Luxembourg Property market - Market Overview 2018

 
Luxembourg Property market - Market Overview 2018
Luxembourg
Property market

       Research Report
       Market Overview 2018

                                   © Le Dôme
                                           Axa
                              Developer : Vinci
Luxembourg Property market - Market Overview 2018
Edito
The property markets in Luxembourg
have reiterated an excellent
annual performance in 2018.
   Dear reader,

    Amidst major ongoing infrastructure works,       pressure. Future development will include
  national elections and uncertainties on            an increased density of construction and the
  the geopolitical level, the property markets       creation of new housing districts, particularly
  in Luxembourg have again outperformed              in locations where new public transport
  in 2018. The take-up level achieved in the         facilities will become available.
  office market 2018 was driven by corporate           The investment market is soaring with a
  activity. The take-up volume is the second         transactional volume close to €1.9 billion in
  highest since the start of our data recordings     2018 all asset classes combined, including
  in 1994, the vacancy rate is at its lowest level   the iconic building The Dôme, a transaction
  since the financial crisis of 2008 and prime       realised by JLL, and the new HQ of Deloitte
  rents are at their highest level ever. The stock   at Ban de Gasperich. The outlook is bright
  recently passed the 4 million sq.m. mark and       as investors’ appetite remains strong,
  speculative development underpins the              particularly for locations outside the CBD
  market. Future growth areas include the Ban        where rental growth is anticipated.
  de Gasperich, Belval and the Station district.       Given the solid fundamentals of the
    The retail market performed below its 2017       national economy, demand for residential
  volume, which was an exceptional year, and         and professional accommodation is
  the number of transactions decreased. Large        expected to remain high and property
  transactions were registered in shopping           markets in Luxembourg are set to grow
  centres and in the main streets of the city        further.
  centre. In the next year, the completion of          In 2019 JLL celebrates 30 years of presence
  large development projects such as Royal-          in Luxembourg. We are proud to have worked
  Hamilius and the shopping centre at Ban de         alongside you to realise the growth of the
  Gasperich will boost market activity.              property markets and we look forward to
    The pace of development in the residential       working with you in the future. Let’s achieve
  market is solid but insufficient to meet           our ambitions together.
  demand and prices are under upward

  ROMA IN MULLER
  M A NAGING DIR E CTO R JLL LUX E MB O U R G
Luxembourg Property market - Market Overview 2018
Contents
5
                                                                                       27
ECONOMIC
BACKGROUND
The economy of the Grand Duchy is in
good health and its growth remains
ahead of that of the Eurozone.
                                                                                       INVESTMENT
                                                                                       MARKETS
                                                                                       The return of mega deals

                                           15
                                           RETAIL
                                           MARKET
                                           The take-up volume in 2018 amounted
                                           to 37.650 sq.m., above the annual
                                           average for the 5-year period 2013-2017.

7
OFFICE
MARKET                                                                                 30
The take-up volume 2018 was the
second highest ever since the start of                                                  SUMMARY
our data recordings in 1994.                                                            Key Performance Indicators

                                           19
                                           RESIDENTIAL
                                           MARKET
                                           The growth of the population, from
                                           435,000 inhabitants in 2000 to 602,000 as
                                           at 1st January 2018 represents a growth
                                           of 38% over the period.
Luxembourg Property market - Market Overview 2018
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

              Hogan Lovells, cabinet d’avocats,
              a fait confiance à Tétris pour deux
              projets consécutifs d’aménagement
              en «build» seul, puis en «design & build».

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                              4
Luxembourg Property market - Market Overview 2018
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

                                                  Economic
                                                 background
The economic situation of the Grand
Duchy is sound and its growth remains
ahead of that of the Eurozone.

                   Last year was a real Sturm und Drang         Domestic demand remains high,                                with the rest of Eurozone. The national
                 situation for the global economy. We           reaching 2017 level at 2.1%. The total                       consumer price index published by
                 saw high and low for 12 months long            population in the Grand Duchy as                             Statec stays at 104.66 in November
                 and uncertainty about Brexit and               at 1st December 2018 amounted to                             2018, a 2.2% increase in comparison
                 China/US trade war promise more                602,005 inhabitants and daily 193,142                        with November 2017. The volume of
                 turbulence in 2019. Despite all of this        commuters top up the potential                               retail sales turnover (excluding sale by
                 we found a beacon of green light:              consumer base and reinforce the                              mail order) increased by 5.5% on an
                 Luxembourg’s economy, where almost             economy. The public debt remains                             annual basis as at October 2018.
                 all indicators stay strong, well ahead of      low at 23% of the GDP in combination
                 the rest of the Eurozone. The increase         with long-term sovereign credit ratings                        Statec published a strong
                 of minimum wage is testimony to how            granted with the highest AAA-rating                          unemployment rate for November
                 Luxembourg’s government stays one              (stable).                                                    at 5.2%, down from 5.8% during the
                 jump ahead of the social discontent                                                                         same period last year and confirming
                 facing neighboring countries.                    Public and private consumption                             a persistent downward trend since
                                                                re m a i n s o l i d a n d t h e m o n t h l y               mid-2014. It represents a seasonally
                   The expected annual GDP growth               consumer confidence index remains                            adjusted number of unemployed
                 rate for 2018 hit 3.0% (according by           largely positive, confirming the                             of 14,576 persons on an active
                 Statec) and 3.9% (according to by              country’s sustained growth. The                              population of 280,315. Looking
                 The Economist). This should continue           consumer confidence indicator                                forward, the unemployment rate is
                 between 3.0% and 3.3% during 2019.             remains at record highs in comparison                        expected to continue to fall in 2019.

                                                                    Consumer  Confidence
                                                                        Consumer             Indicator
                                                                                 Confidence Indicator
         30,0

         20,0

         1 0,0

          0,0                                                                                                                                                                  EU-28
Index

                                                                                                                                                                               Belgium

                                                                                                                                                                               Germany
        -1 0,0
                                                                                                                                                                               France

                                                                                                                                                                               Luxembourg
        -20,0

        -30,0

        -40,0

                                                                                         5                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
Luxembourg Property market - Market Overview 2018
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                            Office
                            market
COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                              6
Luxembourg Property market - Market Overview 2018
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

                  TAKE-UP: 2018 IS AN EXCELLENT YEAR
                     AND THE OUTLOOK IS BRIGHT

The take-up volume in 2018 amounted
to more than 245,000 sq.m., the
second highest annual volume ever.

