On a day in early January, Brussels is having a London moment. It is very wet, very cold, and very dull. Well protected from the elements in modern office buildings, the city’s agents joke that Estates Gazette has kindly brought the weather with it on the EuroStar. But, if that is the only comparison with Britain’s capital, then the same agents are happy, at least in terms of the office market.
In a world where economic downturns and unstable political situations have had a dramatic effect on the international office sector, Brussels, because of its unique position, has remained relatively cocooned.
Being a country with two distinct languages Flemish and French means Brussels has two governments. And both need office space. More space is needed for a separate federal government overseeing general issues within the country. And being Europe’s capital city means there is a demand for space from the various European government bodies and their administrative arms. NATO is also based in the city.
Then there are businesses. There are around 1,000 US companies in Brussels alone 300 of them with European headquarters.
While the private sector is prominent in the city, it has been the exuberant demands of the public sector and primarily the federal government that Brussels’s property sector has to thank for a very good 2003.
“Who would have believed last January that 2003 would be such a vintage year?” asks Eric Peeters, partner with Cushman & Wakefield Healey & Baker, in Brussels. Who indeed?
The market was predicting that take-up was going to be 450,000m2 the same as 2002. But, with the various public sector bodies taking up more space than anticipated a majority of which was in the central business district of Central, North Station and Leopold meant the total take-up for the year was more than 700,000m2.
Firms vacating asbestos-riddled buildings, and expansion from various government bodies were the reasons behind most of the deals. Two of the largest lettings were the Ministry of Finance taking 75,000m2 in the Central district at the beginning of 2003, and the letting to the Federal Public Service Finance of the 108,000m2 North Galaxy Towers in Espace Nord although, it could be the beginning of next year before the buildings are finished.
The activity in the CBD boosted rents. Prime rents in the Leopold district rose 18% over the past 12 months, hitting €275 per m2 a year. Catella’s European Office Market report, published last November, forecasts prime rents rising further still reaching €300 per m2 in 2004-2005.
As a result, Brussels has become the envy of other European cities. “Brussels heads the ranking of European cities in terms of take-up,” says Peeters. CWHB’s 2003 Office Space Review figures compares Brussels’ take-up last year with that in Paris at 546,000m2, Frankfurt at 487,000m2, London 453,000m2, and Berlin 320,000m2.
Expectations are now high among Brussels’s agents for a great 2004. But there is a slight cloud on the horizon. It is widely believed that the various Belgian government bodies have fulfilled the majority of their requirements for the next 10 years, at least.
However, Vincent Querton, managing director of Jones Lang LaSalle in Belgium still believes that demand from European Institutions and lobbyists, plus demand from East European countries joining the EU, will continue to play an important role over the next 12 months, although it is unlikely to result in the take-up that was seen in 2003.
If the market relied solely on the private sector, take-up this year would be very poor. Traditionally, the private sector makes up two-thirds of lettings and the public sector the remainder. This, however, was not the case in 2003. “During 2003, those shares were reversed, with the private sector accounting for just 36% of the take-up and the public sector 64%,” states Catella’s report.
As in London, Paris and Berlin, the private sector in Brussels has been hit by the economic downturn. While vacancy rates in the CBD are as low as 3.8%, they reach 19% in the Periphery, the home of many corporations.
The Periphery, on the outskirts of the city, forms the third ring of Brussels’ office sector. It has 15% of the city’s office stock and is located in both the Flemish and Wallonia region. The CBD provides 63% of stock, and the decentralised area, east and west of the city, accommodate the remaining 22%.
But, Kim Verdonck of CBRE, remains optimistic that the private sector will maintain demand. “The federal government has made 2003 a good year, and there will be a fall back. But we do think the private sector will pick up and fill that gap.” The question is, when will this happen?
The signs from the private sector are not promising. Alessandro Bronda, head of European research at Catella Codemer, Brussels, says the city is still coming out of a recession. Even so, he does believe 2004 will turn out to be a good year. One positive sign for the Periphery is the lack of new stock coming onto the market, although other parts of the city will see around 92,900m2 come on stream this year.
Referring to the recovery of the private sector, Christian Karkan, partner at CWHB, says: “Our best hope for 2004 is to see some signs of improvement by the end of the year. We see some signs of improvement in the US, but really it’s still all crystal-ball gazing.”
|
|
|
The Brussels investment market is coming to terms with a strange occurrence. Latest figures from Cushman & Wakefield Healey & Baker show that, in 2003, for the first time in many years, Belgian investors were outdone by an amalgamation of other countries, and no longer take the largest share of the investment cake. Christian Karkan, partner with CWHB, says a psychological barrier has been breached. “Belgians represented 44% of investment and the amalgamation of the other countries, 56%. It’s a sign that interest from foreigners is still strong, and they are not just members of the EU. Countries such as Croatia are there.” German investors make up the largest proportion of foreigners, with 35%, while France takes around 5%, Saudi Arabia 3% and Ireland 1%. “Brussels is still regarded as a safe market, even by people who don’t know much about real estate, because of its unique position as European capital,” says Karkan. The Belgium market is tipped to stay healthy during 2004. |
|
|
|
Brussels agents boast about the low office vacancy rate in the CDB district. But judging by the number of agents’ boards around the city centre, the whole office market seems up for sale. But Christian Karkan, partner at Cushman & Wakefield Healey & Baker, says the boards are excellent advertising for the various agents. And the fact that they do not need permission to hang boards means they can stay up for a long time. “If you are a potential tenant and you see a certain company name everywhere, then you are more likely to go to that company, ” says Karkan. His own office building has a board the size of a small house on it, even though it is only advertising 500m² of space, from a total of 30, 000m². Even when a building is fully let, a board can stay up. “We don’t hurry to take it away, but we do make clear it is fully let,” admits Karkan, who adds that boards sometimes only come down when a new owner writes to request its removal. He accepts that it may give a bad impression of the market, but the free advertising is worth it. |
