Brussels office investment market is on track to exceed €2bn in 2011, which is a return to average levels seen in the early 2000’s according to Savills research.
Brussels office investment market is on track to exceed €2bn in 2011, which is a return to average levels seen in the early 2000’s according to Savills research.
The firm reports that investment turnover in the city increased by 234% in Q1 2011 compared with the same quarter in 2010, from €124 to €416m. Nationally for Belgium, Savills data reveals that turnover reached €616m in Q1 2011, which already represents 48% of the total volume achieved in 2010.
Sheelam Chadha, head of research at Savills Belux, says: "We are expecting to see an increase in properties with short-term leases hitting the market during the coming months and, as a result of continued demand particularly from Belgian investors, predict that investment levels will reach approximately €2 to €2.25bn by the end of the year. This is similar to the average levels seen in the early 2000s."
In terms of investment yields, Savills expects prime yields for long-term leases, now at 5%, to remain steady but anticipates prime yields for short-term leases, currently at 6.25%, to move in to 6% or lower due to increased demand.
Chadha continues: "There is a clear trend, especially from international investors to shy away from long-term leases, which no longer seem to offer reasonable returns. The short-term lease market, although still perceived as slightly risky, offers a reasonable 100 basis point risk premium over longer-term let assets."
The office lettings market in Brussels reached 116,600 sq m (1.2m sq ft) in Q1 2011 according to Savills, a 4% decrease on Q1 2010 and a 250% increase on Q4 2010. The firm reports that 74% of these lettings were in the city’s central business district (CBD), including the pre-letting of 54,461sq m to Régie des Batiments in the Belair Building. In total, 111 transactions were completed in Q1 2011 with larger requirements making a significant come back. Savills predicts that larger lettings transactions by the public sector will drive take-up in 2011 and expects the year end figure to reach 400,000 sq m (4.3m sq ft), which exceeds 2010 levels.
Prime rents in Brussels hovered between €295 and €300 per sq m in Q1 2011, while top quartile rents increased 7% to €222 per sq m according to Savills research.