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The future of the Belgian office market The future of the Belgian office market


The future of the Belgian office market

Some updated insights on the Belgian office market. 


The big trends expected to reshape the Belgian Office Market


December 2022

A look back at 2022

After two years of ups and downs, marked by the COVID-19 pandemic in 2020 and improving economic activity following the post-crisis rebound in 2021, one might have expected somewhat 2022 to be a regular year. 2022 was an unusual year from every point of view yet. The Russian invasion of Ukraine had significant repercussions on both the world and local economies. Continued high inflation and soaring energy prices are affecting our lifestyles and consumer habits. 

The commercial real estate market is no exception, growing inflation and energy prices continue to influence the future real estate landscape. So, let’s examine 2022 and its influence on the Belgian office market.

In Brussels, a decreasing take-up…

This year, take-up in the Brussels-Capital Region totaled just over 300,000 sq m, a 30% decrease from the five-years’ annual average (± 400,000 sq m). Despite the declining take-up, the amount of transactions remained constant, indicating a still dynamic market based essentially on space reduction by most of the occupiers. 

In 2022, just like in previous years, the offer on the sublease market has risen. In order to adapt to their workers’ new way of working and to prepare for a significant indexation of their leases, many companies have opted to minimise their surfaces. As a result, the vacancy rate has increased overall this year, and is now at a level of 8%. 

According to Maximilien Mandart, Head of Occupier Services, “Every year, the proportion of firms conscious to the environmental concerns grows and this is reflected in their real estate strategy.” In addition, record inflation due to the conflict in Ukraine is raising concerns about high indexation of rents, which is why occupiers are opting for smaller but more sustainable office spaces. As a result, despite the low take-up rate, prime rents increased to a record level of €340/sq m/year in the Brussels office market due to the lack of high-quality assets.

Remote-working has become a new way of working since the COVID-19 pandemic. However, companies are focusing on employee wellbeing through appealing facilities, and placing a strong emphasis on ESG requirements to bring back their workforce on site. 

… but a record investment market

In contrast to the occupational market, the Brussels investment market is performing at record levels despite the challenging economic conditions. The exceptionally large volume recorded this year did not reflect anything about the market’s present state, confirmed Michael Despiegelaere, Head of Capital Markets. More than €2.5 billion have been invested in 2022, mainly boosted by the closing of large transactions. A large portion of the amount invested this year is the outcome of previous negotiations. 

However, the commercial real estate market began to adapt to this challenging economic climate at the end of the year, and Brussels is experiencing longer and more difficult transactions, a growing gap between asking and offering prices, and transactions repricing. As a result, prime yields have been revised upwards to a level of 4.10% at the end of the year, from 3.60% at the start.

The Regional Office market 

2022 began with the lowest take-up in the first quarter, since the pandemic. It was able to achieve a robust take-up in the following quarters. The take-up of the Belgian regional office market has decreased from 307,000 sq m in 2021 to respectively 269,000 sq m (-12.35%). Furthermore, the market witnessed a 23% decrease from the five-year’s annual average (±350,000 sq m). The number of transactions also slowed down due to the same reasons as the Brussels office market. 

Although the overall take-up has decreased, Flanders remained robust (238,000 sq m). For example, Mechelen saw an sharp increase of at least 25%. Additionally, the Antwerp Office market witnessed an increase of 8%. The other major Flemish cities witnessed a decrease of approximately 25% (Ghent and Leuven). 

On the other side of the country, Wallonia witnessed its quietest take-up since 2015 with 31,000 sq m. The major cities, such as Charleroi and Liège, witnessed decreases from 2021 to 2022 with 50% an 70% respectively. Only Namur’s take-up witnessed an increase with 50% compared to 2021.

Take-up by regions

Shifting trends in the regional office markets

The demand in Flanders can be roughly characterised as existing occupiers on the market who are in search of high-quality offices. The overall take-up in Flanders accounted for more than on third (35%) in Grade A offices. This demand is mainly stimulated by companies’ ESG requirements which will allow well-located prime products to face no difficulties in terms of availabilities issues. 

The prime rents in Wallonia witnessed a significant pressure from the Grade C offices. The prime rent remained stable at 160 €/sq m/year. Whereas in Flanders, due to the demand of Grade A offices and the lack of immediate availability in future-proof developments, the prime rent increased from 165 €/sq m/year to 170 €/sq m/year.

Prime rents by regions

Increasing interest to increase in uncertainty

Although the occupational market was slower than previous years, the Regional investment market has performed strongly compared to previous years. More transactions were recorded compared to 2021, which resulted in an investment volume of nearly €400 million. 

As mentioned in the Brussels’ office market, the commercial real estate market began to adapt to these challenging conditions. A widening gap between asking and offering prices, which led to transaction repricing, resulted in an increase of the prime yields since the beginning of 2022. The prime yields increased from 5.25% to 5.60% (+35 bps) in Flanders and in Wallonia, the prime yield witnessed an increase of 25bps (from 7% to 7.25%).

Investment volumes by regions

Prime yields by regions

Outlook 2022 for the Brussels Office Market


Sustainability  Sustainability is now mandatory

Green building really kicked off in the recent years. Now, it has gone crucial, and many expect a certain amount of sustainability in their buildings. “We’re at a place where science is telling us to take action and the financials are telling us it’s doable” said Marta Schantz, senior vice president for the Greenprint Center for Building Performance at the Urban Land Institute . Recent events may bolster such developments, with the coronavirus pandemic confirming interest in these sorts of healthy workplaces.

