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Dual blow for Flanders office market

The Link has been a major driver of activity. Image: Jaspers-Eyers architects.
The Link has been a major driver of activity. Image: Jaspers-Eyers architects.

Real estate advisor CBRE has produced a report showing the state of the Flanders office market at the end of the second quarter of 2020, and obviously in the wake of the onset of the Covid-19 crisis. Office take-up in Flemish markets at the end of the first half of the year, CBRE finds, was 80,000 m². This is low but comparable to 2015 at the mid year point. CBRE says that there are two major influencing factors. One is clearly a Covid effect, with some companies having already mandated home-working until September or even the end of the year. There is therefore simply a maintenance of the status quo, and feedback suggests that this has been relatively successful. Real estate decisions will then be delayed until a clearer strategy can be formed.

Quality

The other dynamic is the chronic lack of quality, available space. Speculative projects (Post X in Antwerp, Forum in Ghent, Corda Campus in Hasselt) have reached stabilised occupancy, and the immediate pipeline is low. Those searching for large surface areas have to allow 12 to 24 months for suitable space, be it existing or a new project. A substantial pipeline of projects has been established, but developers are still hesitant to break ground at risk. Mechelen is the best example of this. And with the added uncertainty from the Corona crisis, financing for large projects is expected to become more complicated, further limiting future supply.

In terms of investment, sentiment initially took a hit in the early days of the crisis but has since recovered. Some deals have been delayed, with due diligence being extended. Others begun before the crisis have moved forward, including the sale of Post X (€260 million). Through the remainder of the year, take-up will be hindered somewhat, particularly if lockdown rules become more stringent. Still, this is no longer uncharted waters, and several known sizeable deals are being negotiated which should boost figures. Investment pricing has been resilient, and solid activity should continue through the year.

Antwerp

Taking a closer look at Flanders’ major office market, Antwerp, CBRE points out that the Antwerp office market is Belgium’s most important market outside of Brussels. It represents over 2 million m² across its four submarkets: the City Centre, Singel, Port, and Periphery. Over the long-term, Antwerp take-up has averaged around 110,000 m² annually. Antwerp take-up activity slowed in the second qurter of this year, however, to bring the first half total to 35,500 m2. The marketing of large projects – namely The Link and Post X – has driven some exceptional activity in the last few years. The uncertainty around the Corona crisis is a contributing factor, but the chronic lack of quality space continues to weigh on take-up numbers. Competition for the limited remaining grade A space was noted this quarter, with a long lease expected for one of the largest vacancies in the third quarter. Demand in this market is still considered strong.

Major deals in the first half of the year include It Afas acquiring 3,385 m²in Gate 7, the Family Justice Center letting 2,700 m² in Bexstraat 20, and Xplore Group letting 2,265 m² in Boudewijnlaan 24. As of the middle of 2020, the vacancy rate is estimated at 8%. Major availabilities include Atlantic House (8,083 m² ), Fidea Tower (6,366 m² ), and Blancefloerlaan 179A (4,315 m²).
Tim Harrup
03-08-2020
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