Office Market Report

Autumn 2012

FLANDERS First Office Market Report about the Region of Flanders. It replaces the City Report Antwerp and covers the largest cities of Flanders, reflecting Jones Lang LaSalle’s expertise in this Region. Focus on the principal Office markets of Flanders, ie Antwerp, Mechelen, Ghent, Leuven and Hasselt. Over the last years an increasing number of transactions were observed, sometimes of large size. A few corporates even moved from the Brussels Periphery to Regional cities spread all over Flanders. Mobility and proximity to employees’ homes play an important role.

2. On Point • Office Market Report • FLANDERS • Autumn 2012

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 3.

Table of Content

-

Flanders Office Market: Key Figures

4

-

Introduction

5

-

Flanders Macro-economy

7

-

Antwerp : Limited pipeline causes tighthening vacancy rates

8

-

Ghent : Rents rose to the level of Antwerp

11

-

Mechelen : Record take-up levels in 2012

13

-

Leuven : The highest rents in Flanders

15

-

Other Flanders : Large non-recurring transactions

17

-

Investment : Retail and retirement homes drive volumes

18

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4. On Point • Office Market Report • FLANDERS • Autumn 2012

Flanders Office Market: Key Figures Antwerp Mechelen Ghent Hasselt Leuven

Antwerp Mechelen Ghent Hasselt Leuven

Prime Office Rents (in €/sqm/year) Q4 2011 Q3 2011 145 145 135 135 140 140 130 130 155 155

Q3 2012 145 140 145 135 155

Office space take-up including owner-occupier (in sqm) 2010 2011 124,282 104,196 (*) 8,557 5,544 55,881 14,144 612 960 6,113 25,079

9M12 54,622 27,244 11,693 1,495 11,676

(*) Restated

Vacancy Q4 2011 Antwerp Mechelen Ghent Hasselt Leuven

sqm 223,393 n/a n/a n/a n/a

Q3 2012 % 11.8 n/a n/a n/a n/a

sqm 218,926 45,969 41,469 n/a 42,694

% 11.4 10.3 3.7 n/a 10.7

Office Space Stock (in thousand sqm) Antwerp Mechelen Ghent Hasselt Leuven

Q3 2012 1,926 446 1,115 n/a 465

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 5.

Introduction Foreword Jones Lang LaSalle has a long history in Flanders, primarily in Antwerp which has long been considered as the main if not the only established Office market of the Region. Things have changed: over the last five years, we have seen an intra-regional shift between Flemish cities, Antwerp losing some of its share to the benefit of other cities such as Mechelen, Ghent, Leuven, Hasselt but also outside these cities. Jones Lang LaSalle has therefore transformed its Antwerp Agency into a Flanders Agency, covering the main cities of the Region. The Research Department follows the same logic, and from now on, the City Report Antwerp gives way to a Flanders Report. We will keep the half yearly frequency.

By privileging a political view of boundaries, the proportion of Flanders in the total take-up has been historically fairly stable, ranging between 38% and 44% over the last 6 years with an average of 40%, compared to 50% for Brussels and 10% for Wallonia. There was an increase over the 9M12 period to 44%, representing c. 190,000 sq. m. All of the regions have registered so far take-up well below the five year average, this trend being even more obvious for Wallonia whose take-up in 9M12 is 60% below the 5 year average compared to 30% for Flanders and 40% for Brussels. This is explained by particularly strong activity in the Brussels Periphery (Flemish Brabant for the majority of the lettings) during the summer of 2012.

Take-Up in Belgium by Region 2007 – 9M12: political view 100% 90%

8%

7%

8%

11%

14%

40%

39%

38%

52%

50%

49%

50%

47%

49%

2007

2008

2009

2010

2011

9M12

14%

80% 70%

42%

60%

39%

44%

50%

When economic reality differs from politics

40% 30% 20%

In common with most of its clients and its competitors, Jones Lang LaSalle integrates several communes of the Flemish Brabant and the Walloon Brabant into the geographical definition Brussels Office market, as these are undoubtedly part of its economic hinterland. In 09/2012, of the 13,053,000 sq. m. office stock of Brussels, 12% was located in the Flemish Brabant, comprising 1,618,000 sq. m. That means that the stock of this sub-market is only 16% smaller than the stock of Antwerp. The Brussels Flemish Periphery would therefore be the second largest office market of Flanders in terms of stock.

Brussels Office Stock: politician view 12%

4%

10% 0% 19 Communes

Flanders

Wallonia

Source : Jones Lang LaSalle Research

The picture is different taking the economic definition of the respective Brussels, Flanders and Wallonia regions. In that case, the proportion of Flanders in the total take-up of Belgium is only 30% on average over the last 6 years, compared to 64% for Brussels and 6% for Wallonia. Over 9M12, Flanders contributed to 31% and Wallonia 3%. From an economic point of view we can again deduce that the relative proportion of Flanders in the Belgian take-up is stable, the main swings happening between Greater Brussels and Wallonia.