Environmental certification and the circular economy are now unique selling points for both owners and occupiers. These factors will reshape profoundly the Brussels office market as outlined below.

Eye Scanner  Investors are attracted by both ends of the risk spectrum

Both Belgian and international investors will continue to take a strong interest in Brussels and Belgium. Despite the current all-time low 3.60% prime yield, Brussels remains particularly attractive when compared with certain other European markets (some recording prime yields below 3%). The fundamentals of Brussels remain solid, and its resilience has always been a key driver for institutional investors. 
Two distinct trends are profiling in terms of risk:
  1. On the one hand, with sustainability now crucial, investors will refocus on Core and Long-Term Core products, i.e., buildings of the highest quality, well connected to transportation hubs and offering secured cashflows. Additionally, “Long-Term Core assets are a hedge against inflation”, confirms Michael Despiegelaere, Head of Capital Markets.
  2. On the other hand, redevelopment assets could represent another important part of the future invested volumes in 2022. Next to complete redevelopments, investors and developers look to create value by renovating older schemes to new ESG standards with the latest environmental certifications.

High quality  High quality offices will drive activity in Brussels

Antoine Brusselmans, Head of Leasing Agency, underlines that “ESG criteria will be the driver of market activity”. With tenants seeking less real estate, though higher quality workspaces in order to foster innovation, collaboration and corporate culture, the remaining vacancy in Grade A buildings in the North district will gradually disappear throughout 2022, while the Grade B- and C buildings will continue to suffer (more on this below). 
The Airport district is already witnessing a huge need for ESG-proof solutions. Projects are currently being developed to meet tenants’ expectations for these specific buildings close to the Airport. 
In 2022, a shortage of delivered high quality office space is expected, but a considerable supply is anticipated in 2023/2024 due to the variety of projects under construction. This would meet the significant demand for ESG-proof offices. This will contribute to a profound rejuvenation of the office stock in the longer term. 


Vacancy  Polarised vacancy in 2022

For 2022, occupier space reductions will contribute to increase the vacancy rate to 8.5% globally for Brussels (7.8% at the end of 2021). The reconcentration of occupiers in the highest quality buildings will contribute to a significant increase in the vacancy rate in Grade B- and C buildings. Cédric Van Meerbeeck, Head of Research and Marketing, says: “Meanwhile, the relatively limited delivery of new unleased office space will help to compress the vacancy in the Grade A segment by the end of 2021.”


Quality building  Prime rent is no longer only dictated by location

The gap in prime rents between the CBD submarkets is narrowing. From now on, the quality of the services and the flexibility of the building, beyond ESG criteria, will be a determining factor for the rental levels, next to the location of the building. Occupiers will focus on the highest quality buildings and will be willing to pay for them.
Further upward moves in prime rents are expected as Grade A assets are in demand while rents in grade B- and C buildings are expected to decrease due to a declining activity. This flight towards quality will turbocharge the spread between rents in the Grade A buildings and the rest of the stock.

Outlook 2022 for the Regional Office Market


Take-up improvement New quality offices will continue to drive take-up in Flanders

It is fair to expect 2022 to be an improvement on 2021 in terms of take-up in Flanders, "But, says Nathan Claessens, this will hinge on supply and the quantity of quality products on offer." We have often been beating the drum for the creation of new offices when timely and appropriate, as they usually meet demand from occupiers. This remains the case for Flanders in 2022 according to Nathan Claessens, although factoring in current availability and occupiers' ESG requirements, such as soft mobility solutions (e.g., access to public transport) is a must. 

  • In Antwerp, Flanders' largest market, there is definitely supply (which may nevertheless be overtaken by strong demand). Indeed, many occupiers are looking for square metres - as opposed to a handful of large occupiers driving demand. 
  • In Ghent, aside from some spaces in recent buildings such as Blue Towers being vacated, and perhaps some recent modestly sized office developments, not much else in terms of Grade A is immediately available on the market. There are nevertheless also a certain number of grey spaces (floors available for sublets) available.
  • In Mechelen, some large new projects are underway, with many pre-lets already registered (although not yet publicly). 
  • New and future supply Leuven is not abundant, although some spaces will be freed by occupiers moving within the market itself.

Transition A year of transition ahead for Wallonia

Stéphane Moermans: "A straightforward year is expected in Wallonia, with no major emerging trends expected to play a part. Much as in 2021, the Walloon authorities, (an important source of demand on the Walloon office market) will play a limited role, save the odd transaction which did not materialise in 2021, most notably the AVIQ-Famiwal move expected in Charleroi. Some deals involving the Federal Building Agency are a possibility, on the back of its new acquisition strategy, which resulted in its purchase of the Cadastre building in Mons, late 2021. However, no further transactions of this ilk are mooted thus far in Wallonia."

With the absence of large deals on the horizon, Stéphane Moermans recommends that developers focus on turnkey- rather than speculative projects currently and probably until the 2024 elections when new public sector occupation strategies may emerge. Bolder developers insistent on launching projects should focus on smaller, more flexible spaces, possibly integrating other functions such as residential units. Accessibility, however, is not a key requirement, as few occupiers from the private sector in Wallonia are intent on shifting to soft mobility exclusively. Indeed, ESG considerations are yet to significantly impact the Walloon office market landscape.

