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The investment market in Belgium The investment market in Belgium


The investment market in Belgium

Discover our regular update on commercial real estate investment in Belgium for office, retail, industrial and logistics. 

Investment market: what to expect for 2021 after an atypical year in 2020?

2020 was an unusual year from every point of view. The global pandemic caused by COVID-19 had significant repercussions on both the world and local economies, affecting every area of activity. And the changes we have seen in our lifestyles and in our way of working and consuming have had similar effects on the various sectors and providers in the world of real estate1.

The investment market was no exception. Numerous changes were triggered in 2020, which are likely to contribute towards a major overhaul of this market in the years to come.

Let’s look back at a 2020 that was like no other and examine the impact it had for the future of the professional real estate market in Belgium.

1See our other articles published recently on the office occupancy market and the retail occupancy market 

1. 2020: record year on the investment market

6 billion euros invested. It was the first time that this symbolic threshold had been exceeded on the Belgian investment market. This result is explained by a number of factors:

  • The investment market was booming before Covid struck, with growing interest from stakeholders across the board, ranging from the local private investor to institutional funds operating on a global scale
  • The continued accommodating monetary policy of the European Central Bank, aimed at re-energising the economy
  • A price level per sq m, rarely seen in Belgium
  • Exceptional transactions, including the Finance Tower at more than 1.2 billion euros, to mention just one

2. The various sectors experienced highly contrasting performances

Very different realities are hidden behind this exceptional figure, depending on the sectors of the market concerned. Indeed, while the office sector saw a record year (with more than 3.5 billion euros invested in Belgium) and significant interest from national and foreign investors, the retail sector recorded a 30% reduction in volumes, achieving 684 million euros across the whole of 2020. The industrial and logistics sectors performed well, with over 650 million euros invested, attracting growing attention from numerous national and international players. The segments previously qualified as “alternative” (nursing homes, residential, etc.) also grew and have a fine future ahead of them.

3. The notion of prime yield has become obsolete; knowledge of the market is now essential

In a world where interest rates are at their lowest and capital at its highest, competition for the best assets is increasing, pushing yields ever lower.

Despite the health situation and its impact on economic growth, there is still some appetite to be seen for all types of assets, depending on the risk profile of investors.

While prime yield may still be the benchmark here, it’s market knowledge that is essential for investors, as Cédric Van Meerbeeck, Partner, Head of Research & Marketing, confirms: “In the current context, investors are constantly looking for more information that will enable them to establish their business case and decide whether to invest – and especially at what price to invest. It is vital for us to be able to give every confidence to investors and this inevitably means the need for a high level of market knowledge, as well as the ability to provide a maximum number of points of comparison. We also need to know the specifics of each transaction so that we can give our clients the best advice. It was with this in mind that we have developed a range of new decision-making tools that are up to date at all times, interactive and which enable investors to take account of where the property is located, its occupants, what’s happening with the competition and so on. By using these tools, investors will always pay the price that they consider to be optimal, independent of the position they adopt in relation to a theoretical benchmark that is prime yield.”

4. The office sector on course for new records in 2021

Despite the current unprecedented situation and the lingering uncertainties surrounding us as 2021 gets underway, both Belgian and foreign investors continue to take an interest in Brussels and Belgium. It has to be said that despite the current floor 4% prime yield, Belgium remains an attractive proposition when compared with certain other European markets (some cities in Europe are recording prime yields of less than 3% for similar products).

In addition, against a background in which the office market will change dramatically in the months and years ahead, new investment opportunities are now emerging. Marc-Antoine Buysschaert, Partner, Head of Capital Markets Office, underlines this: “The economic problems caused by the health crisis will force many owner-occupiers to dispose of their property to release liquid funds so that they can relaunch their business as soon as possible. As a result, the number of sale and leaseback transactions will increase in the coming months, opening up great opportunities for investors. It would also appear that a new category of investment has got the wind in its sails at the present time: “forward funding” or “forward commitment”. More and more investors are looking for office projects with planning permission to invest in brand-new developments of high quality and that meet the latest standards in terms of energy and efficiency. We recently concluded the deal on The First, a building located in the heart of the Leopold quarter, using this structure – and I can already tell you that there are others in the pipeline for 2021.”

It also appears that investors will refocus on so-called “core” products, i.e. buildings that are of higher quality, better located or offering greater security in terms of their occupancy – in other words a combination of these different factors. Marc-Antoine Buysschaert concludes: “We get numerous calls from parties looking for investments in Belgium. While travel restrictions have forced us to reinvent ourselves in terms of the way we market a property, they have not slowed down investor appetite. As a result, today’s prime yields at 4% for offices could see further cuts during the course of 2021.”

