Brussels’ office market trends

For the first time since the outbreak of COVID-19, economic activity has returned — and even exceeded — pre-crisis levels in Belgium.

However, inflation reached 5.71% in Belgium at the end of 2021 in the wake of surging energy prices, supply bottlenecks and the rapid rebound of economic activity — the highest level since 2008. Consequently, investors have increasingly turned to real estate to provide a reliable hedge against inflation.

Regions with resilient economies and well-located assets attract investors’ attention. As a result, Brussels has entered PwC’s list of the top 10 most interesting cities in terms of real estate prospects in Europe due to its location at the heart of Europe, resilient stock and yields for core assets.

European office assets have displayed appealing overall momentum heading into 2022 and Brussels is no exception. So, what is driving growth in this sector and what lies ahead for Brussels’ office real estate market in 2022?

Sustainability and centrality: key trends for Brussels’ office sector

Brussels’ office market largely recovered from the impacts of the pandemic in 2021. JLL’s market research report on Brussels’ office market in Q4 of 2021 attributed €2.5 billion of the region’s investment volume to large-sized office transactions, with a record take-up of 472,000 sq m throughout the year.

Throughout 2021, several trends emerged in Brussels’ office market: first and foremost, sustainability. Last year, the relative proportion of Grade A property was 53%, of which 31% consisted of projects under development.

Large-scale transactions attributed to green projects in the central business district (CBD) also characterised 2021. Centrality was also crucial last year, with capital growth recorded in central locations accessible by train or metro and expansion of the CBD’s share of total take-up. As a result, office landlords considered a change of use to residential in many decentralised areas.

Prime rents remained largely the same, except for the decentralised districts. Compared to Q3, vacancy levels stabilised in Q4 of 2021, although forecasts predict they could rise again in the short-term whilst the office market adjusts to the post-crisis landscape.

Cumulative investment transaction volume soared by 49% compared to 2020 and outperformed the five-year average by 13%. Average transaction size also surged by 43%, exceeding the five-year average by 21%. Fewer transactions were recorded than before the pandemic, but €1.1 billion was invested into this market in Q4 of 2021, marking it one of the region’s best final quarters for office investments.

Market predictions for 2022: on the road to recovery

In 2022, core inflation in Belgium is projected to grow from 2.4% to 4.2% due to rising commodity prices and increased consumer spending. But despite the uncertainty created by these economic shifts, investor confidence in Brussels’ office assets is strong. Now that the worst of the pandemic has hopefully passed, many businesses are looking ahead and tackling the next big challenge: climate change.

Sustainability will remain a core factor in the market this year, as 2021 proved that investors are willing to pay a premium for properties with superior ‘green’ credentials to help facilitate more environmentally friendly ways of living and working. As such, developers are focusing on securing assets with BREEAM ratings of Excellent or Outstanding, potentially leading to a slight decompression of non-ESG-compliant properties.

Real estate researchers are forecasting higher returns in 2022 than the previous year, and analysts predict that the availability of debt and equity will be plentiful. The indexation of rents during the coming months will prove positive for investors.

Real estate investment prospects remain strong in Brussels and many other prime European locations. Contact Rynda at +44 (0) 20 3709 9875 to discuss our pan-European real estate services.