Still an owner’s market for commercial real estate – Delano
Although the offices in Luxembourg were vacated after the coronavirus pandemic, life should return in 2021.
Ahmed Kahilia, consultant at CBRE, remains optimistic about the market in 2021 and estimates that demand for office space will remain high even if prices stabilize.
What impact will teleworking have on the office market?
Real estate is the second most important expense for businesses. It’s something companies are questioning, and we can imagine some companies looking to optimize their space and cut costs.
However, the situation in Luxembourg differs from that of our neighbors due to the limited number of teleworking days for cross-border commuters. I don’t think we will continue to work from home as massively in 2021 as in 2020. And companies want more space to compact, for example in open-plan offices.
How will these developments affect prices?
In the current context, we do not see a fall in prices, but a stabilization. We are in an owner’s market and there are very few availabilities in core districts. In 2020 the area will be more than 200,000 square meters.
There are very few speculative constructions in Luxembourg. Buildings are pre-let. Before starting construction, you must first try to find a tenant. What could change in the future is that the time it takes to market the properties is getting longer as companies want to delay decision making.
In the medium term, we are unsure of the health crisis.
What is the future for business districts like Kirchberg?
The assignments are particularly emphasized on the level of mobility and infrastructure. Statec [Luxembourg’s statistics bureau] It is estimated that 600,000 cross-border commuters will be employed by 2040; today there are 200,000. This is a big problem for developers who need to find the right locations.
It is certain that districts on the border will become very popular. Some companies may choose a smaller headquarters with satellite locations in other parts of the country.
Rooms like Kirchberg were pretty empty because of the pandemic and remote working. We seldom saw many shops, including on avenue de la Gare and Grand-Rue. For commercial space in these areas, it depends on the development of the crisis, since everything is correlated with each other – gross domestic product, jobs, demand for offices and consumption in commercial space.
This article originally appeared in Delano’s 2021 Forecast issue, published December 21.