Brussels bucks the European trend

News

05 September 2002

Private buyers are out in force for every lot size in the West End and City, while tenant demand is patchy at best in the West End, and there are estimates that 65% of space in the City has come from tenants wanting to sublet.

And in Paris, around €1bn of investment deals have been secured in the past three months, yet news from Hammerson this month following its half-year results demonstrates the weakness of the occupational market. A Goldman Sachs’ analyst’s note points out that Hammerson has still not found tenants for its two major developments in the French capital – the 9,000m2 Quai D’Orsay and the 10,400m2 rue de L’Université – both of which will be completed this month. Hammerson is to lower its rental expectations.

The one exception to the weak leasing/ strong investment trend, however, appears to be central Brussels – that curious market at the middle of Europe which runs on its own rules, failing to boom or bust while everywhere else falls prey to the cycle.

Vacancy rates for the Brussels region (not including the periphery, which is suffering) have, of course, risen in the past 12 months just like other European cities. However, here we are just talking about a 20 basis-point rise to 4.5%, according to Catella Codemer. Bearing in mind the statistics seen in other cities, that hardly even counts as a rise.

The city certainly will not be lacking in demand, either. The European Commission has been more vocal than usual about its future requirements as enlargement looms, with a decision expected on the candidates for EU entry by the end of the year. The Commission estimates that it will be looking for 180,000m2, but as such a market-mover it is rightly cagey about exactly how much space it needs, saying that some of its requirements may just be upgrades for existing offices.

However, the market thinks that the Commission will soak up nearer to 300,000m2, including all the government agencies, but this does not count embassies having to widen their remits or new lobbyists moving in. Unfortunately, there is also no accounting for the speed at which this particular tenant moves; some poor EU translators have been looking for 60,000m2 for several years now.

Brussels’ problem is that it will probably find it difficult to cope; an issue that must be on the agenda within the Commission. The city’s strict planning regime will force development to move to around the north and central stations, but because building permits are so difficult to obtain, the path of development will not be a smooth one.

However, a strong occupational market must be attractive to investors, as is proved by the interest in the sale of both the Dexia portfolio and property company Banimmo. Brussels is probably the only European city looking forward to a record investment year, while maintaining a healthy occupational market.

Property markets across Europe are continuing to experience the anomoly of having a strong investment sector combined with a weak leasing sector. London, the largest and most liquid market in Europe, is no exception. Private buyers are out in force for every lot size in the West End and City, while tenant demand is patchy at best in the West End, and there are estimates that 65% of space in the City has come from tenants wanting to sublet. And in Paris, around €1bn of investment deals have been secured in the past three months, yet news from Hammerson this month following its half-year results demonstrates the weakness of the occupational market. A Goldman Sachs’ analyst’s note points out that Hammerson has still not found tenants for its two major developments in the French capital – the 9,000m2 Quai D’Orsay and the 10,400m2 rue de L’Université – both of which will be completed this month. Hammerson is to lower its rental expectations. The one exception to the weak leasing/ strong investment trend, however, appears to be central Brussels – that curious market at the middle of Europe which runs on its own rules, failing to boom or bust while everywhere else falls prey to the cycle. Vacancy rates for the Brussels region (not including the periphery, which is suffering) have, of course, risen in the past 12 months just like other European cities. However, here we are just talking about a 20 basis-point rise to 4.5%, according to Catella Codemer. Bearing in mind the statistics seen in other cities, that hardly even counts as a rise. The city certainly will not be lacking in demand, either. The European Commission has been more vocal than usual about its future requirements as enlargement looms, with a decision expected on the candidates for EU entry by the end of the year. The Commission estimates that it will be looking for 180,000m2, but as such a market-mover it is rightly cagey about exactly how much space it needs, saying that some of its requirements may just be upgrades for existing offices. However, the market thinks that the Commission will soak up nearer to 300,000m2, including all the government agencies, but this does not count embassies having to widen their remits or new lobbyists moving in. Unfortunately, there is also no accounting for the speed at which this particular tenant moves; some poor EU translators have been looking for 60,000m2 for several years now. Brussels’ problem is that it will probably find it difficult to cope; an issue that must be on the agenda within the Commission. The city’s strict planning regime will force development to move to around the north and central stations, but because building permits are so difficult to obtain, the path of development will not be a smooth one. However, a strong occupational market must be attractive to investors, as is proved by the interest in the sale of both the Dexia portfolio and property company Banimmo. Brussels is probably the only European city looking forward to a record investment year, while maintaining a healthy occupational market.