Notable speculative projects Flanders and Wallonia
(over 5,000 sq m, and with available spaces remaining)




Offices (sq m)

Delivery year


Greenhouse Collection



2022 (delivered)


Novo, Pelican, Arto





Montevideo Westkaai










Paradis Express





Airport City L'Escale - phase 1 Tour Escale










AXS Namur





Het Zegel





Tirou n°1





Left Side Business Park - Ohrizons Charleroi





Biotech 5





Standard de Liège Business Center





Campus West





Left Side Business Park - Rivage





Aquilis B/C





Airport City L'Escale - phases 3 + 4 Tour Escale





Coworking Satellite offices and coworking partnerships

During peak pandemic, there was a feeling that larger occupiers with headquarters in the capital could be susceptible to opening satellite offices around the country. This, in a context where many employees have discovered that government-imposed home working has afforded them better work-life balance with long commutes temporarily out of the window.
In both Wallonia and Flanders, the reality so far has been more nuanced. Indeed, occupiers with business across the country, such as the public sector, consulting firms, or the banking and insurance sector had already implemented regionalisation strategies, on the back of the 6th Reform of the Belgian state (transfer of competences from the federal level to the regional level), and the rise of New Ways Of Working.
Therefore, new demand for satellite offices has not been tangible. Instead, we note partnerships between occupiers and coworking operators in certain cases, particularly in Flanders. The coworking landscape in Flanders has reached a certain level of maturity, with - often local - operators present across all four markets, as well as flexible office solutions offered by many owners. "Most coworking spaces in Flanders register strong occupancy numbers and do not intend to further expand as it stands" notes Nathan Claessens. In Wallonia, the coworking situation is somewhat bleaker, in Stéphane Moermans' words "Coworking spaces aren't especially successful in Wallonia, except for a few standout examples in Liège and Namur, nor is there much supply." As a result, we do not expect strong demand from the coworking sector in 2022.

Research & Development Time for Belgian real estate to harness strong R&D potential

Life Sciences have been more than a buzzword since the global health crisis took hold two years ago. Nevertheless, there is a feeling that Belgium's true R&D potential is yet to be fully harnessed in a real estate sense. Indeed, Belgium is a R&D and engineering powerhouse with important poles located in Ghent and Leuven, as well as Louvain-la-Neuve and Gosselies. 
According to Nathan Claessens, it is a matter of time before developers jump on the R&D bandwagon, as there are little privately owned (thus excluding higher education facilities) products on the market, even less so in the case of top facilities (e.g., including high ceilings, reinforced floors, and power supplies for high-power equipment). 
A certain number of occupier files are in the pipeline, and according to Nathan, these could amount to as much as 25% of take-up in Flanders in 2022 if they all come to fruition this year.


Rents more expensive Rents will become more expensive

Cost of construction has undergone increase, and factors such as bottlenecks in the supply chain, scarcity of materials, scarcity of labour (e.g., in the transport sector), will all contribute to pushing rents up in newbuilds in 2022.

A look back at 2020 and the outlook for the office market in Belgium in 2021

2020 was an unusual year from every point of view. The global pandemic triggered by COVID-19 had significant repercussions on both the world and local economies, affecting every sector of business. Lockdown, mandatory working from home, the repeated closures of businesses, bars, restaurants and performance venues were all events that forced us to adapt and change our way of life and consumer habits – along with a whole range of other impacts on the various real estate providers and sectors. 

The office market was no exception to this and the substantial increase in homeworking is bound to contribute towards a major overhaul of the tertiary real estate landscape in the future. So let’s look back at an unprecedented year in 2020 and at the impact it will have for the office market in Belgium in the future. 

1. In Brussels, take-up was the lowest in 20 years

Take-up in the capital was 260,000 sq m across the whole of the year. This was 50% lower than 2019 and 30% below the annual average for the past 5 years (+/- 400,000 sq m as an annual mean). Around 260 transactions were recorded, which was the lowest level ever seen. The health crisis put a brake on viewings and also slowed the speed at which occupants took decisions – in fact, it contributed to a total redefinition of occupancy strategy, which in turn had a significant impact on leasing activity. 

Despite the low take-up rate, prime rents remained at €320 per sq m per year in the Léopold quarter of the city. It rose in many other districts, driven up by the combined effect of historically low vacancy rates (around 7.6% for Brussels on average), the handover of high-quality buildings and heightened competition for the best locations. Forecasts for prime rents confirm that this level will stabilise in 2021, with a fresh increase to €325 per sq m per year from 2022 onwards. 

The large number of office projects launched on a speculative basis is a cause for concern regarding developments on the Brussels market. In fact, more than 150,000 sq m of new offices is expected to come on-stream in 2021, with around the same number in the pipeline for 2022. Combined with the new space likely to be released in the months ahead, the impact on the vacancy rate could become problematic in some districts more than others, particularly if the current high level of homeworking is confirmed with the passage of time. 

Subleases come on to the market at regular intervals. This could also have a negative impact on the vacancy rate. Indeed, working practices becoming more flexible in large companies are currently freeing up floor space that has become redundant, returning previously occupied space to the market. 