    From 2015 to 2017, take-up in                   volume amounted to 85,100 sq.m., a 10                          dependent on recruiting and retaining
 Luxembourg has been rather stable.                 year record. Behind this boost we saw                          talent so getting a modern place to
 2018 marks a transition and shows new              transactions from Deloitte in D Square                         work is essential for the sustainability of
 potential in offices take-up. This year            (31,000 sq.m.) and Alter Domus in Melius                       their operations. Noteworthy also is the
 the market reached pre-subprime crisis             (10,600 sq.m.). These two operations                           presence of the retail sector, particularly
 levels again with a take-up volume of              in Q4 made the difference, driving the                         companies active in e-commerce.
 245,000 sq.m., representing an 18%                 volumes to a record high. To illustrate                        The remaining transactions were
 increase vs. 2017. Two major reasons               this, the number of deals registered (278                      spread over diverse activities.
 are behind this evolution. The first is            transactions) was below last year’s total
 the good (and stable) economic health              of 293, proof that the average deal was
                                                                                                                      In terms of geographical spread, Ban
 of Luxembourg, which attracts more                 higher at 885 sq.m. (vs 729 sq.m. in 2017).
                                                                                                                   de Gasperich confirms its attractivity by
 and more corporate companies. This
                                                                                                                   hosting 27% of the transactional volume
 is an oasis compared to the economic
                                                       Mid-size categor y transactions                             in 2018, almost tripling 2017 numbers.
 turbulence experience in neighboring
                                                    between 5,000 and 10,000 sq.m. are                             As mentioned earlier, locations outside
 countries (Brexit, gilets jaunes, etc.). The
                                                    way up withan increase of +246%                                of Luxembourg city are more and more
 second is the willingness of corporates
                                                    versus 2017 and +147% vs.the 5-year                            appreciated. Transactions in the City
 to provide modern high-quality
                                                    average numbers. This is made up of                            Belt confirm this trend. Strassen is
 workplaces which give their workforce
                                                    partly Local Administration and partly                         particularly appreciated, with Serenity,
 more room for creativity and interaction.
                                                    financial and service sector corporates.                       Edison 7, «Le 5» and Kiem buildings
 Talent acquisition and retention is
                                                    This should be confirmed during 2019                           accounting for 75% of the transactions
 at the centre of their strategy, hence
                                                    whenn more buildings of this size will                         in the district. Leudelange, Airport,
 new buildings are particularly in
                                                    become available.                                              Hamm and Bertrange are also in the
 demand even if they are not exactly
                                                                                                                   spotlight as they more than double their
 located in the centre of Luxembourg                   Looking into details of occupant
                                                                                                                   take-up transactions in comparison with
 where accessibility suffers from a lack            types, corporates account for 84% of
                                                                                                                   2017. The Periphery and Esch/Belval
 of infrastructure. Trendy business                 the take-up volume whilst local and EU
                                                                                                                   also grow in take-up volume, from
 locations such as Esch/Belval or the City          administrations represent together 16%
                                                                                                                   22,000 sq.m in 2017 to 32,400 sq.m in
 Belt are more and more sought after.               . Take-up transactions in the corporate
                                                                                                                   2018.
                                                    sector are mainly attributed to business
                                                    services (37%), banking and finance
   More concretely, 2018 is 17% above
                                                    (17%) and computer and IT services
 the 5-year average and the Q4 take-up
                                                    (8%). These three sectors are particularly

                                                                            7                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
Luxembourg Property market - Market Overview 2018
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

Vacancy declined in the last quarter
of 2018 to reach 3.4% representing
139,439 sq.m. This represents a
decline for the fourth consecutive
quarter and marks a long-time record
low.

        2018 was a record year for office                            more specifically in the CBD, where
        stock in Luxembourg the symbolic                             the current vacancy rate drops
        level of 4 million sq.m for the whole                        from 2.7% in Q3 to 1.6% in Q4. We
        country was reached for the first                            expect that speculative movement
        time. Vacancy nevertheless declined                          will continue contracting this ratio
        in the last quarter of 2018 to reach                         further. The lowest vacancy rate in the
        3.4% representing 139,439 sq.m.                              centre is recorded in the Kirchberg
                                                                     district where vacancy eventually
        This is the fourth consecutive                               increases from 0.6% to 0.8% due to
        quarter where vacancy has declined                           an additional stock delivery. In the
        and marks a long-time record low.                            City Belt, the vacancy rate shrinks
        If we compare the 2018 Q4 vacancy                            from 6.4% to 5.8% under pressure
        rate to the same period last year, the                       from the Airport district where the
        decrease amounts to 140 bps. With a                          vacancy rate decreased. In Esch/
        speculative pipeline of 45,000 sq.m.                         Belval and the Periphery (Windhof,
        due for delivery in 2019, the vacancy                        Contern, Capellen, Munsbach and
        rate is expected to decrease further,                        Potaschberg), average vacancy rates
        particularly in the first half of 2019.                      remained stable between 6.7% and
                                                                     8.8%. The outlook for 2019 is bright                                             Copyright : Royal-Hamilius
                                                                                                                                    Architects : Foster + Partners & Tetra Kayser
        Looking at district level, a decrease                        as demand is sustained.
                                                                                                                                                        Developer : Codic Group
        was noted in the central districts and

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                              8
Luxembourg Property market - Market Overview 2018
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

     Top 5 transactions 2018

 District           Building        Age Class                   Area (sq.m.)                   Operation                             Occupier
 Ban de
                    D Square                New                        31,000                    Pre-letting                           Deloitte
Gasperich
 Ban de
                     Melius                 New                        10,600                    Pre-letting                       Alter Domus
Gasperich
                   The Square-
Kirchberg                                Modern                        10,073                    Pre-letting                E-commerce sector
                      Geos

Bertrange          Beaubourg                New                         9,000                    Pre-letting                           Telindus

                     Le Foyer                                                                      Owner                            Le Foyer &
Leudelange                                  New                         7,898
                    Extension                                                                     occupier                         subsidiaries

                                                               Other
                               Retail
                                                                7%
                                5%

   Insurance & Pension
          Funds
           4%                                                                                                       Business Services
                                                                                                                          37%
  Real Estate Activities
           6%

              IT
             8%

                      Administration
                          16%                                                                               Banking and
                                                                                                              Finance
                                                                                                                17%

                                                                    9                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
Luxembourg Property market - Market Overview 2018
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                 Take-Up (Sq.m.)

                                                                                          Take-Up (sq.m.)
                  90.000

                  80.000

                  70.000

                  60.000

                  50.000

                  40.000

                  30.000

                  20.000

                  10.000

                       -
                                           2014                             2015                           2016                          2017         2018

                                                                                             Q1      Q2     Q3      Q4

                 Vacancy Rate By District

                                                                         Vacancy rate by district
                           0%                       2%                          4%                        6%                        8%          10%          12%

                   CBD

              Kirchberg

                Station

 Ban de Gasperich

               City Belt

              Periphery

             Esch/Belval

 Luxembourg total

                                                                                  Q4 16        Q4 17        Q4 18

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            10
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

   SPECULATIVE PIPELINE DRIVEN BY CITY BELT,
KIRCHBERG AND CLOCHE D’OR / BAN DE GASPERICH

In 2018, we saw 102,000 sq.m. of new
office space built in Luxembourg.
Ban de Gasperich and City
Belt accounted for 87%
of the total amount.