5. Despite the turbulence, the retail sector will continue to offer excellent opportunities

2020 was a difficult year for the retail sector, with repeated store closures weighing heavily on commercial activity, which in turn impacted retail sales, forcing some businesses to close their doors permanently. COVID-19 has had the effect of accelerating the trends previously seen – in particular greater competition from online retail and changes in the way people shop and consume goods. However, it seems that Europeans and Belgians continue to like bricks-and-mortar retail, which is the way that people in Belgium prefer doing their shopping.

In this context, while investors may be demonstrating greater caution in terms of investments in the retail sector, there are still some great opportunities to be snapped up. Retail is increasingly a question of having detailed knowledge of the market, as well as an understanding of locations, growth sectors and the options for repurposing the property.

The fashion sector is the one that has been affected most severely by the health crisis and, as a result of the snowball effect, this is impacting value in the High Street and Shopping Centres. These are the two segments of the market where we have seen the biggest rent corrections, around 20 to 30% compared with 2019. Yields have also been affected in an upward direction, settling at 4% in the country’s leading retail streets and 4.4% for the prime shopping centres. According to our forecasts, a further round of slight increases is expected for 2021. However, the way Arnaud de Bergeyck, International Partner, Head of Capital Markets Retail, sees things, there are new opportunities opening up to investors. “Despite the pandemic,” he says, “we managed to finalise some great transactions in the high street sector in 2020, in particular the sale of the Primark site in Chaussée d’Ixelles. But it’s true to say that it is the smaller volumes (less than 3 million euros) that generally find a positive outcome. Transactions with larger volumes take a longer time and require more analysis to get them over the line. But there will be other investment opportunities in this sector in 2021. We are currently in the process of preparing to launch a number of sales and all of them should be completed during the year.”

In contrast to High Streets and Shopping Centres, which have seen mixed performances, the retail market the out-of-town retail market is going full steam ahead, which is having a positive effect on the investment market. Investors are very clearly showing a growing interest in retail parks – especially when they include a food store. This viewpoint is confirmed by Arnaud de Bergeyck. “There has never been such a great appetite for this type of product than there is now,” he says. “It is also the only subsector that hasn’t seen a correction in yields. These should remain stable during 2021 and may decline just a little. In addition to the biggest transaction of the year, the sale of the Olen Shopping Park that we advised in 2020, there were numerous other deals. And plenty of existing projects or out-of-town retail outlets will change hands during 2021.”

6. Industrial and logistics sectors in pole position of investment wishes

The logistics sector is doing well and has performed impressively over the past few years. This sector was also in the spotlight in 2020, with the explosion of online shopping providing a glimpse of a rosy future. Bart Vanderhoydonck, Associate, Head of Industrial, explains: “The logistics market is a lot broader than e-commerce. But it is clear that online sales took off in 2020 and should continue to do so in the years ahead. This means that new developments are expected, while vacancy rates are at historically low levels. And the growing scarcity of available land is having the effect of pushing prices up.”

Sales of more than 650 million euros were recorded in the industrial and logistics sector in 2020. This was an impressive level, driven by numerous transactions of significant size, such as the sale of a logistics portfolio by AG Real Estate to Prologis and the resale of the Casa logistics centre at the end of the year. Investors have massively redirected their investments towards this sector since the appearance of Covid-19, causing an impressive compression of yields throughout the year. Still at 5.10% at the end of 2019, twelve months later, by the end of 2020, prime yields were at 4.70%. And our latest forecasts herald further reductions for 2021 and 2022, with prime yields likely to be at 4.25% before long. However, Bart Vanderhoydonck concludes: “If there was ever a sector where the notion of prime yield has become obsolete, it’s logistics. Indeed, depending on the location, the quality of the asset and its occupant, etc., we will certainly see yields at 4% and even below this symbolic threshold during 2021.”

7. Cushman & Wakefield ready to guide you in your investment strategy

Against this most unusual background, we are there by your side more than ever, ready to help guide you every step of the way.

Throughout 2020, our teams strengthened their positions in the market, providing advice on more than 80 investment deals for a total of more than EUR 2.4bn, both for local private investors and global institutional players, ranging from the smallest transactions up to the biggest deals:

  • Finance Tower: the biggest office deal of all time in Belgium
  • Olen Shopping Park: the biggest retail transaction of the year 2020
  • Logistics portfolio sold by AG Real Estate to Prologis

Working with our teams of real estate specialists, drawing on our unrivalled expert knowledge of the market and benefiting from the development of new services and tools, we are there to assist you with your investment strategy. So, please, do not hesitate to contact us with any questions linked to your property:

Selling or investing,
- Optimising your real estate portfolio,
- Sales & Leaseback,
- Forward funding or forward commitment
- etc.

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