As a result, the current vacancy rate of 7.6% is estimated to rise to over 8.3% by the end of 2021 and could exceed 8.7% (maybe as high as 9%) by the end of 2022, all districts combined. Location, performance and especially flexibility and the option to repurpose space will all be factors that determine the success of these buildings. In-depth knowledge of the market and expert advice will be essential for guiding and marketing these projects. 

2. Flanders’ sharp decrease in demand resulted in the lowest year since 2011

Flanders take-up decreased dramatically by 39% in 2020, to total 142,000 sq m across Antwerp, Ghent, Leuven and Mechelen. 

Perhaps most striking was the decline in Antwerp, which was knocked it off its usual top spot among Belgium’s regional markets with take-up of 70,000 sq m, its lowest level since 2005. This is explained by a decline in the number of transactions, with occupiers biding their time on their occupation strategies with the economy in flux and new work habits emerging.

Ghent provided a silver lining, with a pretty robust 55,000 sq m despite a decrease in the number of deals recorded (72, compared with against 90 in 2019). Nevertheless, more than a third of this figure was due to two major deals: the purchase of the former Thomas Cook offices (approximately 10,000 sq m) by Colruyt Group, and the development of 13,000 sq m for own use by Daikin, which plans to centralise its Belgian activities in Zwijnaarde.

Maximilien Mandart, Partner: “Part of the issue, particularly in Antwerp, may be related to the reduced speculative deliveries in 2020. As new available supply plays a key role in ensuring healthy rotation on the market, this could provide an explanation for some of the market slowdown in 2020.

Meanwhile, supply was also the issue in Mechelen, where a drop in take-up was also noted, although developers are beginning to flock back to the market, with new projects on the back of the recent success of more recent buildings, such as the Elephant, illustrating the demand for quality premises. Up and coming projects include the former Inofer building, redeveloped by CODIC and PSR, and the Het Zegel project acquired by Leasinvest External Link in 2020.

Perspectives in Antwerp are somewhat more encouraging in the medium term, thanks to projects in the Linkeroever area (Ghelamco’s Campus West), Leasinvest’s Hangar 26/27 in the Centre district, TheM, a project recently acquired by Intervest Offices, and warehouses in the Singel district. In Ghent, there is also a healthy pipeline, particularly in the area of The Loop, as well as projects such as the Keizerpoort (Oryx).

As far as demand is concerned, the dark clouds still need to clear and no significant improvement is expected in the year ahead.

Only Ghent is expected to see a prime rent increase in 2021:

Antwerp: 165 EUR/sq m/year
Ghent: 165 EUR/sq m/year
Leuven: 135 EUR/sq m/year
Mechelen: 150 EUR/sq m/year

3. Wallonia’s record year at the unlikeliest of times – Namur: Belgium’s second market in 2020

Wallonia take-up in 2020 amounted to 127,000 sq m, registering a 41% growth in the process. This includes 78,000 sq m of take-up in Namur, which makes it Belgium’s second market in terms of take-up ahead of usual frontrunner, Antwerp.

Wallonia was the only region to improve on its 2019 figures. Such a leap is bound to raise eyebrows, particularly in a year when the economy had to with the disastrous consequences of the COVID-19 pandemic. In fact, this upward trend was achieved through a substantial increase in the size and number of deals – attributable in particular to the Regional administration’s new occupational strategy. These deals were not carried out on a whim and were long overdue as taxpayer money was spent more wisely and efficiently on overheads than in the past. 

The main beneficiary of the public sector’s vigour was Namur, with approval granted for the future Court of Justice (approximately 35,000 sq m) and the Walloon administration taking in excess of 34,000 sq m in two buildings (AXS and Crosspoint). Charleroi actually recorded a significant fall in activity (6,000 sq m in 2020), whereas Liège was broadly in line with 2019’s excellent figure with 43,000 sq m. A special mention for Mons, albeit located outside the three “recognised” Walloon market cities, where a couple of public sector bodies pre-leased 10,000 sq m in the Renouv’O building at the end of the year.

Stéphane Moermans, Head of Office Leasing Wallonia, said, “Building on these major lettings in Mons, we predict 2021 will be a highlight year, especially for Hainaut and Charleroi, following Liège in 2019 and Namur in 2020. Indeed, some large moves involving various public sector bodies are expected to come to fruition, potentially yielding as much as 25,000 sq m of take-up.

Apart from Charleroi, though, Wallonia has reached the end of a cycle as far as public sector relocations and influence on take-up are concerned. In an ideal world, the market would look to the private sector to pick up the mantle in 2021; however, the pandemic has put a dampener on this prospect. “However, the COVID situation and general rethink around workplace strategies may provide regional markets with an opportunity to position themselves as proper decentralised locations for companies looking to provide offices nearer their employees than Brussels, as is often the case.”, said Stéphane Moermans. In Liège in particular, a strong speculative pipeline on the outskirts of the city, as well as in central areas certainly provides opportunities for corporates looking to make a move. Conversely, the Namur pipeline offers very little in the short and medium term. 

No shifts from current prime rent levels are anticipated in 2021:
Liège: 160 EUR/sq m/ear
Namur: 160 EUR/sq m/year
Charleroi: 135 EUR/sq m/year

4. The future of the office, the office of the future 

The health situation has caused a dramatic change in our structures and the way they operate. Working from home has risen sharply and, according to our latest international survey1, homeworking will occupy a significant place in the way work is organised in the future. 

