Belgium’s office investment market jumps

BRUSSELS (Belgium): Office investment levels in Belgium have soared 205%, totaling €430.6 million in 4Q 2009 compared to the previous quarter, while buyers have increased to five per asset compared to one per asset at end of 2008, according to Savills’ Brussels Office Market 4Q 2009 report.

“This time one year ago, only one buyer was around for every prime asset with three to five buyers today.  Funds which missed their chances in 2009 will need to be quick as competition for the few prime assets is becoming more apparent,” said Sheelam Chadha, head of research for Savills Belux.

The demand saw yields for nine-year leases compress from 6% at the end of Q309 to 5.8% today.

In the city of Brussels alone, investment activity in 2H 2009 saw an increase of 391% compared to 1H 2009, though year-on-year (y-o-y) investment levels only reached €363 million in the city in 2009, a drop of 71%, compared to 2008.

Savills attributed the overall decline in activity to a lack of long-let product and unwillingness of owners to sell at above average yields despite the re-emergence of international investment funds looking to purchase prime product in 4Q.

Yields for leases between three and six years remained stagnant at 6.5-6.75%, as investors perceive these assets to be more risky due to a lingering lack of confidence in the short-term rental markets.

As with the investment market, the Brussels’ office leasing market also experienced a surge of activity in 4Q 2009 marking a 165% y-o-y increase in quarterly take-up. The period also recorded one of the largest transactions in over five years with the leasing of 80,7293 sq ft of space to Electrabel-Suez in the North district.

Overall take-up in the central business district (CBD) however declined 37% compared to 2008 as public bodies which usually account for 65% of the take-up, saw a significant reduction to only 16% of the market. Prime Brussels CBD rents dipped 6.3% while top quartile rents fell 1.0% from the previous year. Rents in the outer CBD of Brussels however, increased by 3.8% to €190 per sq m/year during 2009.
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