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Prime office rents in the Cloche d’Or district inched up in the first quarter of 2020 as the grand duchy recorded high demand, CBRE has said. Library picture: Romain Gamba/Maison Moderne 

“Office lettings and sales in Q1 were buoyant, masking the threat from the corona crisis,” according to the commercial real estate brokerage CBRE.

Vacancy rate

The office market progressed at a healthy clip. CBRE stated:

“Take-up in the first quarter of the year counted a strong 45,000m2. This is higher than the Q1 of the previous two years and better than the long-term average. Deals continued as normal without much disruption from the corona crisis, but we expect activity to slow considerably in Q2 as further transactions are delayed.”

CBRE counted 149,000m2 of vacant office space out of a total stock of 4.35 million. This translated to “a very tight market” with a national vacancy rate of 3.4%.

Vacancy rates in the central business district, Kirchberg, Strassen and Gare district remained under 1.5%. The vacancy rate in Cloche d’Or fell from 8% three years ago to roughly 3%. The rate in Esch-Belval was 5%, CBRE said.

Developments

Only 13,000 square metres of office space was delivered during the first quarter, but CBRE reported:

“The pipeline for the remainder of the year is very robust, counting more than 317,000m2 of projects. Half of this amount, however, is concentrated in one phase of the [European] Parliament building in Kirchberg.”

Less than a quarter of that 317,000m2 is still available to let. A further 200,000m2 is planned for 2021, of which nearly half remains available.

Rents

Prime rents in the central business district hit “a record” €52 per square metre per month (excluding VAT), “despite the uncertainty surrounding the covid-19 pandemic,” CBRE wrote.

Rates in Cloche d’Or “experienced a strong increase” to €34 per square metre per month, but rents elsewhere were “unchanged”.

Investments

The firm tracked €736m in office deals during the first quarter. “Three of these deals closed with 9-figure price tags.”

CBRE released its “Luxembourg Offices Q1 2020: Solid office activity amidst corona uncertainty” report at the end of May.