Overall, hybrid working (in which the employee works part of the time in the office and the other part from home or some other location) is set to more than double in the years ahead, rising from 22% pre-pandemic, to more than 58%. In Belgium, over 55% of employees expect to see the way they work become more flexible2

Having said that, it would appear that the office market is entering a new age that will see big changes to the way offices are used. In fact, some of the conclusions from our survey point towards the workplace becoming more important for:
- Creativity and innovation
- Collaboration
Corporate culture 
- The employee experience and sense of belonging 

This means that the way offices are used – and hence the form they take – will change in the future. However, according to Antoine Brusselmans, Director of the Brussels Office Leasing Department, “The change will become visible over a relatively long period of time. Tertiary real estate has already started moving towards this new paradigm. But, like an ocean liner, changing course will take some time to happen. In the future, we expect there to be more communal spaces for staff to work together and meet, with conference rooms of various sizes, office communities and spaces for ad hoc meetings, etc. Urban locations would also appear to be in favour. In a world where employees will come to the office less often, they will be looking more for additional amenities and services when they do, such as retail outlets, fitness studios, cafés and restaurants. This means that fast, urban means of transport will be determining for greater workforce mobility.” Hence, the old adage of ‘Location, Location, Location’ will be amplified by ‘Flexibility, Flexibility, Flexibility’ in the months and years to come. 

While the actual impact is difficult to estimate accurately in terms of figures, for Brussels take-up is likely to decrease in the years ahead and stabilise at around the 320,000 sq m mark, on average, rather than the 400,000 sq m recorded annually over the past 5 to 10 years. And this change will raise numerous questions about the future of the tertiary real estate landscape. Antoine Brusselmans concludes, “Nevertheless, a number of major deals should make it safely into land in 2021, which will contribute significantly to take-up. Combined with a certain resilience in the segment for medium-sized office space, 2021 could still have a few pleasant surprises up its sleeve for us.” 

5. How can we help you?

In this highly specific environment, we will be by your side more than ever to support and guide you through all of your office leasing procedures.

As the market leader3 for many years, we reinforced our dominant position in 2020 thanks to our team of experts, our undisputed knowledge of the market and the development of new services and tools. 

Cushman & Wakefield is the only property consultant with offices in each region, in Antwerp and Liège, as well as in Brussels.

So, please do not hesitate to contact us for all your questions about your commercial real estate: 
- Renewing or negotiating your lease, 
- Taking advantage of our unequalled market knowledge,
- Analysing and optimising your office occupancy,
- Defining your new spaces for working and collaborating


1 See particularly Workplace Ecosystems of the Future
2 See Workplace Ecosystems of the Future, p. 10. 
Based on the annual rankings published by Expertise News External Link on 14th January 2021


Forecasting how Belgian Commercial Real Estate values will cope with inflation and the rising cost of debt

The COVID-19 pandemic, and the Russian invasion of Ukraine have turned economies upside down. The latter has indeed led to the greatest cost-of-living crisis of our generation. Multiple European countries are exposed to the consequences of the war. One of those consequences is the sky-high inflation that was last seen at a similar level as long as almost half a century ago. In the upcoming series of articles, the impact on Belgian commercial real estate takes centre stage.


  1. Establishing the key economic fundamentals 
  2. The theory behind a forecasting model
  3. Market sentiment backed up by forecasts

Market sentiment backed up by forecasts

In our first article, we established the key economic fundamentals for the commercial real estate market and examed the economic indicators that are most relevant in determining market direction. In the second part, we discussed the methodology we used for forecasting prime yields in the upcoming months. This final article discusses the results of the model, the expected prime yields and market sentiment for the near future. 


Following the recent changes in the monetary policy of the European Central Bank (ECB), commercial real estate has started to adapt to these interest rate increases and as in the rest of Europe, Brussels is experiencing longer and more difficult transactions, a growing gap between asking and offering prices, and transaction repricing and/or asset withdrawals from sale because offers have not met expected price levels. 

It goes without saying that the prime yields in the office market are facing changes. Last quarter, Brussels’ prime office yield have increased towards 3.85% coming from 3.60% in the beginning of 2022. Although the increase is relatively limited at the time being, uncertainties will remain for a while and therefore, the difficulty to assess commercial real estate yields will continue. 

Our previous article showed the methodology of our statistical model in which economic indicators are either or not relevant to determine the future of the investor market. It is no surprise that the Belgian ten-year bond rates (OLO 10Y) showed the strongest correlation coefficient between the examined variables. Historically, the ten-year bond rates (OLO 10Y) have seen a strong correlation with the prime office yield, especially visible before the Global Financial Crisis (GFC). 

For many investors the spread between the OLO 10Y and prime office yields was key between the 2013-2021 period. The Eurozone was yet to gather traction in 2013 and times of ultra-low inflation and quantitative easing started as a tentative of the European Central Bank (ECB) to speed the up economic recovery. During this period, the spread was approximately 400 bps compared to 130 bps prior to the GFC. During the GFC, the spread was even below 90 bps. 

