Brussels Office MarketView Q3 2024

Take-up

Office take-up in Brussels was solid in the third quarter, reaching 77,512 m² and bringing the year-to-date total to 245,079 m². With only one quarter remaining, 2024's office take-up is on track to match or slightly exceed the volumes of the previous two years.

To date, we have recorded 238 transactions, compared to a 5-year annual average of 332. As we approach the total volume of the past two years, it indicates that a significant number of large deals have already occurred this year.

Vacancy

Vacant office space increased slightly to 7.6% of total stock in the Brussels market in Q3. This is equivalent to 943,000 m² including 131,400 m2 of grade A vacancies. Vacancy in grade A increased on the back of recently finished projects that are not yet fully commercialised. Grade B and grade C vacancy remained stable to the previous quarter, eventually resulting in a higher vacancy rate.

Office vacancy in the CBD increased slightly 3.9% in the third quarter of 2024. The Decentralised and Peripheral markets also increased to 10.87% and 18.1%, respectively, on the back of new commercialisations of existing office buildings.

Conversion

In H1 of this year, developers already marked some 93,000 m² of office space for conversion into alternative uses, mostly into residential. This quarter was more modest, with 15,162 m² of office space planned to be converted into residential use. 

This brings the total conversion volume for the year 2024 to over 108,000 m², which is already higher than the total volume of the previous 4 years.

Development

In Q3, some 102,000 m² of development was completed, bringing the total for the year to 195,000 m². This significant volume of office completions was expected earlier this year and a reason why vacancy is slightly up this quarter. Some delivered projects are still in their commercialisation phase.

Notable developments are Park 7 - Xenon (11,000 m²) and The Meadow (13,500 m²) in the Periphery Airport district, The Louise (33,000 m²) and The Precedent (8,000 m²) in the Louise district, Montoyer 10 (6,300 m²) and K-Nopy (8,600 m²) in Brussels Leopold, and Deux Gares 80-82 (23,500 m²) in Brussels South. 

The remaining office development pipeline for the year is more modest, with some 20,000 m² of projected office completions, including Pacheco 32/34 (11,600 m²) though this project might see some delay. In 2025, we expect 150,000 m² of office space to be completed, of which half is already secured by occupiers. In 2026, the pipeline is set to grow, which is highly welcomed as occupiers increasingly favor high-quality, sustainable office buildings. Specifically, there are plans for 242,000 m², with 29% already secured.

Rents

Throughout 2024, rents for quality office space have been under upward pressure given the scarcity of supply, level of demand and overall inflation including construction costs. This is also reflected in renegotiations of existing contracts to remain in current locations. As a result, average rents have been driven considerably higher in key markets this quarter (trailing four quarters). 

Following last quarter's increases in prime rents across the Leopold, Centre, and Decentralised districts, we can confirm that our general prime rent has again risen to €400/m²/year. This letting is as usual to be found in the Leopold district.

 

Additionally, the Brussels periphery is experiencing upward pressure on prime rents, with record rents observed at the newly completed Park 7 - Xenon. 
It must be said that many European cities have experienced rising top rents over the past 2 years. Among them, Brussels stands out as the prime rent increased over 20% during this period.

Investment

CRE investment in Belgium surged this quarter, bringing the year-to-date total to €2.93 billion, already exceeding the full-year total for 2023. This increase was largely driven by two major transactions: TPG Real Estate's acquisition of B-REIT Intervest Offices & Warehouses (Q1 2024) and the SFPIM EU Deal (Q2 2024). 

Despite this, the office investment market in Brussels remains weak. Although the recent ECB interest rate cut is a positive development, rates are still high, creating pressure on bid-ask spreads. Value-add and opportunistic deals are currently the main drivers of market activity. There are several attractive investment opportunities emerging, as developers look for buyers and funds consider divesting certain assets. With market conditions showing signs of improvement compared to earlier this year, it remains to be seen what the near-term future holds for the investment market. 

Prime investment yields remained stable throughout Q3 2024, estimated at 5.25% for standard leases and 4.75% for long-term contracts.