19 Communes Flemish Brabant Brabant Wallon

84%

Source : Jones Lang LaSalle Research

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6. On Point • Office Market Report • FLANDERS • Autumn 2012

Take-Up in Belgium by Region 2007 – 9M12: economic view 100% 90% 80%

2% 26%

5% 29%

70%

11% 29%

5% 33%

10% 29%

3% 31%

Take-Up in Flanders by Submarket 2007 9M12

60% 50% 40% 30%

72%

66%

60%

62%

61%

66%

2008

2009

2010

2011

9M12

20% 10% 0% 2007

Greater Brussels

Flanders

As a conclusion, we expect further developments in Ghent, Aalst, Mechelen, Leuven and to a lesser extent Hasselt, to the expense of Antwerp that will keep its growth potential but no longer as “the only place to be” in Flanders.

Wallonia

Source : Jones Lang LaSalle Research

Intra-City Movements If there is no material shift from one economic region to another, we have observed over the last 6 years important movements between the major cities of Flanders. Historically, Antwerp has always been the economic centre of Flanders, with the most active office market. Until the first part of the years 2000, the vast majority of the office transactions in Flanders were realised in Antwerp. For a few years, this has no longer been true: alternative cities such as Ghent, Mechelen, Leuven, Bruges or even Hasselt now attract corporate tenants. The common factor between these cities is that they offer the right products and better accessibility than Antwerp.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

54%

58%

2007

2008

41%

2009

50%

2010

59% 41%

2011

9M12

ANTWERP

GHENT

MECHELEN

HASSELT

LEUVEN

OTHER FLANDERS

2007

2008

2009

2010

2011

9M12

ANTWERP

54%

58%

41%

50%

59%

41%

GHENT

33%

15%

27%

22%

8%

9%

MECHELEN

6%

8%

9%

3%

3%

20%

HASSELT

0%

0%

4%

0%

1%

1%

LEUVEN

3%

14%

9%

2%

15%

9%

OTHER FLANDERS

5%

4%

10%

22%

14%

20%

Source : Jones Lang LaSalle Research

Brand new developments above rail stations such as the KAM in Brugge (let to Federal and Flemish administrations) or the area around the Mechelen station (multi-tenant, including Sanoma) attracted key corporate tenants or administrations. The attractivity of Mechelen station is also boosted by the Diabolo train link between Leuven, Zaventem/Brussels Airport, Mechelen and Antwerp. Developments alongside highways but at a certain distance from the daily traffic jams on the Brussels and Antwerp ring roads such as the MG Tower in Ghent (acquired by KBC and renamed KBC Arteveldetoren) are also successful. Developers try taking advantage of the demand for high quality offices at a closer proximity to the residence of skilled employees.

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 7.

Flanders macro-economy Flanders is focused on services, industry still critical Flanders has a population of 6.3 million inhabitants, accounting for 57.7% of the Belgian population (10,951,000 as of 01/01/2011 – Source: Eurostat). The density is higher than over the whole country, at 452 inhabitants / km² against 342 for Belgium. Flanders benefits from excellent transport connections, by road or by train, contributing to the dynamism of the economy. The Gross Regional Product (GRP) contributes to 57.1% of the Belgian GDP, though Flanders exports 75% of total Belgian exports (source: European Commission). This is explained by the still critical proportion of industry in the GDP, at 25%.

The ongoing sovereign debt crisis in Europe, increased financial market volatility, and the expected tightening of fiscal policy in the coming years are all expected to restrict growth in the short and medium terms. Near-term growth could also be negatively affected by the unstable political situation in Belgium, and the rising global oil and food prices that will restrict purchasing power, thus hampering the fragile economic recovery. Belgium's GDP forecasts for 2012 vary from the 0.6 growth forecast by the National Bank on the upside, over 0.4% growth forecast by OECD to -0.3% contraction forecast by IHS on the downside. GDP growth is projected to remain close to nil in 2013 before increasing again to above 1% in 2014.

Source : IHS Global Insight, National Bank of Belgium, OECD.

The unemployment rate in Belgium was 7.2% in 07/2012, well below the euro-zone average of 11.3%. In Flanders it was estimated at 7.28% in September (Source: Flemish Ministry of Employment), rising during the summer with the weaker economic climate. There are material sub-regional differences, for instance the unemployment rate in West Flanders ranks among the lowest in Europe at 3.2% as of 12/2011. The Belgian economy in 2012 to date The Belgian economy proved rather resilient in 2011, against the background of the economic and financial crisis in Europe. This in spite of an 18-months long national government formation that ended only in December 2011, and public debt to GDP in the region of 100%. Belgium’s export-oriented economy held firm, supported by the booming German economy and domestic demand. Belgian GDP growth in 2011 stood at 1.9%, slightly better than the EU-27 GDP growth of 1.5% in 2011. Belgium’s economic activity was stronger than expected in the early months of 2012, with real GDP up 0.3% quarteron-quarter, apparently driven by private consumption as retail sales data for the first two months of the year was very robust. Despite this positive picture for the first quarter, Belgium’s economic activity worsened markedly in the second quarter of 2012, as GDP contracted 0.6% quarteron-quarter and it was down 0.4% year-on-year. The National Bank of Belgium's leading indicator remains deeply in negative territory, and it is now below its long-term average. The consumer confidence index has also declined and it stood at a six-month low in August 2012.

