Residential segment more mainstream than everLIVING
Along with a detailed look at the office market, real estate advisor JLL focused on the ‘Living’ sector at its press conference for 2022 – ‘Living’ is the term now used to designate all types of residential property, from apartments to old people’s homes… The accent was on traditional family homes, however, with some interesting figures about the evolution of the market, and in particular the multi-family segment.
Head of Capital Markets Belux Adrian Glatt started by saying that investors are allocating larger proportions to the living sector. In the past 18 months, close to one fifth of all investment volume in Belgium went into the living sector. The attractiveness of the sector throughout Europe and the need for sourcing product has brought international investors toBelgium’s main cities, thus ensuring stronger demand and a drive to develop new stock. While senior housing remains the dominant subsector, multifamily has outperformed its longer term averages in the past few years. Looking forward, the growing rental markets in large cities will offer opportunities to create steady income flows for both specialised and diversified investment portfolios.
He went on to say that as at the 1st of January 2022, Belgium numbered 4,612,284 buildings totalling 5,381,671 dwellings. The current building stock represents an increase of 0.5% year-over year, +0.9% compared to 2020 and a 16 % increase since 1995. Of this total, 83% or 3,837,076 buildings are properties for residential use (attached, semi-detached and detached houses and apartment buildings). When focusing on apartments, JLL notes that there are 233,052 apartment buildings in Belgium, a growth of 3.5% year-over-year. These buildings house a total of 1,585,057 dwellings. 29% of the number of dwellings in Belgium are apartments, while 71% of the residential stock is in houses. The stock of apartment buildings has risen consistently at a pace of more than 3% per year in the past three years while the stock of houses grew 0.3% to 0.4% per year in the same period.
The length of time taken to obtain permits is an almost permanent restricting factor for office development, as is often reported, but the residential sector does not escape the problem. Adrian Glatt notes that a total of 17,707 building permits were delivered in Belgium in the first seven months of 2022, representing a decrease of 8.5% year-over-year. Differences apply, however, from one region to another. In the Flemish Region the decrease was 7%, whilst in Brussels the decrease was 14.7%. In the Walloon Region the number of building permits granted between January and July 2022 was 12.9% lower than in the same period in 2021. It has to be noted that the number of permits delivered in 2021 was high in all regions due to the absorption of the backlog incurred during the lock-downs in 2020. The long deadlines to obtain building permits in Brussels in combination with the strong demand for new housing limits the available offer. Residential agents report an offer that is significantly less than 5 years ago, whilst demand for new sustainable and fossil energy-free housing tends to increase as occupiers carefully consider the total cost of occupancy. The lack of supply is causing investors to look at forward funding deals or to take development risk. Renovations exceed new constructions: 11 to 1 in the Brussels Region. In the Walloon Region the balance shifted in favour of renovations in 2008. Currently 56% of the permits relate to renovations. In the Flanders Region, new constructions slightly exceed renovations, with notable exceptions at the start of the century, in 2009 and again in 2015.
Among others, JLL has observed two major trends In the residential market. Firstly, demand for energy-efficient housing is growing and the energy crisis is turning the attention of occupiers to the total cost of tenureship rather than merely the acquisition price. Fossil-free energy multifamily housing will quickly become the norm as the prices of gas and other fossil fuels have recently risen dramatically. In addition, the uncertainty of the supply of gas in a potentially cold winter accelerates the shift to green energy sources. The recent legal initiatives for a (partial) one-time ‘index-jump’ for properties that are not energy-efficient, will also lead to an increased investor preference for sustainable properties.
In addition, new living concepts – real estate as a service – is now a reality and co-living concepts are here to stay. As in other European countries, sharing common areas such as a garden or a kitchen appeals to the younger generation. Not only do they find here a community of other young people to socialise with, but the all in monthly rents avoid uncertainty of costs and the shorter duration of leases for this type of accommodation provide a very flexible housing service. A variety of investors and specialized operators are very active in the Belgian market. Brussels especially plays a pioneering role in the development of this niche-segment.