That’s according to CBRE’s 2021 Luxembourg Real Estate Market Outlook, which notes that the grand duchy had less volatile economic changes throughout 2020 compared to other European countries, even if the country is still highly dependent on its neighbours. 

The hospitality and retail sector have suffered hard as a result of forced closures and imposed curfew. CBRE notes that in April 2020 retail sales were down one-third compared to the year start, and by Q3 the horeca sector had worked 17% fewer hours compared to the beginning of the year. 

“Forecasts for 2021 remain highly uncertain due to the unpredictable course of the pandemic,” the report authors note. 

“Everything will depend on the speed with which vaccines will be available and how they will be welcomed by the general public, on European fiscal and monetary policy and, ultimately, on the return of confidence.”

Commercial real estate outlook

But there’s still an appetite out there, and CBRE predicts 2021 investment similar to that achieved in 2020, around €1.6b. While Q1 investment may hover around €200m, the second half of the year is expected to pick up, as Korean investors should return to the grand duchy (although in the meantime, French investors are helping to fill in those gaps). 

CBRE expects retail volume to look less optimistic in 2021 because of covid measures, despite 2020 volume of €157m. For retail, 2021 will be “a year of risk management,” with the real estate company calling for enhanced lease flexibility and clear measures in this sector.

In terms of office takeup, 2021 should be more moderate. Peripheral markets are expected to benefit as they reach maturation, competing with more central locations, as these locations offer around 10% vacancy and tend to offer improved accessibility and other attractive features. 

In 2020, office takeup reached 344,00m2, boosted in Q4 by the public sector. Office demand should be driven by two factors moving forward: delays in strategic decision-making around real estate as well as potential cross-border tax revisions, due to the rise of remote working. 

Residential outlook 

Even though transactions remained limited, the residential market underwent ever-higher prices, per the report. Here, again, delays are seen in construction--which will undoubtedly put more pressure on prices. New apartment builds increased 3.1% in Q3 year-on-year, averaging €11,500/m2 in the capital. 

Here again, peripheral markets may see benefits for investors, who can use them to manage risk in areas where pricing is more attractive.

CBRE Luxembourg has around 30 employees and is part of the CBRE Group, a Fortune 500 and S&P 500 company with headquarters in Dallas, Texas (US). The group has over 100,000 employees in some 530 offices worldwide.