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8. On Point • Office Market Report • FLANDERS • Autumn 2012

Antwerp

The average size of transactions in the first nine months of 2012 was 658 sq. m., which is 11% above the 5-year average for the first nine months of the year, whereas the number of transactions at 83 was down 26% YoY. By district, the Centre was the most active, with 60% of takeup, followed by the Ring and the Periphery with 19% of takeup each. The centre therefore outperforms the 5-year average which stands at 42%. Ring and Periphery accounted for an average of 27 and 23% of the annual takeup respectively in the past 5 years. The two largest transactions in 2012 involve companies from the energy sector : the 11,000 sq. m. pre-let by Electrabel in the city centre, and a 3,000 sq. m. letting by Essent in the Everest building in Kontich on the Periphery South. The letting of 2,500 sq. m. by These Days in the Metro building in Berchem (Ring) completes the top three. All top 3 occupiers are corporates. Take-up is forecast to remain under the 5-year average volume of 108,000 sq. m. this year. Traditionally the fourth quarter is the strongest quarter of the year, but it seems unlikely that this will bridge the gap.

Take-up : Periphery and CBD most popular with occupiers in first nine months of 2012 After a relatively weak first quarter and a distinct improvement in the second quarter, take-up in the third quarter increased again in comparison with the previous quarter, bringing the total year-to-date volume to 55,000 sq. m. In spite of this gradual recovery, the take-up volume is still 30% below the 5-year average for the first 9 months of the year, and 20% below the level achieved in the same period in 2011. This weak take-up level in 2012 so far is largely due to the economic climate, resulting in a spectacular downfall in takeup in Q1, whereas in Q2 and Q3 both the number of transactions and the average size per transaction gradually increased, resulting in a fair take-up figure for those quarters. This recovery, however, did not compensate the lack of take-up in Q1, resulting in a globally weak year so far. Take-up in the first nine months of 2012 was largely dominated by corporate occupiers, with local administrations taking up only 1,000 sq. m. so far this year, in a letting transaction in a new building on the Northern Periphery, the Luitenant Coppenskazerne in Brasschaat. 42% of take-up was in new buildings and pre-lets. The success of pre-lets is due to the scarcity of available product that meets the highest standards, especially in the larger segment located in the city centre. The largest transaction this year was the pre-let of 11,000 sq.m by Electrabel in the Kievit II project of developer Kairos on the Kievitplein in the city centre. The project is due for delivery in Spring 2015.

Take-up by business sector 150.000

sqm

100.000

50.000

0 '04

'05

Corporates

'06

'07

'08

Local Adm

'09

'10

'11

'12 Q3

International Adm

Source: Jones Lang LaSalle Research

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 9.

Take-up by district 140.000

sq.m.

120.000 100.000 80.000 60.000 40.000 20.000 0 '04

'05

City Center

'06

'07 Port

'08

'09 Ring

'10

'11

'12 Q3

Kievit II (Electrabel): Dev.: Kairos, Arch.: Jaspers - Eyers

Periphery

Source : Jones Lang LaSalle Research

Prime Rents stabilise

With c. 12,000 sq. m. completed in 2012 so far, the stock increased in 2012 to 1,925,000 sq. m.. A number of older buildings came onto the market, and as such the global vacancy rate remains above the 10% mark, at 11.4% in Q3 2012. Over the past 2 years, there was a peak in Q1 2011 at 12.9% due to large completions and low take-up. The vacancy rate as at end September 2012 is the lowest in new buildings, at 7.75%, and the highest in old buildings, 14.5%.

As of the end of Q3 2012, prime rents remained stable in the Centre at 145€/sq. m./year, this being the sixth consecutive quarter. Compared to beginning 2011, this is an increase of 6.6%. In the Ring district prime rents increased in Q4 2011 from 136€/sq. m./year to 140€/sq. m./year and remained stable since that time. In other districts, the prime rents in the Port area declined from 130€/sq. m./year to 125€/sq. m./year in Q4 2011 and remained stable since then. Prime rental values in the Periphery remained unchanged at 125€/sq. m./year.

Although in absolute terms the vacancy rate remains high, it should be noted that out of the c. 220,000 sq. m. currently available, only 10% are new and 62% are old. Availability of prime space in excess of 2,000 sq. m. is very limited.

Incentives remain an important part of lease negotiations, with a discount equivalent to 8-10% reduction on the headline rent being the market practice, usually given as a rent free period.

Few speculative completions in the near future

Prime Rental bands €/sq.m, /Year 145

Prime Rent From

Prime Rent To

140

125

Periphery

125

Ring

150 145 140 135 130 125 120 115 110 105 100

Port

This is not likely to change in the foreseeable future with speculative development for the remainder of 2012 and 2013 limited to 12,000 sq. m.. Large new projects such as Antwerpen X and Nieuw Zuid with a total office area around 188,000 sq. m. might come to the market from end 2014 onwards. However, so far building permits were delivered for 35,000 sq. m. only. In Q1 2013, only a few speculative developments are expected to be completed: 6,500 sq. m. in the ONYX building in the Ring district, the remainder of the property, 2,600 sq. m. in Brecht on the periphery, and 2,500 sq. m. in the northern part of the town centre near the Port. Besides, there is less than 2,000 sq. m. speculative additional development planned in 2013. From 2014 onwards several non-speculative projects are planned, amongst which the Montevideo (5,000 sq. m. in the Centre), City Link 2 and 3 with a permit for 28,000 sq. m., Antwerpen X with a permit for 25,000 sq. m. as a first phase, and the Kievitplein project near the Central Station.