      For City Belt, the extension of “Le           sq.m. and NAOS with 17,338 sq.m co-                        finance sector.
    Foyer” and the new construction                 developed by Arhs Developments
    “Beaubourg” freshly occupied by                 and Atenor and sold to the Belgian                          In Esch/Belval projects currently
    Telindus were the biggest completions.          institutional insurer Ethias and Le                        under construction with completion
    For Cloche d’Or, the project “D-Square”         Foyer from Luxemburg. The third                            scheduled in 2019 account for 41,000
    (31,000 sq.m.) built-to-suit for Deloitte       largest completions expected is the                        sq.m additional office space. In
    HQ was the main factor of this increase.        office component of ROYAL-HAMILIUS                         Kirchberg, three different projects
                                                    (from Codic Group) at 10,150 sq.m.                         totalising 14,000 sq.m. are under
     Looking forward, more than 262,800             and already fully prelet. The fourth                       development: INFINITY, SERRA and
    sq.m. are currently under construction          is the ZENIT in CBD (10,000 sq.m),                         STACCATO. Finally, in Ban de Gasperich
    with completions expected in the next           owned by Everop and already pre-                           other deliveries , the buildings Bijou,
    two years. In this amount, speculative          let at 55% by Bank of China. All four                      Darwin and Kockelscheuer are planned
    space accounts for 91,800 sq.m (around          should be finished and delivered in                        before the end of 2019.
    35% of the total). This number may of           2019. In Leudelange, the ALTITUDE
    course change as pre-lettings occur.            LA PAZ building (7,200 sq.m.) is under
                                                    construction and 90% of the building
      The largest completions scheduled             has recently been pre-let by JLL to a
    for 2019 are CASA FERRERO with 29,000           company active in the banking and

                                                                    11                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                    For 2020, the biggest project to date is the Court of Justice                                 OFFICE CENTER I & II will boost the stock by respectively
                  in Kirchberg. The building will offer an extra 39,750 sq.m to                                   16,000 sq.m. and 30,000 sq.m., both projects being scheduled
                  the European Court of Justice and could be delivered in Q4                                      for completion towards the end of 2020.
                  of that year. Still in Kirchberg, a French developer is launching
                  the OBH building (10,000 sq.m.). Next to Bertrange/Strassen,                                      ARCELOR MITTAL (55,000 sq.m.) in Kirchberg and POST LUX
                  but still in the commune of Luxembourg City, CREOS project                                      (27,700 sq.m.) in the Station district are under construction
                  is expected with 19,400 sq.m. of office space. In Leudelange,                                   and expected to be completed in 2021-2022. In Belval,
8                two projects are planned for 2019: the W4 where 3,587 sq.m.                                     BesixRed is developing its ICONIC building (18,000 sq.m.)       New Map
                  is pre-let and few remains available ant the ALTITUDE LA PAZ                                    designed by the famous architect Foster & Partners. JLL is
                  where also the major part is pre-let. BUZZCITY and AM BANN                                      co-agent in the letting of the property.
    Analysis                                                                                  Save                Share            Print        Directions   Measure        Bookmarks      Fin

          Luxembourg Pipeline                                                                                                                                                     48,420

                                                                                                                  290,356

                                                                                                                                              17,196

                                                                                           47,729

                                                                                                 45,177

                                                                              29,364

                                                                                                       9,676

                       46,566

          COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            12
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

                UPWARD PRESSURE ON RENTS
                  IN CENTRAL LOCATIONS

Prime rents rise to €50 per sq.m.
per month in CBD and to €36 per
sq.m. per month in Kirchberg,
with upward pressure.

           The most impressive increase came from                     If we compare December 2018 to the
         the CBD where €50/sq.m./month (+VAT)                       same period one year ago, we see a 6%
         is the prime rent applicable at the end                    increase in prime rents for CBD and 5% for
         of this year. We estimate that this trend                  Cloche d’Or/Ban de Gasperich (30€/sq.m).
         will continue through 2019, with upward                    Munsbach is also growing at 5% yoy and
         potential to €52/sq.m./month. A number                     has reached €22.50/sq.m. Leudelange
         of transactions were realised above €50/                   and Hamm/Neudorf see their prime rents
         sq.m. per month (+VAT) in the CBD and                      increase both by 4% yoy with a rent at €24/
         asking prices for top buildings are rising.                sq.m./month.
         The situation in Kirchberg is similar, albeit
         at a lower level: prime rents went from €35/                 The global rental analysis (prime and
         sq.m. to €36/sq.m. this year.                              second-hand included) for the last four
                                                                    quarters shows another trend. Top quartile
           All other districts show broad stability                 rents in Q4 decrease by 1.5% in comparison
         from Q3 to Q4 in prime rents: Station district             with the previous quarter, to €39.50 per
         stands at €35 per sq.m. per month, Cloche                  sq.m. per month. Weighted average rents
         d’Or/Ban de Gasperich at €30 per sq.m. per                 have increased by 1.1% to €27.9 per sq.m.
         month and Howald at €25 per sq.m. per                      per month (+VAT).
         month. In the City Belt, prime rents range
         from €23.5 to €28.5 per sq.m. per month.                     All rents quoted are exclusive of VAT.
         In Belval, €24 per sq.m. per month is the
         standard rent for new projects.

                                                          13                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                               Retail
                               market
COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            14
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

                                                                      TAKE-UP

The take-up volume 2018 reached
37,650 sq.m., above the annual average
for the 5-year period 2013-2017.
     The average size per transaction this                 in the past five years. The transacted                       by a large transaction in the city centre
  year was 509 sq.m. overall, varying per                  volume in the sectors Health & Beauty                        to a fashion retailer whose name is
  market segment from 383 sq.m. in high                    and Telecom was stable in terms of the                       confidential. In 2018, retailers active in
  streets to 1,392 sq.m. per transaction in                proportion of the total market. All other                    high streets were mainly fashion brands
  retail warehousing.                                      categories decreased in comparison                           and food & beverages. The Grand-Rue
                                                           with their respective 5-year averages.                       and its adjoining streets accounted for
    The annual volume is, however,
                                                                                                                        more than half of the take-up volume in
  22% below that of 2017, which was an                        The shopping centre segment took
                                                                                                                        the country, thus confirming their prime
  exceptional year with two transactions                   first place in 2018 with over 15,400 sq.m.
                                                                                                                        status.
  above 5,000 sq.m. in retail warehousing                  in 37 transactions, 147% above the
  parks. Transactions were spread                          5-year average. The volume recorded                             In the retail warehousing segment, a
  unevenly over the different quarters in                  in shopping centres was underpinned                          total volume of just around 11.100 sq.m.
  2018: 77% of the volume representing                     on the one hand by a high number                             was registered in 2018. The volume was
  close to 29,000 sq.m. was recorded in                    of transactions in City Concorde and                         70% lower than that of 2017, which
  the first half year. The second half of                  Belval Plaza, and on the other hand                          was an exceptional year with two large
  the year represented 23% of the annual                   by large size transactions in La Belle                       transactions totalling 23,000 sq.m.
  volume with a total take-up of 8,500                     Etoile (2,055 sq.m. let by Maisons du                        When excluding these, the decrease
  sq.m.                                                    Monde, a transaction realised by JLL)                        year-over-year is limited to 13%. The
                                                           and Knauf Schmiede (1,045 sq.m. let by                       number of transactions in the segment
     Fashion remains the largest category
                                                           Sportsdirect).                                               was relatively low in 2018, 53% below
  in 2018 representing close to one fifth
                                                                                                                        the 5-year annual average of 17
  of the transacted volume, vs. a 5-year                      An annual volume of 10,400 sq.m.
                                                                                                                        transactions, due to a lack of available
  average of 12%. Growth vs. 2017 was                      was recorded in the high street segment
                                                                                                                        units. The average size of transaction
  also recorded in the categories Leisure                  in 2018, 23% above its 5-year annual
                                                                                                                        in 2018, however, reached 1,392 sq.m.,
  & Sport which represented 9% of the                      average, in spite of being hampered
                                                                                                                        well above the 5-year average of 807
  volume in 2018 vs. a 5-year average of                   by infrastructure works in Luxembourg
                                                                                                                        sq.m.
  3%, and in the Services sector with 9%                   city centre and the rise of online retail.
  of the volume against 1% on average                      The transaction volume was boosted

