Luxembourg to offer buying opportunities in 2010: Savills

Luxembourg's office market will see some buying opportunities in 2010 as funds reassess their position, according to Savills. The market, which has seen a steep decline in office take up and a very small number of investment transactions, is set to return next year as GDP growth is forecast at 1%.

The international real estate adviser recorded a 74% decline in office take-up during the first three quarters of 2009, compared to the same period in 2008, and a 71% decrease in investment deals also in this time period. This lack of transactional movement has resulted in little change in rental market prices, the average prime office rent stands at approx EUR 456/m2/year.

Likewise, due to a lack of market activity, Savills reports a difficulty in quoting of investment yields but believes prime yields have moved from 5.35% to 6% so far this year.

Sheelam Chadha, head of research for Savills Benelux, says: 'Limited movements in the letting and investment market have profoundly affected the overall sentiment in Luxembourg. However, the underlying fundamentals remain strong despite the short term imbalances. We forecast some good buy opportunities coming onto the market for 2010.'

During Q309 no more than 8,470 m² was let compared to 28,000 m² during Q308. Vacancy rates have risen from 2.05% in 2008 up to 3.5% during the past quarter and are set to rise as an additional 330,000 m² is delivered to the market in Q409 and 2010, albeit 69% of this space remains speculative. In the investment arena, EUR 88 mln of turnover was transacted in Luxembourg's office market during the first three quarters of the year, representing a 71% fall when comparing these quarters to 2008, and a 96% drop compared to 2007.