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Property Times. Market Reports Luxembourg, Q4 2015

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Luxembourg at record levels
Luxembourg offices Q4 2015

• Luxembourg is one of the most dynamic countries in Europe, with a GDP growth around 4%, a strong rise of the employment, and an unemployment rate around 5.6% at the end of 2015. Recent economic and political turmoil in Europe had only limited impact on the Luxembourg economy and, as a consequence, on the office market. 
• The activity on the Luxembourg office market reached a record level of 337,000 sq m in 2015, mostly boosted by the different occupations of the University (around 105,000 sq m) and the European Institutions (more than 60,000 sq m). As the corporate remained active, the take-up increased by more than 60% compared to 2014.
• The vacancy rate continued to decrease in 2015 to stand at a low 4.2%. As the speculative pipeline is very limited for 2016 (only 38,000 sq m available), further decrease of the vacancy rate is expected. Due to the increasing scarcity of available spaces, the prime rents are under pressure and could increase up to EUR 48 or EUR 50/sq m/month in the coming months. 
• Impressive activity is also witnessed on the investment market which reached EUR 1.1bn in 2015, increasing by 10% compared to 2014. This represents the highest level since 2007. 
• The investment market is more and more international as domestic investors represent only 12% of the total in 2015. Middle-East and US investors were the most active with respective shares of 27% and 18%. Further internationalisation is expected in the coming months as overseas available equities are huge and appetite is growing for European assets. 
• Prime office yields decreased in 2015 to reach 5.1%. Further compression are awaited in the coming months.