                                      50
                    Thousands sq.m.

                                      45                                                                           8
                                      40
                                                                                                                   4
                                      35
                                                              29                                                                   11
                                      30
                                      25
                                      20       10                               6
                                                                                                                  36               15
                                      15                      12                4                10
                                                3
                                      10                                                          3
                                                               3               14
                                       5       13                                                                                  11
                                                               7                                  8
                                       0
                                              2013          2014              2015             2016              2017            2018

                                      Retail warehousing       Shopping centres               High street              5-y annual average

                                                                                  15                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                                                                         PRIME RENTS

                                 Prime rents remained stable in the                                 average rents reach €90 per sq.m. per
                              fourth quarter. Prime rents for shopping                              month + VAT. Prime rents up to €20 per
                              centres remain at €110 per sq.m. per                                  sq.m. apply to the retail warehousing
                              month (+ VAT) and apply to the best                                   parks in the periphery of Luxembourg
                              shopping centres around the City of                                   City. The outlook for rents applicable to
                              Luxembourg. In the high street segment,                               prime locations remains stable, whilst
                              on the prime high street locations in the                             rents for secondary locations are under
                              city an average rent of €150 per sq.m.                                downward pressure.
                              per month applies. In the station area

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            16
Research Report • Luxembourg Property Markets • Overview 2018                                                        www.jll.lu

                                                            SUPPLY

  As at the end of 2018, the total stock      retail warehousing in Luxembourg’s                           looks very promising with an extra
for retail in Luxembourg amounted to          periphery by Leasinvest offering                             113,109 sqm. under construction
1.2 million sq.m. Beating 2017 was not        22,700 sq.m. of retail area, where                           as at today. Large completions are
an easy task if we see the extra 50,000       a second development phase is                                scheduled in 2019, amongst which
sq.m. that were completed during              planned for completion by 2020, and                          the shopping centre Cloche d’Or in
that year. In 2018 the completed              the extension of shopping centre                             Gasperich with its pharaonic 75,000
volume was lower, at 27,500 sq.m.,            City Concorde offering 4,800 sq.m. of                        sq.m., the Royal-Hamilius in the
but remains nevertheless the second-          additional retail area and 250 parking                       hyper-centre of Luxembourg offering
best annual completion volume of              spaces.                                                      17,000 sq.m. of shopping area and
the past 10 years.                                                                                         Infinity Retail on avenue J.F. Kennedy
                                                Projects in the pipeline with
                                                                                                           in Kirchberg with a retail space of
  The two largest completions in              completion foreseen in the next two
                                                                                                           6,500 sq.m.
2018 were the redevelopment of a              years amount to 145,000 sq.m. 2019

Projects
Knauf Schmiede, Ulflingen                                                    Royal-Hamilius, Luxembourg

© Leasinvest                                                                  © Codic Group – Royal-Hamilius Retail

Auchan, Cloche d’Or

© Auchan / Promobe

                                                                      17                                 COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

     Residential
       Market

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            18
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

                     FACTORS IMPACTING DEMAND:
                     FROM DEMOGRAPHIC GROWTH
                       TO LOW INTEREST RATES

The growth of the population, from
435,000 inhabitants in 2000 to 602,000
as at 1st January 2018 represents
a growth of 38% over the period.

      Mainly driven by expats,                  units per year. In the period between                      major part is contracted in variable
    Luxembourg is experiencing a                2000 and 2014 an annual average                            rate (75.8% of loans) this could raise
    tremendous population growth                of 2,600 units was completed in                            the threat of defaults should there be
    of 20% in 18 years, from 502,100            Luxembourg, rising to 4,000 in 2016,                       a major increase in interest rates. This
    inhabitants to 602,005 inhabitants.         still below the calculated demand.                         medium-term vulnerability should be
    The proportion of foreigners reached        This imbalance results in increasing                       taken in context however as financial
    33% during the same period. This            pressure on prices.                                        assets-to-debt ratio per households is
    results in growing demand in the                                                                       one step higher at 251%.
                                                   The low level of interest rates gives
    residential sector. Looking at canton
                                                access to cheaper mortgage loans                             The combination of sustained
    level, the highest growth in the
                                                and further fuels demand. Rates on                         demographic growth, persistent
    period 2000-2018 was recorded in
                                                variable interest rate mortgage loans                      demand in excess of supply and
    the cantons Luxembourg (+ 53,786
                                                granted to households decreased to                         sustained low interest rates results in
    inhabitants), in Esch (+ 46.011 inh.)
                                                1.47% during October 2018, a 13 basis                      increasing upward pressure on prices.
    and in Capellen (+ 11,500 inh.).
                                                points’ decrease on a yearly basis.
    In percentages, the demographic
                                                The volume of newly granted loans
    growth ranged from 29% (Diekrich) to
                                                reached €248 million, stable monthly.
    49% (Clervaux) during the 2000-2018
                                                The fixed interest rate on mortgage
    period. The canton of Luxembourg
                                                l oa n s g ra n t e d t o h o u s e h o l d s
    currently has the highest number of
                                                remained at 1.91% during October
    inhabitants in the country, 182,607,
                                                2018.
    closely followed by Esch with 176,820
    inhabitants. This global upward trend         According to the “Revue de Stabilité
    should continue during the following        Financière 2018” from the BCL, the
    years to 760,000 residents by end           last household debt-to-disposable-
    2030 or even 1 million by 2060.             income ratio calculated is the
                                                third in Europe at 176% (Q3 2017)
      On the demand side, STATEC has
                                                mainly due to the sharp increase in
    estimated the required number of
                                                property prices. As 90% of this debt is
    new dwellings at approx. 6,000-6,500
                                                concentrated in only 5 banks and the

                                                                19                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                 SALES PRICES AND RENTS FOR RESIDENTIAL
                  PROPERTY IN LUXEMBOURG RISE STEADILY

