-Philip Vroninks, head of Capital Markets BeLux, said: The Luxembourg investment market is experiencing strong interest for prime product creating yield compression. This is further enhanced by a strong occupational market which is the main differentiator with other European markets. 0% Germany 0% 0% Belgium Luxembourg 009 00 0 0 Q Source: JLL Research Prime Yield evolution (6/9yr lease) 6.0% 6.0% 6.00% 5.75% 5.80% 5.60% 5.0% 5.0% 5.00%.80% 00 005 Source: JLL Research 006 007 008 009 00 0 0 Q
6 On Point Luxembourg Office Market Report Q 0 Luxembourg Office market: Key figures Statistics Market 0 0 Q 0 66 (*) 5 (*) 6 (*). (*) Stock in Mio. sq. m...5 (**).5.5 Completions (cumulative) in 000 sq. m. 80 7 7. Vacancy in 000 sq. m. 06 78 76 Vacancy Rate in % Prime Rent in / sq. m. /month (typical /6/9) 6. 6.5 (**) 5. 5.0 8 0 Investment volume total in Mio (***) 67 567 685 58 Prime Yield Band in % (typical /6/9) 5.75-6.50 5.75-6.50 5.75-6.50 5.75-6.50 0e 05e 06e.7 66..5 77.5 9. 7.8 00. 5.5 78. Take-up (cumulative) in 000 sq. m. Capital Market Future Supply, Speculative ( 000 sq. m. ) Future Supply, Non Speculative ( 000 sq. m. ) Total ( 000 sq. m. ) (*) Including BelVal (Esch) (**) Restated (***) Incl. owner occupation, development, and land sales Largest Transactions in Luxembourg + Q 0 YEAR QTR SUBDISTRICT OPERATION BUILDING AGE 0 0 0 KIRCH CLOCHE D OR CLOCHE D OR HAMM CLOCHE D OR KIRCH ESCH STATION BERTRANGE KIRCH AIRPORT STATION MUNSBACH STATION Acquisition Pre-letting Pre-letting Extension Acquisition IEK GEOS VERTIGO NAOS DROSBACH E BITBOURG DROSBACH E IIK SQUARE MILE LOT WARLON PLAZA LIBERTY ATRIUM - EXCIO IEK EOLIS DAIDALOS ROYAL, CENTRAL PLAZA VAL FLEURI LIPPMANN, C CITY STATION Modern Modern UC Old UR Modern UR Old Modern Source: JLL Research, based on publicly available data AREA (sq.m) 0,076 6,8 5,808 5,700 5,0 5,07,65,7,97,750,87,9,55,50,58,05,90 TENANT PARLEMENT EUROPEEN INTERTRUST ING BANK STATE OF LUXEMBOURG CENTRE TRADUCTION UE CREDIT SUISSE UNIVERSITÉ DU LUXEMBOURG SERVICE DE L ETAT ASSISTANCE SOCIALE KPMG E-COMMERCE CARGOLUX CHINA CONSTRUCTION BANK SA SOCIETE GENERALE EUROFINS HAUCK & AUFHAUSER CENTRALIS
7 On Point Luxembourg Office Market Report Q 0 Major Office Investment Transactions in Luxembourg + Q 0 Year Qtr District Property Price est. (EUR Mio) Seller Decentralised Tour Cubus II & III 60 59 Giorgetti Ikodomos Holding 0 0 0 Station Esch Decentralised Decentralised Galerie Kons * K Forte K Ellipse Kubik Plaza Grande Duchesse BR0 Aire Square Mile Roosevelt 0- Piret (ex-ing) * Bertholet Pasteur Grand Rue 56 Sternberg House Route d'esch Conf. 55.5 5.6 9.5 5 (est) 0 6.9.5.5 9.5 Conf. 6.75 Pramerica Aberdeen Aberdeen Aberdeen BNP Paribas BGL BNPP Allfin Technoconsult Baloise ING Avensis Leasinvest Real Estate Credit Suisse Aviva ING Luxembourg Decentralised POP (Bourmicht) Private (*): Development or redevelopment deal Buyer State of Luxembourg Family Office CLI / Immobel / Besix Union Investment Union Investment Union Investment Private Cardif AXA Ogeo Family Office Atenor Group Family Office AIK Family Office AIK Private Baloise Luxembourg
8 On Point Luxembourg Office Market Report Q 0 Map of the Luxembourg Office Market
9 On Point Luxembourg Office Market Report Q 0 Definitions Take-up Take-Up : Represents take-up of floorspace in new or substantially refurbished buildings of less than five years since completion. Take-Up Modern: Represents take-up of floorspace built or renovated between 5-5 years ago. Take-up Old: Represents take-up of floorspace built more than 5 years ago and not renovated. Rent Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 500 sq. m. of lettable floorspace, which excludes rents that represent a premium level paid for a small quantity of space. Top Quartile Office Rent represents the average mean value of the top (5 %) quartile of all known face rents achieved on leasing transactions completed within a market during the survey period (normally calculated annually, or quarterly on a monthly rolling basis). It excludes any unrepresentative deals. Weighted Average Rent represents the average mean value of all known face rents achieved on leasing transactions completed within a market during the survey period weighted with the floorspace (normally calculated annually, or quarterly on a month rolling The property should be let at the prevailing market rent to a first class tenant with an occupational lease that is standard for the local market. The prime initial net yield is quoted, i.e., the initial net income at the date of purchase, expressed as a percentage of the total purchase price, which includes acquisition costs and transfer taxes. Vacancy Vacancy represents completed floorspace offered on the open market for leasing or sale, vacant for immediate occupation on the survey date (normally at the end of each quarter period), within a market. It includes all vacant accommodation irrespective of the quality of office space or the terms on which it is offered. Vacancy excludes obsolete or mothballed office property, i.e. floorspace held vacant and not being offered for letting, usually pending redevelopment or major refurbishment. Vacancy Rate The Vacancy Rate represents immediately vacant office floorspace in all completed buildings within a market as at the survey date (normally at the end of each quarter period), expressed as a percentage of the total stock. Stock Stock represents the total amount of completed office space in buildings mainly used for office purposes within a market that is capable of occupation regardless of the type of ownership or type of building quality, as at the survey (normally at the end of each quarter period). basis). It excludes any unrepresentative deals. Prime Yield Represents the best (i.e. lowest) rack-rented yield estimated to be achievable for a notional office property of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). Completions Completions represent floor-space completed during the survey period (normally annually). Completions include new development and refurbished accommodation, speculative developments, pre-let floor space and space for owner-occupation.
JLL Office - Luxembourg Atrium Business Park rue du Puits Romain 8070 Bertrange Tel : + 5-6.5.0 www.jll.lu Contact Romain Muller Angélique Sabron Jean-Philip Vroninks (*) Pierre-Paul Verelst Managing Director Luxembourg Head of Office Agency Luxembourg Head of Capital Markets BeLux Head of Research Belux +5 6 5 0 +5 6 5 0 7 + (0) 550 6 6 + (0) 550 5 0 Romain.Muller@eu.jll.com Angelique.Sabron@eu.jll.com Jean-Philip.Vroninks@eu.jll.com Pierre-Paul.Verelst@eu.jll.com (*) Sprl / Bvba COPYRIGHT JONES LANG LASALLE IP, INC. 0. 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. Printing information: paper, inks, printing process, recycle directive.