City Center

Limited pipeline causes tightening vacancy rates

Source: Jones Lang LaSalle Research

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10. On Point • Office Market Report • FLANDERS • Autumn 2012

Antwerp : Take-up, Completions, Pipeline and Vacancy

120

sq.m.

%

100

14 12

11,4

10

80

8

60

6

40

4

20

2

Take-up Completions F C Spec. F C Non Spec. Vacancy Rate (RHS)

0

0

2007

2008

2009

2010

2011

2012 Q3 2012e

2013e

2014

Source : Jones Lang LaSalle Research

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 11.

Ghent Take-up dominated by Corporates Take-up registered in Ghent in the first nine months of 2012 reached 11,700 sq. m., which is 11% higher than the take-up achieved in the first nine months of 2011, but 60% lower than the 3-year average for the same period, which stands at 29,000 sq. m.. In comparison with the other Flemish cities, take-up in Ghent in the first 3 quarters represented 9% of the total volume taken up in Flanders, which confirms Ghent’s status as part of the top 3 cities in Flanders in terms of office take-up. In the period 2007-2011, Ghent benefitted from an average of 21% of the take-up in Flanders, with notable large transactions including :     

36,200 sq. m. let by the Ministry of Justice (Centre) in 2007, 36,000 sq. m. pre-let by the Flemish Government (VAC Ghent Centre) in 2010, 24,000 sq. m. in the MG Tower developed for KBC (South district – the Loop), 11,000 sq. m. let by Christelijke Mutualiteit in 2008 (Centre), and 9,250 sq. m. let by the local authorities in the town centre in 2009.

The take-up level in 2012 so far is influenced downward by the economic climate, resulting in cautiousness from occupiers, both corporates and administrations, and affecting the average size of transactions. With the exception of the largest transactions in excess of 2,500 sq. m., such as those mentioned above, the take-up level in 2012 so far is in line with that of the past 5 years. Corporates accounted for 100% of the take-up in the first 9 months of 2012. The largest transactions in 2012 so far are two lettings in excess of 1,000 sq. m. by large corporates, both in the Ghent East district.

Source : Google Maps

Take-up by District sq.m.

70.000 60.000 50.000 40.000 30.000 20.000 10.000 0 2007

2008 South

2009 East

North

2010

2011

2012 Q3

Centre

Source : Jones Lang LaSalle Research

Take-up by type of user

The number of transactions registered in the first nine months, 36, was in line with the 5-year average of 38, and an increase of 28% YoY. Due to the lack of transactions in the larger segments above 2,500 sq. m., the average size of transactions in 2012 decreased to 325 sq. m., which is 62% lower than the 3-year average for the first 9 months, 845 sq. m.. By district, the Centre was the most active with 50% of takeup in 21 transactions, followed by the South district with 31% and the East with 19% in just 2 transactions. Source : Jones Lang LaSalle Research

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12. On Point • Office Market Report • FLANDERS • Autumn 2012

Limited pipeline keeps vacancy rates low The vacancy rate has remained under 5% for the past 3 years. It currently stands at 3.7%, similar to 2011, coming from 2.3% in 2010 and 4.2% in 2009. The low speculative completion level maintains the vacancy rate at this low level, in spite of decreasing take-up level. Speculative completions in the near future concentrated in the South district

The Loop is a new mixed development zone in the South district, endorsed by the city of Ghent and sponsored by a public-private cooperation vehicle, that exists to integrate the redevelopment of the old Expo-site. Future development is planned mainly in the South district, with approx. 135,000 sq. m., and in the Centre, with approx. 50,000 sq. m.. In the short term, the main property under construction is the 22-storey building of 36,000 sq. m. for VAC (Vlaams Administratief Centrum) in the Centre that is due for delivery in the second half of 2013. In the South district, c. 47,000 sq. m. are currently underway speculatively and will be delivered in the next 15 months. Rents rising up to the level of Antwerp As of the end of Q2 2012, rents for prime buildings in prime locations in Ghent increased from 140€/sq. m./year to 145€/sq. m./year, after remaining stable for 9 consecutive quarters. Compared to the beginning 2011, this is an increase of 3.6%. Rents for prime buildings on secondary locations, or for secondary buildings on prime locations are about 20% lower at a current level of 120 €/sq. m./year. Incentives remain an important part of lease negotiations, with a discount equivalent to 4-5% reduction on the headline rent being the market practice, usually given as a rent free period. Evolution of Rents 2007-Q3 2012 (€/sq.m./y)

KBC Artevelde Tower (Dev.: De Paepe, Arch.: Jaspers – Eyers)

After nine months, completions for the year-to-date reached 30,000 sq. m. in 3 buildings, the largest being the 24,000 sq. m. in the MG Tower, a 118.5 metres high office tower developed by De Paepe Group and pre-acquired by KBC, subsequently renamed KBC Arteveldetoren. The Tower is located near the exit of the E40 motorway in St Denijs Westrem and forms the entry to the Loop development zone, where the two other buildings completed this year are located. All three were new constructions. Only 4,200 sq. m. was developed speculatively.