Sales prices
Luxembourg City
          Reference prices for residential                            more than doubled bringing the                                price to € 8,856 €/sqm, well above the
        accommodation in Luxembourg City                              average for the city to €7,063 per sq.m.                      national average of €5,590 per sq.m.
        rose steadily over the past ten years.                        when the national average sits around                         (CAGR of 4.4%). During one year,
        Compounded average growth rate                                € 4,419 per sq.m. Weimerskirch and                            “Ville Haute” had seen tremendous
        for sqm sales prices for housing rose                         Kirchberg complete the podium with                            growth of 13.5% compared to July
        to 3.4% for houses and to 4.4% for                            6.7% and 6.3% of CAGR during the                              2017. Limpertsberg and Gasperich
        apartments between 2009 and June                              last ten years.                                               dominate the ranking with
        2018 included.                                                                                                              respectively 8.6% and 7.7% of CAGR
                                                                        For apartment sales, prices in
                                                                                                                                    during the last ten years, followed by
          For house sales, prices per sq.m.                           Luxembourg City trend upwards with
                                                                                                                                    Kirchberg at 6.3%.
        for “Ville-Haute” of Luxembourg City                          a CAGR of 6.4% bringing the average

                                                   Prix moyen
                                                   Average priceannoncé auper
                                                                announced  m²sq.m
                                                                              en €incourant
                                                                                     current €

      9.000 €

      8.000 €

      7.000 €

      6.000 €

      5.000 €

      4.000 €

      3.000 €
                       2009             2010            2011              2012            2013            2014            2015            2016       2017        2018

                                                            Country Sale Apartments                         Country Sale House

                                                            Lux City Sale Apartments                        Lux City Sale House

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            20
Research Report • Luxembourg Property Markets • Overview 2018                                                                         www.jll.lu

                                                                  50                                       99
                                                                                      49

                                                                                                32
                                              67

                                                                                                 25               Kirchberg
                                                                                                                     428

                                                                 Limperts-
                                                                   berg
                                                                    322
                                                                                           31
                                                                                                                          98

                                                        Belair                         Ville          27
                                                         244                          Haute
                                                                                       174
                                      179
                                                                                                                                  80

                                                                               Gare
                                                         119                   275

                                                                                                           Bonnevoie
                                                                                                              284

                                            Cessange
                                              289

                                                                             Gasperich
                                                                               1,022

                                                                                                                                                   Average prices (based on offers):
                                                                                                                                                                < € 7.000/sq.m.
                                                                                                                                                                € 7.000/sq.m. - € 7.999/sq.m.
                                                                                                                                                                > € 8.000/sq.m.

                                                                                                                                                   Number of offers:
                                                                                                                                                                 from 10 to 49
                                                                                                                                                                 from 50 to 149
                                                                                                                                                                 from 150 to 299

                                                                                                                                                                 more than 300

Rest of Luxembourg
   The countrywide CAGR prices increased                 We can see a big difference in price
about 4.4% for apartments and 3.4% for                 between Luxembourg City and the
houses over the last 10 years. The national            Periphery which means that residents
average price for existing apartments                  behaviour changes when the question of
increased from € 3,877 per sq.m. in 2009 to            moving pops up. Indeed, there is a trend
€5,976 per sq.m in Q2 2018. Prices are also            pushing Luxembourgers to relocate outside
rising by between 3% and 4% for Strassen,              the city to benefit from lower prices whilst
Mamer and Steinsel in the Luxembourg city              keeping the same perspective of value
periphery.                                             growth.

                                                                                      21                                       COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                           Research Report • Luxembourg Property Markets • Overview 2018

                                                                                                                           Période du 1er octobre 2016 au 30 septembre 2017

                                                                                 Troisvierges
                                                                                                                                 Prix de vente moyen des appartements existants
                                                                                               Weiswampach                                   (issus des actes notariés)

                                                                                                                                                     nombre de ventes insuffisant

                                                                                                Clervaux                                             moins de 4 000 €/m²
                                                                 Wincrange
                                                                                                                                                     de 4 000 à 4 499 €/m²

                                                                                                                                                     de 4 500 à 4 999 €/m²

                                                                                                  Parc Hosingen                                      de 5 000 à 5 999 €/m²
                                                                      Wiltz
                                                                               Kiischpelt                                                            6 000 €/m² ou plus
                                                        Winseler
                                                                                                           Putscheid                        5 002 €/m² : moyenne du pays
                                                                                                                       Vianden
                                                                         Goesdorf
                                              Lac de la Haute-Sûre
                                                                                               Bourscheid         Tandel
                                             Boulaide
                                                                    Esch-sur-Sûre
                                                                                Erpeldange-sur-Sûre
                                                                                               Diekirch
                                                                                           Feulen     Bettendorf Reisdorf
                                                                 Grosbous           Ettelbruck
                                             Rambrouch      Wahl          Mertzig                                  Beaufort
                                                                                         Schieren Vallée de l'Ernz
                                                                                                                              Berdorf
                                                                               Colmar-Berg
                                                             Préizerdaul Vichten              Nommern                              Echternach
                                                                                Bissen                           Waldbillig
                                                        Redange                                                                             Rosport
                                                                  Useldange                        Larochette             Consdorf
                                                   Ell                                                      Heffingen
                                                                     Boevange-sur-Attert
                                                                                                                                         Mompach
                                                                                      Mersch       Fischbach                Bech
                                                       Beckerich      Saeul
                                                                                             Lintgen                               Manternach
                                                                            Tuntange                                                          Mertert
                                                                                                            Junglinster      Biwer
                                                                   Septfontaines           Lorentzweiler
                                                            Hobscheid
                                                                                                                                        Betzdorf
                                                                               Kehlen         Steinsel                                             Grevenmacher
                                                                     Koerich          Kopstal
                                                                                           Walferdange Niederanven                         Flaxweiler
                                                               Steinfort

                                                                                    Mamer        Strassen                  Schuttrange
                                                                    Garnich                                           Sandweiler              Wormeldange
                                                                                                       Luxembourg-Ville             Lenningen
                                                                                           Bertrange
                                                                        Dippach                                            Contern
                                                                                                              Hesperange                Stadtbredimus
                                                             Kaerjeng
                                                                                   Leudelange                                 Waldbredimus
                                                                       Reckange-sur-Mess                                                Bous
                                                      Pétange                                                    Weiler-la-Tour
                                                                                                                                           Remich
                                                                         Mondercange                        Roeser           Dalheim
                                                        Differdange Sanem            Bettembourg                  Frisange Mondorf-les-Bains
                                                                            Schifflange
                                                                                                                                         Schengen
                                                                    Esch-sur-Alzette
                                                                                 Kayl Dudelange
                                                                                  Rumelange

                                    0          5         10 km

                                    Auteur : B. Darud, LISER, Janvier 2018
                                    Fonds de carte : ACT, LISER, 2015
                                    Données statistiques : Publicité Foncière, calculs STATEC-Observatoire de l’Habitat
                                    Note : Un minimum de 5 ventes d’appartements après sélection, rejet des extrêmes et traitements est requis pour afficher le prix moyen communal.

