Office rents up as firms grapple over best locations
Office rents in Luxembourg’s main business areas are expected to rise in the coming months as companies struggle to find space at the most prestigious addresses, a real estate expert said on Tuesday.
Companies pay on average €52 per square metre each month for an office in the capital's city centre while those located in Kirchberg pay around €41 per square metre, a study by real estate agency Cushman & Wakefield shows. But in the coming months, they are expected to increase and reach around €56 per square metre by 2025, the study said.
“Today there is a product shortage at prime locations,” said Sebastien Becquet, partner and head of Luxembourg at Cushman & Wakefield. “If tomorrow a product becomes available, people will be ready to pay the necessary price.”
Currently, there is not a single offering in the city centre for a surface area of 3,000 square metres, which large companies such as banks would require, Becquet said.
Between the start of the year and the end of September, real estate investments had slowed significantly but foreign investors were keen to snap up space, sealing two of the five deals made between July and September, the study published on Tuesday showed. The largest purchase stood at €40 million when German real estate fund, KanAm Group, acquired a 3,000 square metre building in the Grund, which was once home to e-commerce giant Amazon.
Outside of the expensive prime locations, more office space is expected to become available next year. This is mainly because companies have not yet decided if staff should return to work for a set number of days per week, Becquet said.
“Implementing work-from-home is more restrictive in Luxembourg than other countries because of the issues with cross-border workers,” he said.
People working in Luxembourg and living in either France, Germany or Belgium can, for now, work from home as much as they want. But if they can only work from home for a limited number of days a year for tax and social security reasons, they will have to return to the office.
“It will depend on whether there are a lot of cross-border workers in the company,” he added.
Some companies are also choosing to share their space, by letting or sub-letting part of their offices, if they do not require as many desks during the pandemic, the study shows.
Companies are already starting to hunt for office space once again after a year-long lull when firms which had planned on moving pulled the plug on their plans, while others were reluctant to commit to a new space.
By July, more office space was either let out immediately or pre-let than throughout the whole of 2020, data from real estate agency JLL showed.