It’s boom time in the commercial property sector, with supply struggling to keep up with demand. To understand how tenants are reacting to this vibrant market, Delano eavesdropped on a client visit to a vacant property.

Normally it takes anything from six to 18 months to find the right commercial property in Luxembourg, depending on the size and location required.

Striking the balance between the square meterage, location, price, and facilities is a time consuming business, particularly for businesses seeking a place in or around the central business district. This is the case for Shane, Marta and Riccardo of a local financial sector company. Delano interviewed them as they paid their third and final visit to a building on the route d’Esch in Luxembourg City on 23 February.

“Our clients and partners, as well as visitors from head office, expect to find us in an attractive, convenient location,” Marta explained. About a year ago, they realised that with their business growing quickly they were set to outgrow their Kirchberg offices. “It’s really time for us to move, as we are sharing a floor with another firm, and this has become increasingly inconvenient in recent months,” Shane added. They added that life has got more difficult on the Kirchberg in recent years as the number of offices has boomed, and this is outstripping the supply of parking, public transport and places for lunch.

They called commercial estate agent JLL in March last year, asking them to suggest good quality properties of about 500-600 square metres near the city centre. A long-list of about ten offices was whittled down to two after a series of visits. The final options are offices on the boulevard Royal and the 600 square metre route d’Esch premises. A further two visits were paid to each.

Location important

“I think we all agree that this is the place for us,” Riccardo noted. Location is key, mainly for the prestige and convenience of being in the centre, with the proximity of business partners, restaurants, hotels, and the airport all important, with the city park being nearby also a plus.

“We are put off the boulevard Royal by the construction work: the tram and the Hamilius site will be ongoing for years,” Marta said. “We can be on the third floor here and that gives us views onto attractive buildings, parkland and you can even see the cathedral,” she added. The 10-15 minute walk into the centre is not ideal but acceptable.

“We had a problem that the site is triangular, but we think the architect came up with an excellent solution,” said Aurélie Frédureau of Ikogest, the property developer. The result is a striking building that has been nominated for an architectural award.

The office is V-shaped. This maximises internal space on the triangular plot of land that was previously occupied by houses and a restaurant. It also makes for a space illuminated by daylight. Image: Lala La Photo

It is a space that makes the most of natural light, with maximum flexibility for creating offices of different sizes with partitions. This was another big plus for this property. “Due to regulations regarding air conditioning, it is only possible to partition-off one-third of the space in the boulevard Royal office,” explained Lotfi Behlouli of JLL.

The route d’Esch site is also well appointed. It has the highest ecological construction rating, the keycard operated lift offers direct access to the floor, and there are showers in the basement for those who want to freshen up after cycling to work or going for a jog. Being a new place also means the tenants don’t have to throw out carpets and partitions not to their taste.

Places near town don’t come cheap, and both options are towards the top of the price range for commercial property in the capital. The route d’Esch place is slightly cheaper than the boulevard Royal option: €43 per square metre without VAT and services, rather than €45.

“These figures are about standard for premium rents in the city at the moment,” explained Stéphanie Dantou of JLL. For properties of this size, she said the standard contract is for nine years, with the chance to opt out after six years. More flexibility is possible for smaller premises.

Due to the triangular nature of the plot of land, the architect needed to innovate to maximise space. The solution was to place the five floors at different angles, with overhanging floors. Not only is this practical, it makes for a stunning building that has been nominated for an international award. Image: Lala La Photo

“We have been involved with this project from the start,” she said. “This is standard practice, as we can give them insight into where the market may be headed, and we can start suggesting this space to clients who are thinking a long way ahead,” she added.

Indeed, a couple of tenants committed to this building before building work had been completed. It has taken a long time to get to this point, with demolition and clearing of the old site having begun in 2013. An illustration that to find just the right property in the current tight market takes time, money and a bit of luck.

This article was first published in the April 2017 issue of Delano magazine. Be the first to read Delano articles on paper before they’re posted online, plus read exclusive features and interviews that only appear in the print edition, by subscribing online.