    Luxembourg and EU                                                                                             Housing Prices Evolution (Index 100 = 2008)
                                                                                         140

       If we compare Luxembourg house
                                                                                         130
    price evolution to the rest of the
    Eurozone, we see that Luxembourg
    beats the Euro zone area average                                                     120
    with a gap of 290 bps. Luxembourg
                                                                          Prices Index

    is followed by Germany and UK with                                                   110
    CAGR of 2.7% and 2.2% respectively.
    This trend is expected to continue
                                                                                         100
    in taking into consideration Statec
    Q2 2018 data and pessimistic
    expectations regarding Brexit.                                                       90

                                                                                         80
                                                                                                    2008       2009         2010         2011        2012           2013     2014    2015   2016     2017
                                                                                                                                                            Years

                                                                                                 Euro area              Belgium          Germany              France         Luxembourg     United Kingdom

                                                                       2018, https://ec.europa.eu/eurostat/web/housing-price-statistics/data/database
COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                                          22
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

Rents
Luxembourg City
    Apartment rental prices for Luxembourg            in Dommeldange and Cessange rose by
  City are growing rapidly. CAGR for rents            27.9% and 23.5% respectively. In June
  in the capital city stood at 4.5% over the          2018, the average rent for an apartment
  last ten years versus 4.1% for the country          in Luxembourg City (excluding charges)
  average. This bring the average rent to 27.1€       amounted to €28 per sq.m. per month.
  per sq.m. The pace of rises is accelerating
  with a city average of 9.7% growth from
  2017 to Q2 2018. In only six months, rents

Rest of Luxembourg
    For the rest of the countr y, rents               years. The average rent for an apartment
  increased at a slightly slower pace than            ranged between €16 and €18 per sq.m.
  sales prices, at a global growth rate of 3%         per month in Esch-sur-Alzette and 20€ and
  per year. Luxembourg City aside, urban              22€ per sq.m. per month for Bertrange and
  areas in the country grew between 2.5%              Strassen.
  and 3.8% per year during the past ten

             Average asking rent for apartments per municipality

                                          National Average: 22,58 €/M²

                                                                      23                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                                   RESIDENTIAL PROPERTY PIPELINE

Large residential developments
are in the pipeline
throughout the territory.

                  The success of a project is directly                       housing and especially in the Station                  big projects. Differdange sees the
               linked to the effort you are ready                            area, Cessange and Kirchberg where                     development of 2 big residential
               to put into it. This said, the budget                         we see a rise in medium range                          complexes: Opkorn and Porte de
               of Luxembourg city for 2019 is at a                           residential buildings (30-50 units)                    l’Europe and in Diekirch Matexi and
               record high: €930 million or in other                         coupled with a fast growth in the                      Thomas & Piron is building a huge
               term a 13.9% increase versus last                             price/sq.m. In the Station area as                     residential project hosting between
               year. Of this budget almost 39% will                          well as the Polvermillen (210 units)                   500 and 700 units.
               be dedicated to their investment in                           the projects Shades and Dernier
                                                                                                                                       This huge need in residential
               infrastructure (housing, childcare,                           Sol will offer respectively 40 and
                                                                                                                                    infrastructure requires land. A good
               mobility, etc.) to tackle the city’s                          30 residential units. In Cessange,
                                                                                                                                    solution to answer the inevitable
               biggest challenge: the steady increase                        “Domaine du Parc de Cessange”
                                                                                                                                    land constraint is to build vertically.
               of the population. To solve the linked                        obtained a permit for the construction
                                                                                                                                    Luxembourg’s government has
               housing issue, the city of Luxembourg                         of 40 apartments and 70 houses.
                                                                                                                                    understood this and has become
               is willing to push the development                            AtHome.lu estimates that around
                                                                                                                                    more flexible for this kind of project.
               of affordable housing. In this sense,                         1.000 extra units could be completerd
                                                                                                                                    In this sense we see residential towers
               several projects are popping up such                          in the next 10-15 years in Cessange.
                                                                                                                                    projects appearing in locations where
               as the transformation in “rue Adolphe                         Finally, according to the Ministry of
                                                                                                                                    demand is high. Infinity, BPI & Opkorn
               Fischer”, the refurbishment project in                        Housing, Kirchberg represents a huge
                                                                                                                                    are all good examples of maximising
               “rue Haute” and new constructions in                          potential where several projects are
                                                                                                                                    unit numbers in narrower space.
               “Rue de Mühlenbach” where 33 new                              planned, to answer the sharp increase
               apartments are planned.                                       of population (from 3,600 to 22,500                       Finally, following the booming
                                                                             inhabitants in the next 20-30 years).                  co-working trend, the new trend “co-
                  The cost of housing will be a
                                                                                                                                    living” is rising, especially appreciated
               serious issue for the government in                             Outside Luxembourg city,
                                                                                                                                    by millenials. A good illustration of
               the next few years. Indeed, the price                         residential development growing
                                                                                                                                    this is the renovation of the Cents
               per sq.m. increased twice as much                             in Belval, with three projects in the
                                                                                                                                    neighbourhood. In this project, we
               as the average disposable income                              pipeline for the end of the decade,
                                                                                                                                    will see 111 new housing units split
               over the last ten years. To tackle this                       allocated to respectively Tralux,
                                                                                                                                    into 7 unifamilial houses and 104
               problem, the government is seriously                          Ate n o r a n d S o l u d e c /A s a rs . I n
                                                                                                                                    co-living spaces. At least 10% of the
               thinking to expand the “emphyteotic                           Walferdange, BesixRed is developing
                                                                                                                                    total surface will be dedicated to
               right” to more low/middle income                              a residential project comparable
                                                                                                                                    affordable housing. This is a good
               households. In this sense, “Fond                              to the famous Soho in Hollerich. In
                                                                                                                                    testimony to the dynamism of the
               du Kirchberg” developed a new                                 Bertrange, new projects are coming
                                                                                                                                    residential market.
               project “habiter au Kirchberg” where                          up with the old KBC site where we will
               Luxembourgers can apply to access                             see the development of respectively
               emphyteotic rents chosen by a lottery                         250 and 160 units. Differdange and
               system.                                                       Diekirch are also nurturing their
                                                                             residential infrastructure needs
                In the capital city, we see a lot of
                                                                             by hosting the development of
               movement also concerning standard

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            24
Research Report • Luxembourg Property Markets • Overview 2018                                                                                                                                    www.jll.lu

          Large residential projects in Luxembourg City

                                                                                                                                                                                                                         KRECH
                                                                                                                                                                                                                       DI
                                                                                                                                                                                                                   K

                                                                                                                                                                                                          EC
                                                                                                                                                                                                           Ï
                                                                                                                                                                                                        DRA
                                                                                                              TROISVIERGES

                                                                                                                                                                                                             +/-220 units / 25 000 sq.m
     120 units / 12.000 sq.m                                                                                            WEISWAMPACH

                                                                                                                                                                                                                      Matexi                                       35 units
   developped by PAP Grossfeld
                                                  M

                                                                                              WINCRANGE                  CLERVAUX
                                                IU

                                                                                                                                                                                                                                   GE
                                           LG

                                                                                                                                                                                                                                      RM
                                                                                                                                     PARC
                                                                                                                                   HOSINGEN
                                       BE

                                                                                                                                                                                                                                                         9 3
                                                                                                     WILTZ

                                                                                                                                                                                                                                          AN

                                                                                                                                                                                                                                                       LOT
                                                                                                              KIISCHPELT
                                                                                   WINSELER
                                                                                                                                            PUTSCHEID

                                                                                                                                                                                                                                          Y
                                                                                                                                                            VIANDEN
                                                                                                             GOESDORF
                                                                        LAC DE LA HAUTE-SÛRE

