Julien Pillot, head of office agency, Inowai Luxembourg. "We estimate that only in the region of 2% (of office property demand) is Brexit-related.”
Brexit’s impact on the Luxembourg property market is very small, says Julien Pillot of the real estate firm Inowai. Luxembourg is filling up though and there is a serious lack of available square meters.
Two recent articles on Bloomberg would have us believe that companies, employees and their families relocating to Luxembourg as a result of Brexit will either be living in the back of beyond or smack bang in the middle of the red-light district. Delano talked to Julien Pillot of Inowai Luxembourg about the concrete impact of Brexit on the property market thus far.
According to Pillot, Luxembourg is indeed filling up, but not necessarily due to Brexit. “In terms of demand for office space, Brexit is not having a big impact. We estimate that only in the region of 2% is Brexit-related.”
Inowai calculates it like this. “We assume that every person needs around 15m2 working space. According to Statec, Brexit has so far created 250 jobs. Therefore, accommodating these people requires +/- 4,000m2.”
That said, it is true that demand in general far outstrips supply in both the office and residential sectors. “On average in the residential sector, 3,000 units are delivered onto the market each year against a demand for 5,000 units. So, there is a significant gap between supply and demand, which is widening year-on-year.”
“In office space we have extremely low vacancy rates,” Pillot continued. “3% in the station area; 2% in the central business district and 1% on Kirchberg. These are the lowest levels since before the crisis of 2008.”
As for Brexit-related demand, “Companies coming here are not brining a lot of people. It is usually to set up a subsidiary in order to have a European address. As such, they tend not to be looking for big spaces. The exception being the insurance company FM Global which took 1,200m2 on Route d’Esch.”
Companies looking for 500m2, for example, are in luck as this can be found in and around Luxembourg City. Much bigger than that and they need to look to the outskirts to places such as Munsbach, Leudelange and Strassen, “None of which, are actually that far from the city,” stressed Pillot.
However, the most sought-after areas remain the central business district (Luxembourg City centre), Kirchberg, the station district and the Cloche d’Or, “In Q1 2018, these areas accounted for 60% of all office property transactions in Luxembourg in terms of m2.”
Going forward, Pillot suggests companies think of the long-term, “Perhaps they should remain where they are for the moment but invest in a future project.” He also proposes a change in mentality and habits, “Why not look at co-working spaces and home working?”
To authorities, his messages is, “Help by facilitating the process for getting a building permit. I know of a promoter who has been waiting 7 years for permission and the average wait is around 36 months. This is too long in a market that needs projects to be delivered now."