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Companies are shifting their office searches out of Luxembourg City, CBRE said in a report published on 10 February. Library picture: Construction site in Luxembourg City-Centre, seen in January 2018. Photo credit: Maison Moderne 

The amount of new space completed was down sharply last year, compared to 2019, but a packed pipeline is planned for 2021, CBRE wrote in a research report released this month.

According to CBRE’s “Luxembourg Office MarketView Q4 2020”:

“Take-up in the fourth quarter of 2020 counted a substantial 160,000m2 to bring the year total to 342,000m2. This is one of the best years on record, which seems all the more surprising given the covid-induced uncertainty and restrictions”.

The public sector represented the largest portion--40%--of new occupancies. This included the European Investment Bank pre-letting 65,000 square metres of office space in Kirchberg and the National Health Fund (CNS) pre-letting 52,300 square metres in the Gare district.

Demand outside the capital picked up. Belvel, Leudelange and Bertrange “all counted notably higher take-up than the previous year,” CBRE reported. While part of the shift is due to a lack of available space in Luxembourg City, other locations increasingly “provide an attractive working environment”.

Nationally, CBRE observed a 3.5% vacancy rate. This varied from “under 2%” in the central business district, Kirchberg and Gare district, to 4.2% in Cloche d’Or and going up to 7% in the airport area.

Prime rents were €52 per square metre per month in the central business district, compared to €38 in the Gare district and €35 in Cloche d’Or, CBRE said.

Project pipeline

About 25,000 square metres was completed during the fourth quarter, bringing the 2020 total to 92,000 square metres, “which is about half of that seen in the previous year.”

300,000 square metres is expected to be completed during 2021, including the EU’s Konrad Adenauer project in Kirchberg, with two-thirds of the space already let.

Investors finalised €444m worth of deals during the fourth quarter, bringing the full year total to €1.6bn. Much of the activity was centred in Cloche d’Or, where four deals worth €229m were closed in the fourth quarter. “High competition for core assets will push prime yields from 3.5% to 3.4% in 2021,” the brokerage forecast.