                                                                                                                           BOURSCHEID                    TANDEL
                                                                        BOULAIDE
                                                                                                ESCH-SUR-SÛRE

                                                                                                                                              DIEKIRCH

                                                                                                                                      ERPELDANGE         BETTENDORF
                                                                                                                                                                                                                                                                  104 units
                                                                                                                                                                         REISDORF
           28 units                                                                                  GROSBOUS
                                                                                                                       FEULEN
                                                                                                                                 ETTELBRUCK                                                                                                                        Tralux
      under construction                                                RAMBROUCH             WAHL               MERTZIG
                                                                                                                                                                          BEAUFORT
                                                                                                                                                     VALLÉE DE L’ERNZ
                                                                                                                                      SCHIEREN
                                                                                                                                                                                       BERDORF
                                                                                                                                  COLMAR
                                                                                                                VICHTEN            -BERG                                                             ECHTERNACH
                                                                                                PRÉIZERDAUL                                    NOMMERN

             LUXEMBOU
                                                                                                                             BISSEN                                     WALDBILLIG
                                                                                                                                                                                                             ROSPORT

          DU         R                                                                                                                               LAROCHETTE                      CONSDORF
                                                                                        REDANGE
                                                                                                       USELDANGE
                                                                                ELL                                                                               HEFFINGEN
                           G

                                                                                                                                                                                                                                                           46
                                                                                                                     BOEVANGE
      N

                                                                                                                                                                                                          MOMPACH
                                                                                                                       -SUR-       MERSCH              FISCHBACH                       BECH
   DI

                                                                                                                      ATTERT

                                                                                                                                                                                                                                                       LOT
JAR

                                                                                       BECKERICH             SAEUL
                                                                                                                                             LINTGEN                                                MANTERNACH
                                                                                                                                                                    JUNGLINSTER                                    MERTERT
                                                                                                         SEPT          TUNTANGE                                                             BIWER
                                                                                                       FONTAINES                          LORENTZWEILER
                                                                                        HOBSCHEID
                                                                                                                                                                                  BETZDORF
                                                                                                                       KEHLEN               STEINSEL
                                                                                                                                                                                                      GREVENMACHER
                                                                                                      KOERICH                    KOPSTAL
                                                                                                                                        WALERDANGE          NIEDERANVEN                FLAXWEILER
                                                                                         STEINFORT

                                                                                                                 MAMER
                                                                                                                                                                                                                                                                  100 unités
                                                                                                                                                                                                                                                                  14 300 sq.m
                                                                                                                                                                   SCHUTTRANGE
             650 units                                                                           GARNICH
                                                                                                                               STRASSEN
                                                                                                                                            LUXEMBOURG        SAND
                                                                                                                                                                                                     WORMELDANGE
                                                                                                                                                                                                                                                                  par Capelli
                                                                                                                                                                                                                                                                   Atenor
                                                                                                                                                              WEILER

          Thomas & Piron                                                                                               BERTRANGE
                                                                                                                                                               CONTERN
                                                                                                                                                                                     LENNINGEN

                                                                                       KAERJENG         DIPPACH                                                                             STADTBREDIMUS
                                                                                                                                               HESPERANGE
                                                                                                                           LEUDELANGE
                                                                                                                                                                       WALDBREDIMUS
                                                                                                                 RECKANGE
                                                                              PETANGE                              -SUR-                                  WEILER                     BOUS

                                                  I                                                                MESS                                    -LA-                             REMICH

                                               BP                                                              MONDERCANGE
                                                                                                                                            ROESER
                                                                                                                                                           TOUR
                                                                                                                                                                     DALHEIM

                                           T                                    DIFFERDANGE
                                                                                                     SANEM
                                                                                                                                BETTEMBOURG
                                       C

                                                                                                                                                         FRISANGE       MONDORF
                                                                                                                                                                                                                                                           47
                                     JE

                                                                                                                                                                         -LES-
                                                                                                                SCHIFFLANGE                                              BAINS  SCHENGEN
                                 P O

                                                                                                         ESCH
                                                                                                                                                                                                                                                       LOT

                                                                                                         -SUR-          KAYL       DUDELANGE
                                                                                                        ALZETTE

                                                                                                             RUMELANGE

                                                                                                                                                                                                                                                                 10 000 sq.m
      100 units / 10.000 sq.m          80 units / 25 000 sq.m
                                                BPI
                                                                                                                     FRANCE                                                                                                                                     Soludec / Asars
               BPI
                                   © BPI - Photo non contractuelle

                                                                                                                                 25                                                                          COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

             Investment
               Market

                                                                                                                                  « Luxembourg is on the
                                                                                                                           “shop list” of all institutional
                                                                                                                          investors. Due to the healthy
                                                                                                                          fundamentals of the market,
                                                                                                                           i.e. low vacancy rate, strong
                                                                                                                            demand and rental growth,
                                                                                                                                 central and non-central
                                                                                                                            locations are sought after. »
                                                                                                                                                     VINCENT VAN BRÉE,
COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            26                                     Head of Capital Markets Luxembourg
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

              SECOND-BEST YEAR EVER CONFIRMED

   2018 started strongly and Q4             to Belgian insurers Integrale and                            transaction was the acquisition of
confirmed the trend: 2018 is the            Ethias. The second is the purchase                           Rosenstiel in the CBD by GLL (5.000
second-best year ever in terms of           by AXA Investment Management Real                            sq.m. of retail space).
investment. The full investment             Assets of the “Le Dome” building from
                                                                                                            We obser ved a change in the
volume for Luxembourg reached               Blackstone. The last but not the least
                                                                                                         breakdown of investment types
almost €1.9 Billion. If we compare          is the acquisition by Immochan of the
                                                                                                         over the course of the year. Value
this with 2017, the numbers talk            JBBK building in Kirchberg previously
                                                                                                         Added was the rule in Q3 and Core
for themselves: a 53% year on year          owned by the German Commerzbank
                                                                                                         transactions took over in Q4 with 58%
increase which is a great leap we           Real. Other obviously played a big
                                                                                                         of the total volume. This was followed
consider that the CAGR was 13%              role into this impressive year such as
                                                                                                         by Value Added (20%), Core+ (13%)
from 2013 to 2017. The good health of       the sale of the KUBIC building BVW
                                                                                                         and finally Opportunistic (9%). Core
Luxembourg’s economy and the rising         Kirchberg SA in Kirchberg. Offices are
                                                                                                         dominates the market largely due to
level of rents attract investors and        clearly the asset class enjoying the
                                                                                                         the acquisition of “Le Dome” in the
explain a major part of this growth.        most liquidity.
                                                                                                         station area and “Melius” in Ban de
  Offices are still the main driver of        Retail is the next biggest asset class                     Gasperich, which represent 34% of
growth for investment in Luxembourg         with €103 million invested this year,                        the total volume. The size of Value
and represent 56% of the total              a slight decrease on 2017 of 3.6%.                           Added category is mainly due to the
investment (or €1.9 billion). If we         Most investors in retail are private                         redevelopment of 37,600 sq.m. of the
dive into the numbers for Offices we        individuals and families having a                            JBBK building in Kirchberg.
see three standout transactions .           patrimonial view, which implies that
The first and largest is the sale of        their strategy is of buy and hold, hence
the new Deloitte HQ (31.000sq.m.)           opportunities are scarce. The biggest

