The Brussels office investment market is on track to exceed 2 billion in 2011, which is a return to average levels seen in the early 2000s according to research by international real estate advisor Savills.
The firm reports that investment turnover in the city increased by 234% in Q1 2011 compared with the same quarter in 2010, from 124 to 416 mln. Nationally for Belgium, Savills data reveals that turnover reached 616 mln. in Q1 2011, which already represents 48% of the total volume achieved in 2010.
Sheelam Chadha, Head of Research at Savills Belux, says: "We are expecting to see an increase in properties with short-term leases hitting the market during the coming months and, as a result of continued demand particularly from Belgian investors, predict that investment levels will reach approximately 2 to 2.25 bln. by the end of the year. This is similar to the average levels seen in the early 2000s."
In terms of investment yields, Savills expects prime yields for long-term leases, now at 5%, to remain steady but anticipates prime yields for short-term leases, currently at 6.25%, to move in to 6% or lower due to increased demand.
Chadha continues: "There is a clear trend, especially from international investors to shy away from long-term leases, which no longer seem to offer reasonable returns. The short-term lease market, although still perceived as slightly risky, offers a reasonable 100 basis point risk premium over longer-term let assets."
The office lettings market in Brussels reached 116,600 m² in Q1 2011 according to Savills, a 4% decrease on Q1 2010 and a 250% increase on Q4 2010. The firm reports that 74% of these lettings were in the city's central business district (CBD), including the pre-letting of 54,461 m² to Régie des Batiments in the Belair Building. In total, 111 transactions were completed in Q1 2011 with larger requirements making a significant come back. Savills predicts that larger lettings transactions by the public sector will drive take-up in 2011 and expects the year end figure to reach 400,000 m², which exceeds 2010 levels.
Prime rents in Brussels hovered between 295 and 300 per m² in Q1 2011, while top quartile rents increased 7% to 222 per m² according to Savills research.