Real estate: the IT sector totalizes 15% of Q2 take up, thanks to Skype, Sogeti…

Property Partners published its second trimester office market results. Does […]

August 20, 2010

Property Partners published its second trimester office market results.

Does the professional real estate market show its first recovery signs?

Despite the less favorable European economic situation and an upturn that appeared much more moderate than expected, Luxembourg office market recorded a slight improvement with a 30,000 sqm let during the Q2 2010 period, the real estate consultant wrote in its latest publication.

Intelsat walks the
(K2) Ballade

“This overcomes the 50,000 sqm let since the beginning of the year,” explained Vincent Bechet, Property Partners’ Senior Partner and Managing Director.

Indeed, during this second trimester, the European Commission finalized the major overall transaction, with a 6,750 sqm-offices surface rented out in the Drosbach area. 

Skype’s hype in Clausen
Only six other operations exceeded the 1,000 sqm-mark: Skype Luxembourg (2,270 sqm) in the Rives de Clausen (CBD), followed by Cobelfret (1,900 sqm) in the station district, VBS (1,700 sqm) in Capellen, Vistra (1,600 sqm) in Kirchberg, by the Chinese bank ICBC (1,467 sqm) on Boulevard Royal and by the law practice Erniquin and Associates (1,100 sqm) in the station district.

Besides Skype four other IT and telecommunication firms moved into new premises: Sogeti to Bertrange (1,781 sqm), UPC-Direct into Howald’s Cubus 2 building (854 sqm), Intelsat into the K2 Ballade edifice located at Kirchberg (840 sqm) and Luxtrust into Mamer/Capellen’s Ivy Building (523 sqm).

According to the report, the take-up distribution per activity shows a preeminence of the business services sector (29% of the total), followed by European institutions (22%), the banking industry contributing this time to only 20% of the whole.

The IT/telecom industry represents 15% of the whole, with a total of 8,447 sqm since last January.

Hence, the vacancy rate remains at its current level of 8.5%. “The sublease trend, which is setting in the Luxembourg real estate landscape, contributes in part to the current indicator level”, the report detailed

According to Bechet, the expected yield in the city is about 6% and 6.75% in the periphery. “The investors are looking for long term tenants (more than five years), and are demanding as far as the quality of buildings in sustainable development and energy savings are concerned,” he wrote. “But the promoters remain reticent and have been waiting for 15 months now before starting building new large-scale risky project.”

For the forthcoming years Property Partners foresees a low growth of 3%, with a moderate evolution of prices and wages. The real estate consultant predicts no significant decline in unemployment rates, which should persist at 6% this year.

“Public finances are to be placed among the good news with a lower than anticipated deterioration,” Bechet added. “Should the international financial environment keep up, the European economies in general and Luxembourg in particular could see the end of the tunnel. Otherwise, we will have to get used to a durably high office vacancy rate,” he concluded.

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