146

145

144 142 140 138 136 134 132 130 2007

2008

2009 Antwerp

2010

2011

Ghent

Source : Jones Lang LaSalle Research

www.jll.be

2012 Q3

On Point • Office Market Report • FLANDERS • Autumn 2012 • 13.

Mechelen Take-up by type of user sq. m.

10,700 sq. m. Sanoma

30.000

6,200 sq. m. Kraft Foods

25.000 20.000 15.000 10.000 5.000 2007

Mechelen is located in the South of the Province of Antwerp, between the cities of Antwerp and Brussels. Economically it is the third Flemish city, after Antwerp and Ghent. Mechelen benefits from excellent access to the Amsterdam-Paris motorway (E19) via 2 exits, MechelenNorth and Mechelen-South. The centrally located station is an important stop in the Belgian north-south railway network, and offers a direct link with Amsterdam (High Speed Train) to the North and Brussels national airport (Diabolo project) to the South. Office zonings are located at the 3 strategic locations described above : Mechelen North and South near the E19 motorway exits, and the city centre near the station. The office stock in Mechelen is estimated at approximately 450,000 sq. m.. Take-Up rises strongly in 2012 Take-up registered in Mechelen in the first 9 months of 2012 reached c. 27,000 sq. m. in 23 letting transactions, a huge increase in comparison with the c. 4,300 sq. m. taken up in the first 9 months of 2011, and more than double the 5-year average for a full year, which stands at 12,025 sq. m.. In comparison with the other Flemish cities, take-up in Mechelen in 2012 so far represented 20% of the total area taken up in Flanders, thus achieving second place after Antwerp. This good result is based upon several lettings near the station, the largest being the 10,700 sq. m. let by Sanoma in the ZuidPoort development, the former Belgacom site. Year

LARGEST TRANSACTIONS 2007-2012 Type Address SQ. Occupant M.

2012 2009 2009

Letting Letting Letting

ZuidPoort Station ZuidPoort

10,700 6,200 3,800

2012 2010

Letting Letting

E19 BP Stephenson Plaza

3,272 3,190

Sanoma Kraft Foods Grontmij Vlaanderen Eneco Alken-Maes

2008

2009 2010 Corp Local Adm

2011

2012 Q3

Source : Jones Lang LaSalle Research

Vacancy Vacancy is currently estimated at 10.2%, representing 46,000 sq. m. Only 8% of the immediate availability is New, 67% is Modern and the rest is Old. Pipeline largely consists of prelet buildings As in the rest of Flanders, the development pipeline is limited. Development projects delivered in 2012 amounted to 3,000 sq. m. delivered near the Station. For 2013, 11,000 sq. m. is under construction non-speculatively, in the Zuidpoort building that was pre-let by Sanoma. Speculative development for 2013 is limited to a 4,000 sq. m. project in the North. Larger longer term projects are in the design phase and are subject to regional development plans.

Zuidpoort (Dev.: Virix, Arch.: Jaspers – Eyers)

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14. On Point • Office Market Report • FLANDERS • Autumn 2012

Rents increases At the beginning of 2012, rents for prime buildings in prime office locations in Mechelen increased from 135€/sq. m./year to 140€/sq. m./year, after remaining stable for 9 consecutive quarters. This increased rental level was recorded for the building pre-let by Sanoma in the Zuidpoort project at the Station. In comparison with other cities in Flanders, rents in Mechelen are relatively low. Rents for prime buildings in secondary locations, or for secondary buildings in prime locations are about 20% lower at a current level of 120 €/sq. m./year. Incentives continue to be important and usually include rent free periods as well as contributions towards the fit-out.

Prime Rents (€/sq.m./y) 160 155

155

150 145

145

140

140

Antwerp Ghent Leuven Mechelen

135 130 125 2007

2008

2009

2010

2011

2012 Q3

Source : Jones Lang LaSalle Research

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 15.

Leuven

Take-Up in line with 5 year average Take-up registered in Leuven in the first 9 months of 2012 reached 14,700 sq. m., in line with the the 5-year average for the first 3 quarters of 15,100 sq. m. The take-up in Leuven represents 8.75% of the total area taken up in Flanders in 2012, putting Leuven in fourth place, but only just after Ghent.

Source : Google Maps

Leuven is located approx. 25 kms East of Brussels, within easy distance of Brussels National Airport, and close to the E40 motorway which crosses the country from East to West. Its office market is located in the old town centre, in new development zones near the Station, and in peripheral areas where the high technology sector, often linked with the university of Leuven, is dominant.