                                                                    27                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

           As previously mentioned the                                   We saw two very interesting trends                         investment. The other nationalities
        structurally low level of vacancy in                          in terms of buyer nationality. The first                      active in the market are UK and Israel,
        the office market and the shortage                            is the boom in investment coming                              with one transaction each.
        of quality housing fuel developers                            from Belgium and France which
        interest for redevelopment                                    generate the biggest drivers of the
        t ra n s a c t i o n s . T h i s s u m m e r,                 global investment growth. Investment
        E a g l e s t o n e a cq u i r e d t h e A l fa               from French companies grew by 127%
        Arcades, (the former headquarters                             yoy (to reach €448 million) and from
        of the Banque de Luxembourg in the                            French firms by 54% (to reach €561
        Station district) After redevelopment                         million). The second point is the
        the property will comprise 2,000 sq.m.                        arrival of US investors, which invested
        of offices, 1,200 sq.m. of retail and 800                     €340 million in 2018 fuelled almost
        sq.m. of residential. Price: €45 Mln.                         entirely by Fidelity acquisitions
                                                                      a cco u n t i n g fo r 8 7 % o f a l l US

                  Building                              Price                               Yield                             Seller                      Buyer
             HQ Deloitte                                                                                                   Extensa /
                                                €225 Mln (est.)                         4.5% (est.)                                                 Integrale/Ethias
             (Cloche d’Or)                                                                                                 Grossfeld

             Le Dôme (Station)                     < €200 Mln                               Conf.                         Blackstone               AXA IM Real Assets

             JBBK (Kirchberg)                        €170 Mln                               Conf.                      Commerz Real                       Private

             Aerogolf Center
                                                     €100 Mln                                                                  Atoz                      Fidelity
             (Airport)
                                                                                                                           Extensa /
             Melius                                   €85 Mln                                                                                      Hannover Leasing
                                                                                                                           Promobe
             Portfolio Intesa
                                                      €85 Mln                                                        Intesa San Paolo                     Triuva
             San Paolo (CBD)

             KUBIC                                    €75 Mln                                                              Aberdeen                       Private

                                                                           LOW YIELDS

           The general good economic                                  previously. Yields are also under                             lack of reference transactions on the
        situation of Luxembourg and the high                          pressure in Periphery as well as in                           market. High street shops and retail
        proportion of Core type of investment                         the City Belt.                                                warehousing yields are flat as well at
        set the tone for for the low level of                                                                                       respectively 3.25% and 5.25%. With
                                                                        Logistics yields are unchanged
        Yields. Office yields are accordingly                                                                                       regard to shopping centers, should a
                                                                      at 5.75%, this level reflects our
        under pressure, new prime office                                                                                            prime opportunity arise we estimate
                                                                      sentiment and comparison with
        buildings with strong creditworthy                                                                                          the yield would be around 4%, down
                                                                      neighbouring countries rather than
        tenants now trade at 4%, vs. 4.5%                                                                                           from 4.5% previously.
                                                                      real transactions because of the

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            28
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

Summary
 MARKET INDICATORS

                             29                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                          Research Report • Luxembourg Property Markets • Overview 2018

                Offices                                        2016                               2017                                 2018
                Take-up
                                                            218,400                            208,600                              245,000
                (total sq.m.)
                Take-up (#
                                                               233                                287                                 278
                transactions)
                Stock (sq.m.)                             3,900,000                          3,950,000                              4,089,000
                Completions
                                                            121,400                             52,000                              102,000
                (sq.m.)
                Vacancy (sq.m.)                             209,700                            188,400                              139,400

                Vacancy rate (%)                                5.3                               4.8                                  3.4
                Prime rent (€/
                                                                46                                 47                                  50
                sq.m./month +vat)

                Retail                                                                2016                            2017                    2018

                Take-up (total sq.m.)                                               20,700                           48,200                  37,650

                Take-up (# transactions)                                                69                              70                      74

                Completions (sq.m.)                                                 14,500                           50,100                  27,500

                Prime rent (€/sq.m./month+vat)

                   High streets                                                        130                             130                    150

                   Shopping Centres                                                    110                             110                    110

                   Retail warehousing                                                   20                              20                      20

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                            30
Research Report • Luxembourg Property Markets • Overview 2018                                                      www.jll.lu

Residential                                                  2016                            2017                      Q2 2018
                                                                                                                     (cumulative)
Sale of apartments :
Country
•        Average price per sq.m.                            €5,590                          €5,783                          €5,976
Luxembourg City
•        Average price per sq.m.                            €7,731                          €8,237                          €8,856

Sale of houses :
Country
•        Average price per sq.m.                            €6,051                          €6,316                          €4,419
Luxembourg City
•        Average price per sq.m.                            €7,587                          €7,895                          €7,064

 Capital Markets                                            2016                            2017                            2018

 Investment volume (million €)                              1,042                           1,260                           1,929
 Of which offices,                                          80%                             82%                             90%

 Prime Yield – offices (%)                                   4.50                            4.50                            4.00

 Prime Yield – logistics (%)                                 6.50                            5.75                            5.75

 Prime Yield –
                                                             4.00                            3.25                            3.25
 retail high streets (%)

 Prime Yield –
                                                             4.75                            4.50                            4.00
 retail shopping centres (%)

 Prime Yield –
                                                             5.50                            5.25                            5.25
 retail warehousing

Sources : JLL Research, LISER-Observatoire de l’Habitat

                                                             31                               COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved
www.jll.lu                                                              Research Report • Luxembourg Property Markets • Overview 2018

                                                              Offices Luxembourg
                                                                             Atrium Business Park
                                                                            41 Rue du Puits Romain
                                                                        L-8070 Bertrange - Luxembourg
                                                                               T: + 352 - 46 45 40
                                                                                    www.jll.lu

                                                                                     Contacts
                                  Romain Muller                                                           Angélique Sabron
                                  MANAGING DIRECTOR                                                       HEAD OF MARKETS
                                  LUXEMBOURG                                                              LUXEMBOURG
                                  +352 46 45 40 22                                                        +352 46 45 40 72
                                  Romain.Muller@eu. jll.com                                               Angelique.Sabron@eu. jll.com

                                  Vincent Van Brée                                                        Ann Vanderwegen
                                  HEAD OF CAPITAL MARKETS                                                 RESEARCH DIRECTOR
                                  LUXEMBOURG                                                              BELUX
                                  + 352 46 45 40 35                                                       +352 46 45 40
                                  Vincent .VanBree@eu. jll.com                                            ann.vander wegen@eu. jll.com

                                                                                                                                                                    © BPI - Photo non contractuelle

                                                                                              www.jll.lu / Jones Lang LaSalle
 © 2019 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal.
  All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary
       for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however,

COPYRIGHT © JONES LANG LASALLE IP, INC. 2019. All Rights Reserved                                   32
                                                                           no representation or warranty is made as to the accuracy thereof.
                                                                                        © pictures : Foster+Partners/Tétra kayser
You can also read
Next slide ... Cancel