Over 200 international banks are represented in the Grand Duchy of Luxembourg, and in a boost to the Investment sector, over 300,000m2 of office space is set to be delivered over the next four years, much of which is already prelet
Luxembourg, already in demand among financial corporates, presently luxuriates in being a favoured choice of institutions to rationalise their operations. According to Keith Burman, associate director of Jones Lang LaSalle: “A number of financial institutions have chosen to consolidate in Europe in the Grand Duchy, rather than have an office each in Belgium, the Netherlands and Luxembourg.”
Around 210 international banks are represented, and there is a big insurance and reinsurance presence. “There are around 2,000 insurers and reinsurers registered here, as the insurance laws are very attractive,” says Burman. There is also a large fund management presence: the Duchy has more funds registered in terms of total volume than anywhere else in Europe at up to $800bn. Little trading takes place, says Burman, but rather the city is host to company legal administration and ownership functions.
Big EC presence
Offices in the downtown and suburban areas primarily accommodate the many EC institutions – Court of Justice of the European Communities, European Investment Bank and European Monetary fund – plus financial, insurance and media industries. There have been two separate stages of development. The first, in the mid-1970s, were for EC use, and its institutions occupy around 370,000m2 of offices. A second wave took place in the mid-1980s to accommodate rapid growth in the financial sector; today the banks occupy about 550,000m2 of offices. According to DTZ Research, total availability only amounts to just over 1% of stock at 20,000m2 of offices; 10,000m2 of this is to be delivered during this year.
The CBD is centred on the prime streets of boulevard Royal, boulevard du Prince Henri and rue des Bains. Rents range from a peak of €29.7 (LFr1,000) to €24.8 (LFr1,200) per m2 a month for new prime buildings, down to €8.7 (LFr350) for older buildings in the Strassen area, west of the city centre. DTZ thinks that due to the scarcity of available accommodation and high demand, rents will rise in the medium term. Over 300,000m2 of space is set to be delivered in the next four years or so, much of which is already prelet.
According to DTZ Winssinger Tie Leung director Martin Heyse, one of the major new office schemes that is scheduled for completion in 2004 is already prelet to a variety of banks. “It will probably also be sold in a few months time; sometimes we sell a building twice over before it is finished,” he says.
In 1999, take-up reached around 80,000m2, which was the highest figure in seven years. During the first half of 2000, almost 40,000m2 of space was let in the city, which indicates that the year’s total will also be a good one, says DTZ. Recent development deals include property company Dexia agreeing in January to buy a €74.4m (LFr3bn) property on the Kirchberg plateau, where it plans to create 14,758m2 of offices to be completed in three years time. The US downturn, which is likely to have a knock-on effect on many European capitals, is unlikely to adversely affect Luxembourg. According to JLL’s Burman: “Up to 80% of take-up is in the financial sector. Most of the telecoms and new technology companies are represented here but the financial sector and the EC account for most of the take-up.”
Rising rents, high demand and availability, coupled with an increasingly transparent market, have boosted the investment sector. The latter part of 1998 and the first quarter of 1999 saw activity grow sharply as interest rates fell to under 4%. During the second half of 1999, interest rates rose, stabilising at around 5.75%. However, yields remained unchanged, and they now stand at 6.75% for new and prime buildings, and at between 7% and 7.75% for older investments.
|
Projects under development |
||
|
Area |
stock m2 |
% of total |
|
CBD |
730,000 |
39 |
|
Central station |
275,000 |
15 |
|
Limperstsberg |
65,000 |
4 |
|
Strassen |
50,000 |
3 |
|
South Periphery |
170,000 |
9 |
|
Airport (Findel) |
100,000 |
5 |
|
Kirchberg |
465,000 |
25 |
|
Source DTZ Research |
||
|
Investment deals |
|
|
Source: DTZ Research |