Our forecasts covered the period from the first quarter of 2021 to the second quarter of 2024. Until the first quarter of 2022, the difference between the forecasted and the actual yields is approximately less than 5 bps. From then on, the theoretical prime yields show an increase of more than 50 bps, which illustrates a significant correction on the actual prime yields is expected. However, the reality shows otherwise. The current prime office yields are lagging behind on our forecasts which demonstrates that the prime yields could increase up to 4.50% for the end of 2023. From H1 2024, a decrease is expected. Although the increase seems significant, it remains still below the historical levels prior to 2017. This is in line with the OLO 10Y, which is projected by Moody’s Analytics to increase to 3% for H1 2023 and from then on decrease towards 2025. The ECB forecasts inflation to stabilize to 2% in 2024, resulting in economics softening and, potentially, a decline in the OLO 10Y, which would lead to further compression of prime yields in the Brussels office market. 

Figure 1: Forecasted & actual yields in comparison with the Belgian ten-year bond rates

Source: Moody’s Analytics, Cushman & Wakefield

It should be noted that a further increase in interest rates can affect the results from our model. Due to the economic uncertainty, the market conditions can change and thus affect the forecasted yields.

Market sentiment

In the third quarter of 2022, over more than EUR 1bn was invested on the Brussels office market which brings the current total invested volume for 2022 to approximately 2.5bn EUR, despite turbulent market conditions. A record investment volume may appear contradictory in a time of war and rising inflation, but most of it is the consequence of prior negotiations.

In response to a more unstable economic environment, some investors’ strategies have already changed. International investors are returning towards their domestic markets where they have a better understanding of the market dynamics. Instead, Belgian local players may be able to take advantage of some favorable positions as a result of the decline of the euro, which may draw foreign investors despite the current state of the economy. 

Together with our Belgian Capital Markets team, the forecasts were examined and brought up in conversation. Recent transactions, such as Whitewood's acquisition of Engie Towers, are the first evidence of the market's current correction and are thus in line with what our model predicted. The Engie Towers, located in the North district, are two buildings totaling 77,000 sq m of office space that are currently fully occupied by Engie for the next seven and a half years. Even though this was a core transaction, the prime yield was already correcting for Q3 as the deal traded at a yield of 4.60%. 

The upward trend in prime yields on the Brussels office market should be confirmed and accentuated in the coming months, with a level of around 4.49% for 2023 in the EU district according to our model.

To wrap up our series of articles, we observe a positive, moderate correlation between the OLO 10Y and the prime office yields. Although the correlation was known in the past, it is unquestionably a good barometer for what will occur. The upwards correction of prime yields illustrates that pricings will differ for many investors and which may lead to investors to delay their investments. Although many investors, who are prone to the rising cost of debt, are putting of their investments while other investor view numerous opportunities. 

In general, 2023 will be a challenging year for many industries. Because of Belgium's market's resilience, notably in the office market, corrections should be smaller than in other countries. 


The theory behind a forecasting model

Grounds for devising a model

As discussed in this series’ first article, the European Central Bank's successive increases in interest rates have resulted in higher ten-year bond rates.

However, the commercial real estate market is only now beginning to adapt to this increase. Like in the rest of Europe, Brussels is experiencing longer and more difficult transactions, a growing gap between asking and offering prices, and transaction -repricing and/or asset withdrawals from sale because offers have not met expected price levels.

As such, prime office yields in Brussels have been revised upwards this last quarter, although to a very limited extent. The Brussels office prime yield now stands at 3.85% compared to 3.60% in the beginning of 2022. As uncertainties continue to reshape the global economy, it is becoming increasingly difficult to assess the evolution of commercial real estate yields.

In our second article in this series, we examine which economic indicators are most useful for determining the market's direction in terms of values and to provide some guidance for the future of the investment market.

Therefore, we decided to implement a Machine Learning algorithm to forecast prime yields using statistical models in the upcoming months. In this article we detail our methodology, which utilises the qualitative datasets at our disposal.

Preliminary study

The database used to train our machine learning model includes quarterly data on the variable to be predicted, namely prime yields on the Brussels office market. The database additionally uses quarterly data on the different explanatory variables which we highlighted in the first article of this series: GDP, inflation, the unemployment rate and ten-year bond yields (OLO 10Y), dating back to 1995.

A preliminary study highlights a significant correlation between yields and ten-year bond yields, but also between yields and the unemployment rate, while inflation and GDP are not correlated with yields (see Figure 1). Indeed, the correlation coefficient between prime yields and ten-year bond yields is the strongest among the examined variables at over 80%, indicating a positive, moderate linear relationship between these two variables.

Figure 1: Correlation matrix

Correlation Matrix

This means that a decline in ten-year bond yields is coupled by a compression in prime yields in the Brussels office market (see Figure 2) and conversely.

Figure 2: Brussels prime office yields and OLO10y evolution in %

Source: Cushman & Wakefield, Moody's Analytics

The correction in ten-year bond yields should therefore lead to an upward correction in prime yields and artificial intelligence could help to understand to what extent and at what level.

Similarly, there is a link (correlation of 76%) between prime office yields and the unemployment rate. Indeed, like ten-year bond rates, the unemployment rate follows the same movements as yields and with the same delay. This means that when the OLO 10Y rises, as it did following the subprime crisis in 2008, the unemployment rate rose as well, but with a delay of one or two quarters, just like prime yields.

Figure 3: Brussels prime office yields and unemployment rate evolution in %

Source: Cushman & Wakefield, Moody's Analytics

On the other hand, it may appear surprising that there is no relationship between GDP and premium returns. This is because, during certain crises, such as the COVID-19 outbreak, GDP fell sharply in 2020 before rebounding strongly in 2021, while yields continued to compress. The same is true for inflation.