In the period 2007-2011, Leuven benefitted from an average of 8.28% of the take-up in Flanders, with notable large transactions including :  22,660 sq. m. pre-let by the Flemish Government in 2008,  10,500 sq. m. acquired by the KVLV in the Remylaan (Campus Remy) in 2009,  10,000 sq. m. acquired by Acerta for their new HQ on the Diestsevest in 2011,  4,100 sq. m. acquired by ACV/CSC in the Kop van Kessel-Lo North development end 2011. The take-up level in 2012 is influenced upward by the availability on the market of new office development in prime locations, near the station and the motorway infrastructure. With a number of larger transactions in the pipeline for Q4 2012, the take-up level at year-end is forecast to be well above average. Take-up 2007-Q3 2012 22,660 sq.m. VAC

sq. m. 35.000 30.000

10,000 sq.m. Acerta HQ

25.000 20.000 15.000 10.000 5.000

Diestsevest, 1: Acerta

2007

With a stock of c.465,000 sq. m., Leuven is a small office market in comparison with the largest Flemish city, Antwerp, with a stock of just under 2 Mio sq. m.. Recent developments in Leuven are concentrated around the Station (Kop van Kessel-Lo), which was been renovated at the same time. Since 2008 part of the city’s administration moved to new premises developed in the Station subdistrict, followed by other administrations and large corporates, mostly active in the business consulting sector.

2008

2009 Corporates

2010

2011

2012

Local Admin

Source :Jones Lang LaSalle Research

Vacancy In Q3 2012 the vacancy rate was estimated at 10.67%, consisting of 42,700 sq. m. of which only 5,000 sq. m. is new.

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16. On Point • Office Market Report • FLANDERS • Autumn 2012

Prime Rents (€/sq. m./y)

Rents are the highest of Flanders At the end of Q3 2012, rents for prime buildings in prime locations in Leuven were the highest in Flanders for the tenth consecutive quarter, at 155€/sq. m./year. This is due to its prime location in Belgium close to Brussels. Compared to early 2011, this is an increase of 3.6%. Rents for prime buildings in secondary locations, or for secondary buildings in prime locations are about 20% lower at a current level of 120 €/sq. m./year.

160 155

155

150 145

145

Ghent

140

Leuven

135 130 125 2007

2008

2009

2010

2011

2012 Q3

Source : Jones Lang LaSalle Research

Leuven: Take-up, Completions, Supply and Vacancy Rate 50.000

12,00%

45.000

10,00%

40.000 35.000

8,00%

30.000 25.000

6,00%

Take-up Completions FC Spec

20.000

4,00%

15.000 10.000

2,00%

5.000

FC Non-spec Vacancy Rate

0,00%

2007

2008

2009

2010

2011

Antwerp

2012 2012e 2013e 2014e 2015e H1

Source : Jones Lang LaSalle Research

www.jll.be

On Point • Office Market Report • FLANDERS • Autumn 2012 • 17.

Other Flanders Hasselt The capital of the province of Limburg completes the top 5 in Flanders. The average annual take-up of the past 5 years amounted to 2,160 sq. m. In 2012, take-up for the year-to-date totals 1,495 sq.m. in 2 transactions. The largest transaction of the year is the 810 sq. m. pre-let by KPMG in the Alverberg project on the Herckenrodesingel, followed by the 685 sq. m. let by insurance broker Gras Savoye on the ground floor of the Singelbeek building on the Gouverneur Roppesingel. Both transactions were realised by Jones Lang LaSalle. There has been no major office completion since the delivery of the 4,000 sq. m. Center 26 project on Klaverblad in 2010. One development project, the Alverberg project of which part will be developed non-speculatively for KPMG, is in the pipeline for the second quarter of 2013. Based on market evidence, prime rents in Hasselt increased by 3.8% in the first quarter of 2012, from 130 to 135€/sq. m./year. Aalst

Other cities Whilst there are few transactions, Bruges has recently been in the spotlight with the two large lettings and huge investment transactions on the KAM building. This double building along the Bruges St Michiels station totals 38,700 sq. m. and is let to the Regie der Gebouwen (West Flanders) and the Vlaamse Gemeenschap. It was acquired by Belfius Insurance (formerly Dexia) in 2011 for €126 Mio. Other cities in the province of West Flanders with an active occupier market in 2012 include Kortrijk and Roeselare. In the province of East Flanders, the largest take-up transaction was the long-term lease for 9,000 sq. m. signed by the Regie der Gebouwen on behalf of the local Police HQ in Dendermonde. In Huizingen in Flemish-Brabant, 2,800 sq. m. was let on the Siemens site, in 2 transactions. In general, the cities outside the top 5 (i.e. Antwerp, Ghent, Mechelen, Leuven and Hasselt) accounted for an average of 11% of take-up in the last 5 years, increasing to 15% in the last 3 years. However, this take-up occurs depends on larger non-recurrent transactions, and it is difficult to conclude that there are active office markets in these cities.

Aalst is a city in the province of East Flanders, and benefits from a situation along the E40 motorway from Brussels to Ghent. The average annual take-up of the past 5 years amounted to 1,600 sq. m. In 2012 so far only 150 sq. m. was let in Aalst, a letting to an occupier in the healthcare sector. Last year in Q4 2011, Gates prelet 2,835 sq. m. in the SkylinE40 building. In 2012, a total of 6,000 sq. m. of non-speculative development was completed, together with 20,700 sq. m. developed speculatively. The major office project completed this year was the 16,600 sq. m. Post site development, located both near the town centre and near the station. The pipeline for 2013 totals 13,000 sqm of which 10,000 sq.m. is speculative, in 2 projects: the SkylinE40 next to the motorway and a building in the Korte Keppestraat 7-9.

