View of the Glacis in Limpertsberg where the average cost of flats reached €12,000 per square metre in 2019
Photo: Caro-Line Photography/archives
Limpertsberg was the most-expensive place in the country to buy an apartment in 2019 with average prices reaching €12,000 per square metre.
According to annual figures published by real estate experts JLL on Tuesday, the other districts to burst through the €10,000 per square metre ceiling were Belair, Cessange, Kirchberg and Gasperich. The remainder of the capital was pushing close to this threshold showing an average purchase rate of between €8,000 and €9,999 per square metre.
“It’s not too late to find solutions. I think we need a new model of living and communal living fills that context,” JLL’s Robby Cluyssen said on Tuesday. He cited the communal living project underway in Differdange as a means to ease housing demand, which is driving up costs. The Differdange scheme, which could be completed in the next two years, would provide 125 serviced flats with communal areas for residents on a flexible-term lease.
Cluyssen said that the project, which transposes the co-working concept into a living context, was inspired by similar projects abroad. Such projects face legislative barriers, for example in terms of domiciliation, but these wrinkles are being worked on. “It’s something that will come. We have support from the housing minister, Henri Kox,” Cluyssen said, adding: “There’s a real interest from developers in Luxembourg City and in Differdange.”
JLL’s Robby Cluyssen is pictured speaking at the firm's annual press conference in Bertrange on 28 January 2020. Photo: Matic Zorman
The take-up of office space in Luxembourg in 2019 beat all records while vacancy rates were at their lowest levels since 2009,
Businesses rented out a further 265,000 square metres of office space last year, up from 245,000 in 2018 and 209,000 in 2018. The average size of transactions was also high, JLL reported, at 1,320 square metres. While seven transactions exceeded 10,000 square metres, twice the number than in 2018.
Growing demand meanwhile forced occupancy rates further down to 3.2% on average, a rate that has not been recorded in the grand duchy since 2009.
Investor volume in office and industrial spaces dropped slightly from €2.049 billion in 2018 to €1.625 in 2019. But, interest remains strong, JLL’s Vincent Van Bree said, explaining this was a result of the fact that Luxembourg had particularly good prime office yields, at 4% (compared to 3.9% in Brussels and 2.8% in Paris) and that Brexit had brought the attention of investors to the cities attracting post-Brexit jobs, such as Frankfurt, Dublin and Luxembourg.
“It wasn’t a record year for investment but it was a good year. There were a lot of transactions and that’s something we’ve seen on a European level.”
He added that the big change in the investor landscape in Luxembourg was the arrival of Korean investors, who represented 12% of investments in this area. “There are about 20 Korean pension funds investing in Luxembourg. So far they tend to invest in buildings which have already been rented out for a minimum of nine years,” Van Bree said. Besides the Korean investors, around a fifth come from the UK, Belgium and Luxembourg respectively. In 2020, some €200m in volume was already in the pipeline with investors.
Vincent Van Bree is pictured on 28 January 2020. Photo: Matic Zorman
Office demand and rents
The expert said that the growth in rents as a result of low vacancy rates, was among the attractions for investors in Luxembourg. Average rents reached €51 per square metre in the central business district, the highest rate in the country. Kirchberg, which had the second-lowest vacancy rate at 0.9% was not far behind at €36, followed by the station district at €35 and Cloche d’Or at €30. Incidentally, the Cloche d’Or recorded the lowest vacancy rate at 0.6%. The cheapest average office rents were found in the periphery region (€22) and Belval (€24).
The squeeze of supply and demand may or may not be eased by the planned completion of 111,108 square metres of office space in 2020, of which 16% is in the Cloche d’Or, 11% in Kirchberg and 11% in the central business district.