Creation of the gradient boosting model

For the construction of the model, the method was a regression algorithm to determine the quantitative variable of the yields. Indeed, regressions have the advantage of being perfectly applicable in cases where all variables are quantitative, i.e., continuous numerical variables.

A Gradient Boosting algorithm was chosen from among the many possible regressions. To select the most accurate model, different models are constructed from decision tree ensembles. Trees are added one at a time to the ensemble and fit to correct the prediction errors made by prior models. This is a type of ensemble machine learning model referred to as boosting. Models are fit using any arbitrary differentiable loss function and gradient descent optimisation algorithm. This gives the technique its name, “gradient boosting,” as the loss gradient is minimised as the model is fit.

The model determined that for an optimal prediction of prime yields in the Brussels office market, the OLO10y variable has the most influence on the yield result, followed by the unemployment rate, GDP, and inflation to a lesser extent (see Figure 4).

Figure 4: Feature importance

Finally, having determined the optimal model, we trained it on twenty-five years of historical data before testing it over the last two years and comparing these results with actual market yields (see Figure 5). The Actual yields are those recorded in our different market reports while the Forecasted yields are those resulting from our theoretical model. 

Figure 5: Comparison between actual and forecasted Brussels prime office yields

In a healthy market, the model fits actual yields relatively well. Indeed, in 2021, the forecasted yields are nearly identical to the actual yields recorded on the Brussels office market between Q1 2021 and Q1 2022, ensuring the model's and forecasts' robustness. However, in 2022, the economy contracted following Russia's invasion of Ukraine in February, and ten-year bond yields jumped in the second quarter as a result of high inflation and rising interest rates. Our theoretical model reacted immediately and significantly to this bond yields increase. On the Brussels office market, the correction is much slower. Indeed, while our forecasted yield (in red in the chart) is at 4.13% in Q2 2022, it was still stable at 3.60% in reality. The first correction observed on the Brussels office market was in Q3 2022 with a 25bps prime yield increase to reach 3.85% while the theoretical yield predicted by our model jumped to 4.3%. 

The ECB's various interest rate hikes have caused ten-year bond rates to rise, causing the model to react definitively faster than the resilient Belgian property market.

So, what's next? 

The model is based on Moody’s Analytics and the NBB’s baseline scenario forecasts figures to predict prime yields on the Brussels office market in the future.

In the past, we have seen a strong correlation between the ten-year bond and the prime office yield. The spread between ten-year bond rates and prime yields was extremely important during the 2013-2021 period as a result of the accommodative monetary policy decided by the ECB to support the economy. Prior to this, the spread between both was somewhere between 100 and 130 bps. It narrowed to around 80bps during the subprime crisis.   

In the final article in this series, we will analyse how the forecasted bond yield evolution could impact the Brussels prime office yield in the future and what the future spread between both could evolve. We will also present some market sentiment on the evolution on the Brussels office investment market in an increasingly uncertain environment. 


Establishing the key economic fundamentals

1. Inflation on the rise - the underlying factors

As a consequence of the COVID-19 pandemic, multiple issues affected the supply chain, triggering inflation to accelerate as from 2021 with the easing of containment measures and consumers’ willingness to spend and travel. Supply and demand were mismatched. Production was constrained due to the pandemic and led to worldwide shortages across several industries. Labour shortages are still sorely felt, notably where truck drivers are concerned, for instance in Germany, where there is a 50-80,000 truck driver deficit according to the European Road Freight Rate Development Benchmark. Raw materials and services such as transport and distribution have become increasingly expensive. Then in 2022, the direct effect of the situation in Ukraine has further exacerbated the inflationary context. Indeed, although multiple dimensions are influencing inflation in Belgium, the rise in energy prices stemming from current geopolitical instability is brutal. According to the latest available Statbel figures, the inflation of energy prices for the month of October 2022 stood at 63%, compared to 60% in September, and account for a large chunk (5.95%) of overall inflation. Belgian inflation stood at 11.27% for the month of September and increased towards 12.27% for October. This level which was last seen in 1975 and, contrary to previous forecasts which announced a decrease of inflation in the second part of 2022, inflation continues to rise. The overall annual inflation forecast for 2022 stands at 9.35% according to Moody’s Analytics’ October figures.

Figure 1: Belgian inflation forecast (2015-2025)

Source: Moody’s Analytics, National Bank of Belgium


2. Gross Domestic Product and Belgium as an exporting economy 

Next to inflation, Belgian Gross Domestic Product (GDP) took a hit in a COVID-ravaged 2020 due to higher unemployment, a limited fiscal response, and subdued external demand. The latter is a crucial component of the overall health of the Belgian economy - despite its size, Belgium was the 10th largest exporting economy worldwide as recently as 2021, with export sales having increased by more than 30.5% against 2020. 
In the first quarter of 2022, GDP growth held up at 4.85% despite the high commodity prices and the disruptions in the supply chain. Growth weakened in the second quarter at 3.29%. The peaking inflation will weigh the most on the Belgian economy in the fourth quarter of 2022 and the first quarter of 2023, when economic growth is expected to stall. Indeed, the economy in Q4 2022 is forecasted to increase by 0.45% and 0.32% in Q1 2023 according to the National Bank of Belgium and Moody’s Analytics. This is largely because of energy-intensive companies reducing their production or even shutting down thereby weighing negatively on Belgian exports. 
Overall, GDP is forecasted to grow by 2.44% overall for 2022, mainly supported by private consumption. In the near term, consumers and businesses alike will reassess their expenditure in a bid to cope with high costs. GDP is therefore forecasted to grow at a slower pace and to reach a growth rate of 1.49% in 2025. 


