Belgium’s property investment market is shaping up for a record year in 2016, as international investors perceive greater value there than larger markets around Europe, with further yield compression and rental growth projected, the CBRE seminar at the REALTY real estate trade fair in Brussels heard on Wednesday.
'We think 2016 could be a record year for Belgian real estate. Yields can compress further with the price advantage real estate has versus bonds and continuing investor inflows will apply more downward pressure. Prime rental growth prospects also look good. So together the conditions are there for capital growth,' Maxime Kumpen, managing director CBRE Belgium and Luxembourg told the seminar.
A CBRE survey of major investors earlier this year concluded that there is a total of around €6.4 bn ready to be placed in the Belgian and Luxembourg markets in 2016, with €1.43 bn in the first five months, particularly from Asian capital seeking trophy assets. This compares with €3.93 bn in 2015 and €3.02 bn in 2014.
Alexander van Ravels, Senior Director Capital Markets CBRE Belgium, said Brussels is looking very cheap in comparison to cities in other EU markets with the yield cap between real estate and sovereign bonds the highest in Europe and the recovery in the occupier market still yet to come.
In an office market known for its stable foundation on tenants from European institutions, Brussels saw only five transactions from the public sector though to May this year. The bulk of deals came from corporates, suggesting that the commercial occupier market is now springing back to life.
Marc Séguinot, head of real estate management at the European Commission’s OIB department, the largest occupier of EU buildings in Brussels, explained why the dynamics of the city’s public sector office market might be changing.
He said the European Commission had scrapped its original plans to expand the office space it occupies in Brussels by between 30,000 to 100,000 m2 in 2016, and is now aiming to reduce the area by about 5% through modern flexible working practices. The OIB is, however, also developing a new EC conference centre and is planning a state-of-the-art mixed-use flagship project at Rue de Loi 130 in the city. A call for tenders fr the conference centre will be launched in October for delivery in 2022.
Retail investors in Belgium favour the Antwerp area over Brussels, due to the port city’s dynamic creative population and high purchasing power, but also because the European capital does a poor job of marketing itself and lags in investment in infrastructure, speakers at the seminar commented. The gap in perception between the two cities as an attractive shopping destination is also widening, according to a CBRE survey of major retailers.
Possibly the most attractive investment sector in Belgium is logistics where e-commerce demands for space are growing at between 15% to 20% a year, but high demand is being met by very limited supply of large, modern, sustainable space.
'The logistics sector is finally being appreciated in Belgium. Tenants seldom move and returns are very positive. There are challenges, but our geographic location is a huge advantage and we are also seeing a lot of consolidation through M&A activity. As new investors enter the market the future is looking great for logistics,' Xavier van Reeth, CBRE head of industrial & logistics in Belgium, concluded.
