Market Report H1-2013 Luxembourg Real Words
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Advise Transact Manage MARKET REPORT H1-2013 LUXEMBOURG REAL WORDS « New look, new business, new opportunities... » Luxembourg is a great place to be in business right now. Throughout the credit crunch, this small country at the heart of Europe has continued energetically and efficiently to provide property, services and investment opportunities to international investors. Whether you have already invested or considered investing in Luxem- bourg, or don’t know it at all, this first issue of RealCorp’s re-branded, more in-depth, Quarterly Report offers a useful up-to-date overview of this thriving market. To inspire you, we begin with a summary of the advantages of Luxem- bourg’s location and economy and verifiable facts about the growth of the real estate market and financial industry. To orient you, we provide an overview of the names and locations of different commercial areas and related industries. To equip you, we then offer a detailed description of market facts for each sector, including total stock, Vacancy Rate, availability, take-up, deliveries, accessibility, facilities, and tenancy profile. There is also a Glossary of commercial real estate terminology used in Luxembourg. This fact-filled summary will pique the interest of most investors. To take it further, talk to us! Michael Chidiac, Managing Director RealCorp I. LUXEMBOURG IN FACTS ..................................................................................3 I.1. Key figures ................................................................................. 3 I.2. Luxembourgish market ............................................................... 4 I.3. Focus on the map ....................................................................... 5 I.3.1. Key Facts ........................................................................... 5 I.3.2. Market Structure ............................................................... 6 I.4. Market focus per sector .............................................................. 7 I.4.1. Luxembourg-City ............................................................... 8 I.4.2. Decentralized-West .......................................................... 15 I.4.3. Decentralized-South ......................................................... 19 I.4.4. Decentralized-East ........................................................... 21 I.4.5. Decentralized-North ......................................................... 24 I.4.6. Esch-Belval ....................................................................... 25 II. GLOSSARY .........................................................................................................26 REALCORP MARKET REPORT - H1-2013 - LUXEMBOURG Page 2 I. LUXEMBOURG I.1. KEY FIGURES IN FACTS In spite of the global financial GROWTH RATES OF GDP IN VOLUME (based on seasonally adjusted data) turmoil throughout Europe and its 2.5 effect on the financial industry, Luxembourg still shows steady 2 economic stability. 1.5 The economy of the country is largely open to the global eco- 1 2012 Q3 nomy with 85% of its production 0.5 exported, making Luxembourg 2012 Q4 a champion in this category! 0 2013 Q1 2013 Q2 -0.5 Luxembourg, located at the heart EA17 EU27 EU28 Luxembourg of Europe, is part of the largest -1 trading area in the world, the -1.5 European Union. From here, it plays a role globally (holding the -2 second place in the Invest- Source: ec.europa.eu/eurostat ment Fund industry) and locally (as the engine of the “Greater Re- gion”, (including South Belgium, KEY FIGURES North-East France and South-West Total Population (07/2013) 537’039 Germany). Luxembourg-City 103’600 Beside its key location, the country Esch-sur-Alzette 31’900 enjoys some of the best transport, Domestic wage-earners (07/2013) 361’668 logistics and telecom infrastru- Cross-border commuters (07/2013) 159’895 tures money can buy, a highly of which from (2012) France: 77’800 skilled and multilingual workforce, a Belgium: 39’500 stable political and social climate, Germany: 39’600 an attractive legal and fiscal environment, as well as one of the Unemployment rate (07/2013) 7.0% highest standards of living in the Inflation rate (07/2013) 1.8% world. All these elements make Growth rate 2013 1.0% Luxembourg a choice location for doing business. Growth rate forecast 2014 2.3% Source: statistiques.public.lu This thriving activity has a direct impact on the Real Estate mar- ket, which has been experiencing FINANCIAL BUSINESS IN LUXEMBOURG steady growth over the last two de- Banks cades. Luxembourg has naturally and rapidly become an attractive Number of banks (08/2013) 143 land of opportunities for real estate Employees (08/2013) 26’382 investors and developers. Luxembourgers 