Figure 2: GDP Belgium forecast (2015-2025)

Source: Moody’s Analytics, Federal Planning Bureau

3. Central banks under the spotlight

Since the financial crisis of 2008, the European Central Bank (ECB) pursued quantitative easing and reduced interest rates to stimulate the economy. For more than five years, the ECB’s policy rate stood at 0% which promoted economic growth, strengthened the labour markets, encouraged businesses to invest further. For Commercial Real Estate (CRE), this meant that players were able to finance projects at a low cost of debt. 
Faced with a different challenge of keeping the current inflationary situation under control, many of the world’s central banks, chiefly the Federal Reserve System (Fed) and the Bank of England both raised their interest rates to combat inflation: 
  • The Bank of England increased its interest rate by 50 basis points in both August and September 2022. The Bank of England then increased its interest rate by a further 75 basis points in the beginning of November, which is its largest rate increase in over 30 years, to reach 3%. Regarding the future, the Bank of England warns of a long recession in the coming years. 
  • The Fed had already delivered three consecutive hikes totaling 225 basis points since May 2022 and is expected to proceed with further increases in the upcoming months. The Fed made history by raising the interest rate for a fourth time in a row by 75 basis points in the month of November. 

The ECB is not an exception and has also increased its interest rate twice already this year. First in July 2022 by 50bps and again in September with an unprecedented 75bps. Other interest and financing rates were immediately affected, and significant tightening was seen in Euribor rates and the yield on Belgian 10-year bonds (OLO – 10y), which is currently close to 3%. 

When announcing the 75 basis points increase in September, Christine Lagarde, the president of the ECB, stated that the dire economic outlook is not anticipated to improve in the short term, with inflation expected to remain high in the months to come. Other interest rates increases are expected before the year-end and early next year to fight this high inflation. This will likely lead to new rise of the OLO yields.

The Fed is pushing up bond yields as a result of the multiple rate hikes. In the Eurozone, the yield on the Belgian ten-year bond (OLO) increased 32 basis points to 2.86% for the month of November. According to Moody’s Analytics, the OLO yields are expected to increase to around 3% in 2023 and remain above 2.50% towards 2025.  

Figure 3: Belgian 10-year bond and ECB interest rates

Source: Moody’s Analytics, European Central Bank


4. The impact of interest rates variations on commercial real estate

Prior to the economic crisis of 2008, we observed a strong correlation between the evolution of the interest rates (the 10Y OLO) and office yields. A variation of the former was generally followed by a variation of the latter, albeit with some delays. 
The 2008 global financial crisis and the strong shift in the monetary policy of the ECB changed this course drastically. Indeed, by “artificially” keeping interest rates at 0%, bond yields were close to (or even below) the 0% threshold for a very long period of time. As such, and despite office yields compression to historically low levels, the spread between both increased. 
Following the recent changes in the monetary policies of Central Banks across the globe, commercial real estate market is only now beginning to adjust to these interest rate increases, and, as in the rest of Europe, Belgium is witnessing longer and more difficult transactions, a growing gap between asking and offering prices, and transaction repricing and/or asset withdrawals from sale because offers have not met expected price levels. 


Figure 4: Belgian 10-year bond and office prime yields

Source: National Bank of Belgium, Cushman & Wakefield

As such, prime office yields in Brussels have been revised on the upwards this last quarter, although to a very limited extent. As uncertainties continue to reshape the global economy, it is becoming increasingly difficult to assess the evolution of commercial real estate yields. 

In our second article in this series, we will examine which economic indicators are most useful for determining the market's direction in terms of values and to provide some guidance for the future of the investment market.

Table 1: Key Performance Indicators Belgium


Data Series
In using the data contained in this report, the following should be noted:

  • The data series has been prepared based on information which has been collected through our own Research, Capital Markets and Agency teams as well as material available to us from public and other external sources. In respect of all external information, the sources are believed to be reliable (unless stated) and have been used in good faith. However, Cushman & Wakefield has not verified such information and cannot accept responsibility for their accuracy and completeness, nor for any undisclosed matters that would affect the conclusions we have drawn. Nonetheless, in interpreting the information used, we have had to rely on the validity and accuracy of the data and information sources available to us.
  • We have taken every possible care in the collation of this data series.  The data is believed to be correct at the time of reporting, but may be subject to change during the life of the project and beyond and as new information becomes available. We reserve the right to change data without prior notice in the light of revised market opinion and evidence.
  • In accordance with standard practice, we would confirm that the information is confidential to the parties to whom it is addressed, for their sole use, and for the stated purposes only. No responsibility is accepted to any third party in respect of the whole or any part of its contents. Neither the whole, nor any part of this project or data series, nor any reference thereto, may be included in any document, circular or statement without our written approval of the form and context in which it appears. It may not be reproduced by any means (electronic or otherwise) without prior written consent from Cushman & Wakefield.

Meet our Research team

Benjamin Devie
Benjamin Devie

Senior Analyst
Brussels, Belgium

+33 (6) 29453281

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