Kam Building, Brugge. Arch. & Dev.: Eurostation

www.jll.be

18. On Point • Office Market Report • FLANDERS • Autumn 2012

residential or mixed-use. The transaction was advised by Jones Lang LaSalle.

Retail and Retirement Homes drive volumes

Total Investment Volume by region – BELGIUM

Over the last five years, the average proportion of investment volumes in Flanders against the Total is 34%, with the year 2009 and 2011 being exceptional (respectively 43% and 41%).

Brussels (incl Peri) Wallonia

Flanders Various (countrywide portfolios)

Source : Jones Lang LaSalle Research

Office investment market is quiet 2012 is quiet so far in terms of Office investment transactions in Belgium, this being valid in Flanders as well with comparatively few Office deals. In 2012 to date, the volumes are sustained by Retail (46%) and retirement Homes transactions (30%), with large transactions such as the Genk Shopping Centre (EUR 69 Mio, purchased by Wereldhave Belgium) and the Vulpia Retirement Homes portfolio (EUR 60 Mio, acquired by AG Real Estate). (1) Not only focused on Antwerp Office investment transactions are traditionally in Antwerp – with the exception of the above-mentioned exceptional core transactions in Brugge last year. Mechelen profiles itself as an attractive target, however, especially in the developing area around the station. In Q3 2011, Jones Lang LaSalle advised on the acquisition by Mercator of the Stephenson Plaza (12,200 sq. m., occupied by Alken Maes and Mundipharma) for c. EUR 27.7 Mio. Investment flows in other cities are limited. The largest Office deal this year to date was the acquisition by Matexi of the Antwerp Tower for EUR 25 Mio. This well-known tower of Antwerp will probably be redeveloped into

9M12

2011

2010

2007

At the end of September, the investment volume in Belgium amounted to EUR 1.328 Mio, of which 38% was realised in Flanders (economic definition), representing EUR 501 Mio. In 2011, investment volume in Flanders was estimated at EUR 735 Mio, ie 41% of the total.

2009

Proportion of Investment volumes in Flanders higher than the 5 year average

5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 2008

Billions

Investment:

Antwerp Tower

Investment Volumes by type (2012) – FLANDERS 10% Office

30%

13% Industrial Retail

1% Other

46%

Retirement Homes

Source : Jones Lang LaSalle Research

For details on the Logistics and Semi-Industrial capital markets in Flanders, please refer to the On-Point Industrial Market Autumn 2012.

1

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On Point • Office Market Report • FLANDERS • Autumn 2012 • 19.

Institutions, Propco’s and REITs control the market

Prime Yields Below 7% for a 6-9 years lease

The vast majority of the investors this year to-date was Belgian (89%, the rest being a UK pooled fund – Aberdeen – which acquired the Olen Shopping Park). In 2011, 95% of investors were Belgian, the other 5% being USA (one transaction: Stanley Black & Decker in Tessenderlo). For the whole of Belgium, 71% of the investors were domestic in 2012 to date, compared to 69.4% in 2011.

In Q2 2012 prime office yields in Antwerp fell below 7% at 6.75%, this being achievable for new buildings with 6/9 leases in the Ring District. In the Centre of Antwerp, yields for prime buildings range between 7% and 7.75%.

Noticeably, private investors (the fourth largest contributors to the market, with 15%) were focused on retail (95%, rest being Industrial). As in Brussels, we observe ever growing interest from Private investors for High Street Shops and retail warehousing, offering attractive yields and some stability at an affordable price, without the swings of the stock and bond markets.

%

7,50 7,25 7,00 6,75 6,50 6,25

'12

'11

'10

'09

Source : Jones Lang LaSalle Research

In Mechelen (Station district), prime yields are similar to Antwerp Ring, at 6.75% - 7.25%. These levels can also be achieved in Ghent and Leuven should a transaction for a prime building with excellent accessibility and long term lease arise. Prime Office Yield Band (6/9yr leases) - FLANDERS 10

%

From

9

Investment Volumes by Purchaser Category (2012) – FLANDERS

'08

'07

'06

6,00 '05

Institutional investors (primarily insurers such as Ethias) are the largest contributors of the investment volumes in Flanders, with 22%. REITs like Montea and Property companies such as AG Real Estate are close behind with respectively 19% and 18%. REITs investments consist of 83% of Retail and 17% of Industrial (no offices). 68% of the investment of Property Companies was in Retirement Homes (the Vulpia portfolio acquired by AG Real Estate), the rest being retail. Institutions invested 69% in Retirement Homes and 31% in Offices.

Prime Office Yield (6/9yr leases) – ANTWERP

'04

On the contrary to Brussels, the Flanders Office investment market has historically been dominated by domestic investors, while Shopping centres attracts a broader range of nationalities.

For 9 year leases, prime yields in Antwerp are between 6.25% and 7%.

