The office market in Luxembourg experienced continuous growth last year, with a record occupancy of 357,000 square meters and quadrupled deliveries, reaching 214,000 square meters. However, Lotfi Behlouli, Director of Office Agency at JLL Luxembourg, stated that these figures need to be nuanced due to numerous pre-leases, the weight of institutions, and the reality of transactions, most of which are below 2,000 square meters. Despite this, the vacancy rate decreased from 4% to 3.6% in a year, which is twice less than in Brussels. This scarcity of supply is explained by a pre-lease and pre-sale rate of 23%, although this figure is down from 51% in 2020.
Luxembourgish (16%) and European (42%) public administrations were overrepresented in the office market last year. The delivery of Kad 2 to the European Parliament (127,000 square meters) was on top, followed by the new headquarters of Post at the Gare (27,700 square meters), and the upcoming move of the European Union Publications Office to Rue Mercier. These operations also changed the game for neighborhoods, with Kirchberg now dominating, representing 45% of the volume delivered, compared to 25% the previous year. Belval saw its share triple to 9% thanks to Société Générale's pre-lease of the Icône building (17,303 square meters) and the pre-lease of the Twist building on 10,150 square meters by Statec.
In terms of rents, the Centre/Boulevard Royal is the most expensive location with a prime rent increase of 4% to €52/month/square meter excluding VAT, ahead of Kirchberg and Gare at €38, and Cloche d'Or at €35/month/square meter excluding VAT, which saw the sharpest increase – 9.4% in a year. In the capital's suburbs, rents remained at €28.5/square meter, as well as in Belval (€24/square meter) and in the far outskirts where the status quo is maintained at €22.5/square meter.
In 2022, the office market is expected to be more balanced, with a 36% drop in deliveries, to 135,468 square meters, of which almost 53% are already pre-leased or reserved. Lotfi Behlouli also emphasizes the increasing interest in buildings with green energy certifications. Regarding investment, the total volume slowed to €1.2 billion in 2021, with a decrease in yields from 3.9% to 3.25% and a focus of investors on the office segment (78%) far ahead of land (13%). Vincent Van Brée, Head of Capital Markets
