Focus on real estate trends in Luxembourg

A new record year


With some 357,000 sqm of take-up in 2021, the office property market in Luxembourg is recording a second consecutive record year. However, these figures must be qualified in view of the numerous pre-lets recorded and the considerable weight of the European institutions and other public administrations over the past year. In addition, Luxembourg has one of the lowest vacancy rates in the European Union with 4 in 2021 compared to 4 in 2020. Focus on the figures for 2021 and on the latest trends in an office real estate market in full mutation, between geographical needs to accommodate a softer mobility and development and construction needs to follow an ESG trend increasingly present in the strategies of companies and institutions.

2021 marks a new record year for deals in the office real estate sector. During the past year, JLL Luxembourg has recorded an occupancy of 356,993 sqm. This is 11% more than in 2020, the previous record year. 77% of this total is made up of existing buildings, 23% of which are agreements still in progress .

There are a number of key developments in the office real estate market in 2021. First of all, there was a significant increase in local sub 13,079 sq. m., or more than twice as much per fellowship at 2020.” This is a testament to the fact that some residents with current leases have a fat of space for their operations and are offering some of it to other companies. We can clearly see in this trend one of the consequences of telecommuting“, says Lofti Behlouli, Office Agency Director at JLL Luxembourg. “Subletting is a trend that can be attractive. However, we must not lose sight of the fact that, in some cases, it requires adjustments that can be complicated to implement and therefore potentially costly,” says Muriel Sam, head of development for Immobel Luxembourg. Repartitioning an open space involves many issues in terms of health and safety at work or cyber security, in particular.”

The attraction of Kirchberg

It represents the largest share of the deals, with a total face of about 150,000 sqm (42%). Again, this is an all-time record. The movements recorded by two major players explain this figure in particular:

  • the European Parliament, which now occupies its new headquarters, the KAD II, in Kirchberg (127,000 m²)
  • the Publications Office, which has taken up residence in the Mercier building (18m ² 00 m2), in the Station district.

Luxembourg institutions were slightly less present than last year. They represent only 16% of total deals compared to 27% last year.

The private corporate sector, which represents 42% of total deals in 2021, has once again been driven by the take-up or pre-letting of financial players BGL BNP Paribas, which has pre-let an 18,300 m2 extension to its current headquarters on the edge of Kirchberg, Société Générale, which has signed for 17,303 m2 in the Icône project in Belval, and finally Union Investment, which is occupying its new 10,700 m2 premises at the airport.

As far as the evolution of the districts is concerned, the weight of the Kirchberg in the total occupancy increases from 25% to 45%. If Belval ‘s share rises to 9% (from 3% in 2020), City Belt ‘s share will fall from 23% to 8% in 2021.

Standing at 4% last year, the vacancy rate has contracted over the past year to.” This decrease in the vacancy rate is due in particular to the high pre-leasing and pre-sale rates as well as the still low supply in Luxembourg“Lofti Behlouli explains, pointing out that Luxembourg has one of the lowest vacancy rates in Europe. On average, in the European Union, this is indeed more than twice as high.” This low vacancy rate compared to other European capitals limits the downward oscillations of the price per square meter. For institutional guests who have hundreds of millions of euros to invest in real estate, Luxembourg becomes more attractive by fellowship to places where the oscillations are more important, such as Paris, Brussels or Frankfurt. If real estate is generally a retreat, in Luxembourg it is even more so“, says Muriel Sam.

“Luxembourg is therefore becoming more attractive compared to places where fluctuations are more important, such as Paris, Brussels or Frankfurt.

Muriel Sam, Head of Development , Immobel Luxembourg SA

Redesigned work spaces

While the office real estate market in Luxembourg has shown a certain resilience, it will still have to evolve significantly to meet the challenges created by the health crisis.

“The pandemic has accelerated trends that were already apparent before the crisis. I am thinking in particular of hot desking, remote working and decentralized offices. Those two years of pandemic and forced telecommuting still highlighted the fact that remote work was not ideal. The office is essential for creating an entrepreneurial spirit, making people productive and creative. To realize this, you just have to see what the offices of Silicon Valley IT companies look like, the very ones that invented telecommunication tools…”, explains Muriel Sam.

In order to identify the new priorities in terms of plod, JLL conducted an international survey.” The quest for a better balance between private and professional life ranks first in terms of expectations,” says Emna Rekik, head of tenant representation at JLL.” Next comes the guarantee a comfortable salaryworking in a company that guarantees the well-being and the mental health and constitution of its employeesand the need to find meaning in his plod.

To meet these new needsAs a result, companies are going to have to append their workspaces.” According to our survey, the first expectation of employees is to have divisions connected to nature. This can be gardens, outdoor spaces or shared vegetable gardens,” explains Pierre Joppart, head of work dynamics at JLL Luxembourg. In the second place, employees want to have places to isolate themselves, to take private calls, for example. Then they expect to have spaces for socializing (coffee areas, diapers, terraces, etc.) and spaces for learning and development, for example, to follow training courses. Finally, they want to be able to take advantage of collaborative spaces, such as thinking apartments.

For Immobel Luxembourg, the health crisis has also had the effect of refocusing employees on their priorities in life.” Health and social relationships have become more important. In this context, the design of spaces should evolve and reflect our need for quality of life at the plod. We will also ensure that the office has a more positive impact on its health with the integration of healthier materials, air quality improvement systems or more personal services. The office is evolving towards more benevolence, integrated services and socialization,” says Muriel Sam.

The "green" building boom

Among the new trends in development in Luxembourg, we can also note the rise of buildings with a green instrument. Thus, according to statistics collected from the BREEAM association and DGNB – two organizations delivering green instruments – about 800,000 m ² of office shells are now certified “green” in Luxembourg. This represents 18% of the current office stock. However, this trend is expected to increase in the coming years, as 313,000 square meters of the approximately 385,000 square meters currently under construction have already been applied for a green instrument.

Symbol of this interest in the “new world”, the “new world” is the green building“More and more instrumental organizations and markers are developing on the market (BREEAM, DGNB, HQE, CO2-Neutral, WELL,etc.). But does being certified imply an enhanced attractiveness for inhabitants, or even higher rents?” It is certain that green instruments have become indispensable to respond to stakeholders’ CSR challenges. The green sesame is entirely part of the selection criteria of an inhabitant. The link between instrument and rent is not to be made directly, the analysis is mainly done on the total cost of occupancy, from the occupant’s point of view”, explains Lofti Behlouli.