6’211 Foreigners (resident / non-resident) 20’165 Countries of origin 26 « This thriving Investment funds Number of UCIs (08/2013) 3884 activity has a Net assets (08/2013) bn€ 2’523 PSF direct impact on Employees (06/2013) 14730 the Real Estate Insurance and Re-insurance Number of insurances (01/2013) 94 market » Number of re-insurances (09/2012) 243 Source: abbl.lu REALCORP MARKET REPORT - H1-2013 - LUXEMBOURG Page 3 I.2. LUXEMBOURGISH MARKET In comparison with 2012, the Total Office Stock has increased by almost 2% to approach 3,5 million sqm. The market expects to reach this figure with some major deliveries still scheduled for the end of this year or early 2014 at the latest (e.g. Aurora or Charlotte, both pre-let in CBD, the new Raiffeisen Bank HQ in Leudelange, etc.). The most significant office deliveries during the past semester to- tal some 25,377sqm (Central Plaza, Southlane I in Esch-Belval, W22 in Windhof and the first phase of the Office Park Potaschbierg between the Airport and the German border). 2013 will see a Vacancy Rate finally dropping under the psycholo- gical threshold of 6%, in line with the figures reported during the best years of the market. However, if we break it down by sector, we notice significant diffe- rences between the City of Luxembourg and Periphery, where the Vacancy Rate can reach up to 28%. Yet that seemingly high Vacancy Rate concerns sectors that contain only a minor portion of the Total Office Stock. Indeed, the City of Luxembourg alone represents about 78% of this stock while running a Vacancy Rate of only 3,8%! At the middle of the year, the Take-up of 68,000sqm was in line with expectations for this time of the year. It traditionally gains momentum in the course of the second semester. Take-up has been boosted by both the Financial sector (KPMG with 3,750sqm in Bertrange) and the Public sector (i.e Université de Luxem- bourg in Esch-Belval with 4,970sqm, the State Services with 4,417sqm and the EU Translation department with 5,130sqm in Gasperich). The average Take-up office size is 500sqm while three-quarters of the demand does not exceed this figure. Tenant demand is still high for small to mid-sized office space while availability is reducing for most sectors. This particularly applies for CBD and Kirchberg which are still the most sought-after locations. Prime rents are still recorded for the CBD where good quality of- fice spaces are scarce, both for small and large offices, reaching 42 euros/sqm/month. « The City of Luxembourg represents alone about 78% of this stock while showing a Vacancy Rate of 3,8%! » REALCORP MARKET REPORT - H1-2013 - LUXEMBOURG Page 4 I.3. FOCUS ON THE MAP AACHEN Bastogne WILTZ DIEKIRCH NORTH ECHTERNACH REDANGE Trier FRANKFURT MERSCH E44 Arlon GREVENMACHER LIEGE - MAASTRICHT NAMUR - BRUXELLES LUXEMBOURG E25 CAPELLEN EAST METZ Pétange WEST NANCY REMICH PARIS Longwy SOUTH E29 ESCH / Schengen STRASBOURG BELVAL SAAREBRÜCKEN E25 THIONVILLE METZ I.3.1. KEY FACTS Luxembourg covers 2,586 km2 and is home to some 229,900 inhabitants (January 2013). The most populated cities are Luxembourg (99,900), Esch-sur-Al- zette (30,900) and Differdange (22,300). The country is divided into three administrative districts Luxembourg, Diekirch and Grevenmacher. Commercial activities are mainly concentrated in the South of the country where Luxembourg and its periphery represent by far most of the office market. Esch-Belval stands as an alternative to the capital with its ambitious and fast developing projects (Belval). Both cities enjoy outstanding railroads and motorway connections to neighbouring countries. While the City of Luxembourg is the traditional home of the financial industry, Esch benefits from its key location, modern and extensive logistic facilities, and its proximity to the French market. More than two thirds of the Total Office Stock is concentrated in the City of Luxembourg. The rest is distributed amongst interconnec- ted office or mixed activities areas stretching across the country along- side the motorway connecting Belgium and Germany. REALCORP MARKET REPORT - H1-2013 - LUXEMBOURG Page 5 I.3. FOCUS ON THE MAP I.3.2. MARKET STRUCTURE For ease of understanding and an optimal reading of the market, we have grouped the market into sectors as follows : 1. CITY OF LUXEMBOURG (COMMUNE DE LUXEMBOURG) The territory of the capital divided itself into 7 sub-sectors. 2. DECENTRALIZED Office & activity sectors surrounding or giving easy access to the City of Luxembourg. 3. PERIPHERY I North Most attractive activity zones are situated along- side the Belgian border (Wiltz for Belgium, Echternach or Diekirch for Germany) or in the central cities (Mersch and Ettelbrück). The activity is mostly industrial (GoodYear, Luxlait), with some large shopping centers (Pommerloch, Mersch). I South Activity is