Real estate: Luxembourg office costs have been flat this year, but landlords are regaining the upper hand, a major commercial realty consultancy has found.
CB Richard Ellis said total occupancy costs for prime office space in Luxembourg were an average of €54.35 per square meter during the first quarter of 2012, a change of zero percent from the year before.
Lessees also received an average of one and a half months rent free, and two to three euro per square meter in tenancy improvements, according to the report, which was issued July 16 and is provided to the firm’s office-seeking clients.
“Luxembourg has been really steady through the whole crisis,” Véronique Koch, research analyst at the firm’s office in the Grand Duchy, told Delano. “This is an advance and a disadvantage.”
She explained that while the rents, charges and taxes that tenants pay have remained flat overall, landlords have been reluctant to make big investments. That means less new office space is coming on the market, while demand remains stable. “For 2013, deliveries [of new and renovated office buildings] will be a bit more important but will not reach pre-crisis level,” further shifting the balance of power back to landlords.
“The vacancy rate in Luxembourg, currently just below 7 percent, is therefore expected to trend further down in the coming months,” another of the firm’s reports said.
Koch explained that this year landlords in Luxembourg city centre were reducing both the number of rent-free months that are offered to clients and their contribution towards the fitting-out of office space. “The really good opportunities, we think, for tenants have passed.”
However for less central locales such as Bertrange or Capellen, “it’s still possible to have some good offers. But the pressure on landlords has decreased and it’s not the same, I would say, as one year ago.”
Larger organisations, which prefer to consolidate spaces when they do move, are notably less active than smaller outfits. CBRE reported that the average deal size during the first quarter was 470 square meters, significantly down from the 2011 average of 716 square meters, and “no transactions of above 3,000 square meters were observed.”
The firm tracks 133 office markets worldwide, and as a whole the euro zone saw the slowest rise in office occupancy costs, while the strongest upticks were seen in Asian and US markets.