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Real estate in Luxembourg: a European Eldorado

The attraction of the Luxembourg real estate market for investors is due to two factors: the economy of the country and the fundamentals of its real estate. In fact, as everybody knows, Luxembourg is a model of political and economic stability, a world-renowned financial centre, home to seven European institutions, and offers a unique system of dialogue with the administrative authorities. Historically robust real estate fundamentals result from all this. First of all, there is constant pressure on rents, with prime rents currently standing at € 45/m²/month. Along with this, the vacancy rate (currently at 4.2%) is continuously the lowest in Europe. And in addition, there is sustained and constant take-up with an annual average in excess of 160,000 m² over the past 5 years. And there is little speculative development. Of the 400,000 m² of new office space set to be constructed by 2018, indeed, 81.5% is already pre-let or for own occupation. And all of these elements support the fact that vacancy is set to further decrease. Finally, while prime yields have reached the lowest level ever recorded (5.0%) and are still under pressure, they still remain higher than the vast majority of European cities. Since 2014, while a major return of German institutional investors and French insurance companies within real estate transactions has been observed, the most striking factor has been the arrival of many investment funds from the USA, and even the Middle East.  It is for this reason that while Union Investment and Axa have been constantly increasing their presence, Blackstone, Starwood and Moor Park Capital have made a highly visible entry, and ASIA has acquired the project which will change the face of the city centre. The Luxembourg real estate market offers many advantages and the outlook for the future is more than promising. Investment funds and developers cannot be but confident.