In 2024, office take-up fell by 24% compared with the previous year, with a total of 133,321m2 of office space occupied. This figure marks a return to historically low levels, to the extent that you have to go back to 2011--at the height of the eurozone crisis--to find a similar situation. “This is another year without significant take-up,” says , country lead at JLL Luxembourg. “Occupiers have maintained a cautious attitude to their real estate decisions. The lack of visibility on growth prospects and ESG issues has slowed down occupiers' decision-making.”
The state and the financial sector, the main tenants
The largest new occupiers were the Luxembourg government, which took over the Laccolith building at the Cloche d’Or for the Rent Commission (11,291m2), and the final phase of Terres Rouges at Belval (just under 10,000m2). Other noteworthy transactions include (9,700m2) and Deutsche Bank’s move to the Skypark in Findel (7,077m2). These transactions highlight one fact: the return of the state in transactions, which has doubled its share of transaction volume, and the financial sector, which dominates the market by a wide margin, with 42% of total take-up compared with 23% in 2023.
“One trend is being confirmed: locations close to the tram are highly sought-after, as shown by the dynamic market at Cloche d’Or, Howald and the airport. On the other hand, it would be wrong to say that the suburbs have lost their appeal with the extension of the tram network. On the contrary, we have observed that transaction volumes and the average size of transactions in the periphery have remained fairly stable in recent years,” explains Jonathan Morand, director office agency at JLL Luxembourg.
2024 was also marked by a decline in total deliveries: -60% compared with 2023, although previous years were marked by the completion of large buildings. As a result, the vacancy rate has fallen to 4.16%, which is still below the European average of 8.5%.
Rents set to rise in 2025-26
Paradoxically, this fall in demand has not prevented rents from continuing to rise, a phenomenon that mainly benefits owners of existing offices. Rents in the capital’s main districts, such as the CBD (€54/m2/month) or the Gare district (€40/m2/month), have remained unchanged. Rents in the Cloche d’Or and Kirchberg are also stable (€38/m2/month and €42/m2/month, respectively). At Belval, the rent is €24/m2/month.
However, JLL expects rents to rise significantly in most districts by 2025-2026, due to limited availability and continuing high construction costs.
An increase in investment, but...
The investment market rose slightly in 2024, with a total investment volume of €606m, compared with €531m in 2023. However, a third of these transactions concerned sales for own occupation, and 36% of the sales volume represented VEFAs (vente en l’état futur d’achèvement, or sale in future state of completion) of residential buildings for the benefit of the Fonds Kirchberg and the City of Luxembourg. These figures are therefore less representative of investors’ appetite for office property.
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“In the office segment, one of the largest transactions in Europe was completed in Luxembourg with the Royal Park, confirming the attractiveness of this market for global investors,” comments Vincent Van Brée, head of capital markets at JLL Belux. “The rate cuts by the European Central Bank bode well, as they open the door to a compression in property yields already at the start of 2025. If we take into account the expected rise in rents in 2025-2026, we think that valuations will start to rise again, which should create a more favourable climate for sellers.”
This article was originally published in .