Transactions - MAY 18, 2017

Toronto investor enters Brussels market

by Andrea Waitrovich

Toronto-based Dream Global REIT has completed the acquisition of all the shares issued by SPE III Runway SPRL, a Belgian entity that holds as its main asset Airport Plaza, a multi-tenant office complex located in Brussels, Belgium. The purchase price was approximately €95.9 million ($143.0 million).

“Brussels, headquarters of the European Union, is amongst the largest office markets in Europe and a strategic location for many multinational companies, making it an ideal location for the Trust’s expansion,” said Jane Gavan, CEO of Dream Global REIT. “We have now entered into our second market outside of Germany, further solidifying our reputation as a local European investor with a strong management platform.”

Airport Plaza was built in 2011 and is currently 97 percent occupied. The complex consists of five multi-story office buildings with underground parking, totaling 387,500 square feet of gross leasable area. The buildings are linked by means of a shared lobby, providing internal access to restaurants and amenities.

Tenants include Samsung, Levi Strauss, Air Products, Estée Lauder, Sanofi, McDonalds, Chevron and NN Belgium (the insurance arm of ING).

The capital city of Brussels is a top six European office market, a preferred location for international organizations and among the largest global centers for international cooperation, serving as the headquarters for both NATO and the European Union. Brussels is at the heart of one of the wealthiest regions in Europe and has office inventory totaling 143 million square feet, comparable in size to Hamburg or Frankfurt in Germany.

The Brussels office market totaled just 822,857 square feet of take-up during the first quarter 2017, according to CBRE. This lackluster figure is largely attributable to a very quiet public sector, which happens occasionally.

There are, however, reasons to be upbeat. For one, this total is roughly average for first quarters since 2011, despite the public sector’s absence, notes CBRE. Additionally, quarterly corporate take-up of more than 710,418 square feet (87 percent of the first-quarter total) is actually better than its medium-term average.

During the first quarter, there were 13 leases greater than 10,000 square feet, of which just two were in the CBD. The largest deal by far was Beobank’s pre-letting of 237,000 square feet in the Quatuor in the North district. Befimmo’s 645,000-square-foot Quatuor office project will replace the current 396,000-square-foot facility occupied by the Flemish Ministry and be completed in 2020.

Of a total office stock of 136.7 million square feet, 12.7 million square feet is considered vacant. The average vacancy rate for the Brussels market effectively held steady from the previous quarter at 9.31 percent.

Prime rents at the very best locations remain stable at €285 per square meter ($317 per square foot) in Leopold. Other districts have achieved rents of €225 per square meter ($250 per square foot) in city center and €210 per square meter ($233 per square foot) in Louise.

In 2017, the office development total is expected to be comparable at 1.3 million square feet, of which 446,702 square feet is speculative. Notable 2017 projects include Herman Teirlinck (538,000 square feet), pre-let by the Flemish government; Axa’s city center office (355,000 square feet); and Ghelamco’s Spectrum (173,837 square feet), being developed speculatively. The 2018 pipeline is robust at more than 2.2 million square feet of space (including non-spec development), almost half of which is speculative.

Brussels’ first-quarter office investment of €486 million ($540 million) was almost identical to that of the previous quarter. Investors focused their funds in CBD markets, with transactions recorded in the Leopold, city center and Louise districts, though three deals in the Airport district suggest investors are still finding value in other markets.

The most significant deal was the Korea Investment & Securities and Hana Asset Management acquisition of Meeûs 8–16 (438,000 square feet) for €205 million ($228 million). This facility was renovated in 2014 and is let long-term to the EU Parliament. The second-largest deal was the CBRE GI (POBA) acquisition of Brederode 13, 9, and Namur 48 (237,000 square feet) for €122 million ($136 million).

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