The Luxembourg property market continues to be a dynamic one. There is significant development in both office or residential properties throughout the country. A trend which should continue over the next few years.
THE OFFICE REAL ESTATE SECTOR IS BEING DRIVEN BY THE COUNTRY’S ECONOMIC GROWTH
For Vincent Bechet, an INOWAI Partner: “The strong health of the office real estate sector has been confirmed with a vacancy rate of less than 5%. It drops to 1.83% in the Kirchberg geographic centre, ahead of Limpertsberg (3.38%) and the Luxembourg city centre (3.48%).”
With the increase of Luxembourg’s active population - which has practically doubled over the past 20 years, whilst it has only increased by 20% in the European Union over the same period -, there is a great expectation regarding new, ongoing real estate projects.
“The volume of deliveries this year should reach more than 134,000 m2, pushing the stock to almost 4 million square metres. 65% of these new surface areas have already been rented”, he added.
Real estate is a real performance lever for the growth of a company. It often represents the second item of expenditure after payroll. Consequently, a good real estate strategy directly contributes to a company’s competitiveness.
Vincent Bechet specifies: “The press regularly confirms that companies intend to remain in the Grand Duchy and incorporate their head offices here. For example, new towers have been announced for 2020; with the Arcelor-Mittal Tower with more than 25 floors, the INFINITY1 residential tower and the 3rd tower of the European Court of Justice. These announcements confirm the good health of the Kirchberg district, which represents 25% of the Luxembourg office stock with more than one million square metres built. The Kirchberg plateau, which now has a history dating back more than 50 years, is a symbolic testimony of Luxembourg’s evolution, with, on the one hand, European institutions, financial institutions and service companies, and on the other hand, industry and the media.”
KEY FACTS: DATA
- 576,250 inhabitants (January 2016) of which 115,200 are in Luxembourg City
- Stable political and social environment
- Qualified multicultural and multilingual workforce
- Solid public finances and financial stability
- International financial centre, a founding country of the EU, AAA-rated
- Business environment with modern infrastructure
- Efficient logistics network
- Easy access: high-speed train linking it with PARIS in 2 hours and 5 minutes
- There is not enough office surface area to satisfy future demand.
- Mobility and the transport infrastructure will play a key role, mobility solutions will be adapted (a tramway is going to link the different districts of the city in 2021).
- The rental market for Luxembourg City and the neighbouring municipalities will be supported by the arrival of new residents.
- The construction of flats shall supplant the construction of individual homes in order to be aligned with the needs and budgets of households.
- The Luxembourg market shall see the arrival of new private and institutional investors such as pension funds, whilst remaining a destination of choice for wealthy individuals.
THE RESIDENTIAL PROPERTY MARKET: A CONTINUAL INCREASE IN DEMAND
For residential real estate, Victor Rockenbrod, Manager of the agency of the same name, and a key player in the market for more than 40 years: “the country’s economic indicators have been green for decades. This favourable context has led to a growing increase in the population. Luxembourg’s demographic growth is around 2.5% every year, the highest level in the Eurozone. The result: a constantly increasing demand for accommodation and a current supply which is struggling to be filled.”
Mr Rockenbrod adds that “due to the continuous increase of demand and the weakness of the supply, the prices of residential properties have increased significantly over the past few years. The Luxembourg rental market remains very attractive in the city of Luxembourg and the neighbouring municipalities, with a preponderance of flats for the rental stock”.
In charge of the co-exclusive marketing of the Royal-Hamilius2 project, Fernand Hornung, Manager and founder of the Unicorn agency, forecasts the arrival of more private foreign investors.
“The city centre of Luxembourg is the leading district for main residences. In a surface area of barely a square kilometre, you can find the Grand-Ducal Palace, the City Hall, different museums, large and small sheltered squares, the pedestrian area with its shops as well as a broad choice of bars and restaurants. Accommodation is rare and therefore highly valued. It is within this area that the Royal-Hamilius project, a realization of Codic Group, will propose exceptional property designed by the Foster+Partners architectural firm, in partnership with the Luxembourg firm Tetra Kayser. The Royal-Aldringen, Royal-Hamilius and Royal-Monterey projects will propose a high level of luxury, comfort and space. The N’Joy interior design firm, which will work hand in hand with the architects, is currently developing complete and made-to-measure design solutions to create chic and elegant accommodation.”
Therefore, this is just the beginning for Luxembourg as a leading area of real estate investment.
For more information, please contact your private banker who will be able to put you in touch with our experts.
With the participation of :
- Vincent Bechet
Managing director & partner d’ Inowai
- Fernand Hornung
Manager - partner of Unicorn
- Victor Rockenbrod
Manager of the agency Rockenbrod
1 The INFINITY project is composed of three buildings: a 25-floor tower which will have a total of 20,000 m² of prestige accommodation, a second building with 6,800 m² of office space and, to link both of them, a 6,500-m² commercial space. The marketing of the 25-floor residential tower began last September.
2 From 2 019, t he Royal-Hamilius complex shall enhance the attractiveness of the capital’s city centre with access to a department store, a supermarket, shops, a sky restaurant, 630 underground car park spaces and several dozen flats
3 According to PricewaterhouseCoopers Luxembourg Real Estate 2020 source