Q1 & Q2 have been marked by a sharp decline in the vacancy rate for Luxembourg real estate.

Appointed in June to head the Office Agency department of Property Partners, Julien Pillot has commented on major points of activity in the second quarter of 2013 for real estate offices in Luxembourg.

The vacancy rate continues to decline, falling to 5.5% in June against 5.54% at the end of March. This phenomenon is primarily motivated by a take-up that remains strong while few new areas become available. The total for rent in the second quarter totaled 38,884 m2, across 47 transactions, including three major ones. The Translation Centre (CDT) of the European Union has leased 5,130 m2 at the Cloche d'Or, in the E wing of the Drosbach building, a transaction carried out by Property Partners. Credit Suisse has chosen 5,072 m2 of office space in the IIK building in Kirchberg. Finally, a service of the state has leased a building of 4,417 m2 on the route d'Arlon, a transaction also achieved through Property Partners.

The average size of operations for the quarter amounted to 827 m2, knowing that 73% of the transactions referenced are still below the average. Property Partners has made 39% of operations in terms of m2, and 26% considering the number of transactions.

Property Partners announced, several months ago, the possibility of upward pressure on rents in the neighbourhoods of Luxembourg city centre, the train station and Kirchberg. This held true for the city centre, where the prime rent has now exceeded €40 htva per m2 per month. Regarding investment, the returns are stable: 5.25% in the city and 6.85% in the periphery. This difference is mainly explained by the relationship between supply and demand. The latter is higher for properties located in the municipality of Luxembourg (whether to buy or lease); the highest yields in the periphery reflect the greater risk that investors are moving towards the periphery. The volume of investment transactions for the first half amounted to nearly €300 million.

Outlook: Few new deliveries will take place by the end of the year. Nevertheless, the City Link building, 3,457 m2 on the Boulevard de la Foire, and the F6 building (Airport - Findel Golf Office Park) with some 14,000 m2. As regards the Grand Duchy's economy, recent figures show that the country continues to show a greater economic stability. The financial market, a central pillar of the Luxembourg activity is resisting: assets under management are constantly increasing and debit funds are not faltering. Finally, three new banks are about to set up in Luxembourg.

Photo by Property Partners: Julien Pillot, Head of Office Agency, Property Partners