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Investment Market Update

Belgium : Yield compression for office - Q1 2014

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The Belgian economy should continue to improve in 2014, following the gradual strengthening of the Eurozone economy. Financing conditions remain attractive with interest rates at historically low levels; this should contribute to boost investments in real estate, combined with the importance of equities available.

Despite this enhancing of the economic conditions, the investment market witnessed a slow start to the year with EUR 200m invested in Belgium. Activity especially involved the smaller lot size assets (under EUR 20m). Out of 23 deals recorded (in line with the quarterly average), only three were above EUR 20m lot size. As important deals are still awaited for 2014, investment volumes should increase by 10% compared to 2013 to reach EUR 2.3 bn.

Investment volumes in the office sectors are the most important, representing more than 62% of the total invested volume. As major office deals are still awaited, this market share of office sector will remain important throughout 2014.

We observe some yields compression in Q1, following the growing competition for office assets since last year. The prime office yield now stands at 6% (for 3/6/9 year leases) and should witness further compression in the coming months. Prime yields for long-term leases have also recorded a downward movement in Q1 to stand at 5% and could also show further compression.

Source : DTZ (Groupe UGL)