The cost to lease prime office space in the Cloche d’Or district has climbed by €2 per square meter per month, according to Cushman & Wakefield. Library picture: An office building with a “to let” sign is seen in Cloche d’Or, 5 November 2021. Photo: Matic Zorman

The cost to lease prime office space in the Cloche d’Or district has climbed by €2 per square meter per month, according to Cushman & Wakefield. Library picture: An office building with a “to let” sign is seen in Cloche d’Or, 5 November 2021. Photo: Matic Zorman

Prime office rents have crept up in Luxembourg City-Centre, Kirchberg and Cloche d’Or.

Office take-up in the grand duchy has slowed in recent months, with nearly two-thirds of deals during the first half of the year involving “smaller spaces”.

That’s according to the “” report, published in August by commercial real estate firm Cushman & Wakefield.

Second quarter take-up was 43,000 square meters, bringing total take-up for the first half of the year to 114,230sqm. That is around half of last year’s figure, but more or less corresponds with January to June take-up in 2018 and 2020.

Cushman & Wakefield said that recent market activity has been driven by smaller spaces. “63% of the transactions recorded this semester were for surfaces of less than 500sqm,” the report stated. “Due to the period of uncertainty caused by the war in Ukraine and rising inflation, the occupational market is experiencing hesitation and some occupiers opt for space reductions.”

Vacancy rates

Nevertheless, “the vacancy rate stood at 4.07%, a slight decrease compared to Q1 2022.” The firm forecast that the vacancy rate would increase to 4.3%, then drop slightly to 4.2% at the end of 2024.

Office pipeline

The report said that roughly 150,000sqm of office space was on track to come onto the Luxembourg market in 2022, followed by 250,000sqm in 2023 and 100,000sqm in 2024. “50% of this is already pre-let,” it stated. “This shows the interest of occupiers in ESG buildings.”

Pricing

“Due to an intense competition for the best buildings and best locations”, prime rents rose by €2 per square meter per month in the central business district and in Cloche d’Or, and by €1/sqm/month in Kirchberg.

Rents in the periphery were stable during the second quarter, but according to Cushman & Wakefield’s calculations, “prime rents could reach new levels of €26.5/sqm/month by 2023 in the periphery.”

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