8 7

To 9

7,75 7

8,5 7,75

8 7,5 6,75

7,25 6,75

6

Le uv en

Gh en t

An tw erp -C en tre An tw er pPo rt An tw er pRi ng An tw er pPe ri Me ch ele n

5

Source : Jones Lang LaSalle Research

Source : Jones Lang LaSalle Research

www.jll.be

20. On Point • Office Market Report • FLANDERS • Autumn 2012

Major Occupier Transactions in Flanders 2011-2012 Year

Qtr

City

District

Operation

Building

Age

2011 2012 2012 2011 2012

3 3 1 1 2

ANT ANT MECHELEN LEUVEN DENDERMONDE

RING CENTRUMANT MECHELEND LEUVENDIS PROVOVL

Letting Letting Letting Acquisition Letting

MERCATOR BUILDING Kievitplein ZUIDPOORT MECHELEN ACERTA HQ POLITIECOMMISSARIAAT

Old PNP New Old New

Area (sq. m.) 13996 11000 10707 10000 9000

Tenant

2011

3

IEPER

PROVWVL

Acquisition

New

6000

2011

3

ANT

PERIE

Acquisition

Ieper Business Park AURIS Gallifort Office Center

Old

5500

2011 2011

1 1

LEUVEN GHENT

LEUVENDIS OOST

Acquisition Acquisition

UC UR

5000 4230

2011 2011

2 4

ANT LEUVEN

CENTRUMANT LEUVENDIS

Acquisition Acquisition

Old New

4178 4121

2011 2012 2011 2012 2011 2011 2012

4 3 4 2 4 1 3

ANT MECHELEN ANT ANT AALST ANT MECHELEN

CENTRUMANT NOORD PERIS PERIS PROVOVL CENTRUMANT MECHELEND

Acquisition Extension Acquisition Letting Letting Acquisition Letting

Old Old Old Modern PWP Modern Modern

3954 3272 3000 2934 2895 2750 2637

LOOS & Co ENECO ENERGIE DYP GROUP ESSENT BELGIUM GATES EUROPE VERSTUYFT BIOCARTIS

2011 2012 2012

4 3 1

ANT ANT GHENT

RING RING PROVOVL

Letting Letting Letting

IMEC TOREN BELLE VUE BUSINESS CENTRE DE BEUK KOP VAN KESSEL-LO NOORD STADSWAAG 1-5 BUSINESS PARK E19 Kontichsesteenweg 40 Everest SKYLINE 40 - Phase I NATIONAL INTERCITY BUSINESS PARK ONYX BUILDING METRO BUILDING SCHAESSESTRAAT 25

Provincie Antwerpen Electrabel SANOMA Acerta REGIE DER GEBOUWEN (OOSTVLAANDEREN) STAD IEPER EN OCMW OCMW ANTWERPEN IMEC WIT GELE KRUIS OOST-VLAANDEREN FIDUCIAL CSC/ACV

UC New Old

2535 2520 2387

2012 2011

2 4

LEUVEN ANT

LEUVENDIS PORT

Acquisition Acquisition

Modern Old

2382 2380

2012

2

ANT

CENTRUMANT

Letting

CAMPUS REMY STRAATSBURGDOK NOORDKAAI 3 ARCHIMEDES BUILDING

BDO THESE DAYS FRIESLAND CAMPINA BELGIUM STUDIOOM PRIVATE

Old

2286

2012

1

HUIZINGEN

PROVVLB

Letting

Old

2231

2011

1

ANT

CENTRUMANT

Letting

SITE SIEMENS HUIZINGEN AVENUE BUILDING

New

2100

2012

3

LEUVEN

LEUVENDIS

Letting

ZEVEN TUINEN

UC

2100

2011 2012 2011 2012 2011 2012

1 1 4 1 2 2

ANT MECHELEN BORNEM ANT ANT ANT

CENTRUMANT MECHELEND PROVANT CENTRUMANT RING PERIS

Acquisition Letting Letting Acquisition Letting Letting

Old New New UR Modern Old

1980 1889 1844 1838 1764 1687

2011

4

ANT

PERIS

Acquisition

LANGE KIEVITSTRAAT 22 MECHELEN CAMPUS F RIJKSWEG 10 WAW Building DE VELDEKENS III PRINS BOUDEWIJNLAAN 5 VELDKANT, 13

Old

1660

MOORE STEPHENS VERSCHELDEN SEN DELA VERZEKERINGEN NOT COMMUNICATED VAN DURME VERHAEREN & CO ARSEUS SITROP NV Amadeus Benelux FEDERAL MOGUL FOR ACCOUNTING TEAM

Source: Jones Lang LaSalle Research, based on publicly available data

www.jll.be

On Point • Office Market Report • FLANDERS • Autumn 2012 • 21.

Major Investment Transactions in Flanders 2012 Year Qtr

Sector

Location

Property

Price est. Mil.EUR

Seller

Buyer

2012 1

Retail Retirement Homes

Genk

Genk Shopping

69

Redevco

Wereldhave Belgium

Various

Vulpia Portfolio

60

Vulpia

AG Real Estate

Antwerp

Olen Shopping Park

48

Cordeel + Aertssen

Aberdeen

2012 1

Retail Retirement Homes

Antwerp

Artur Building

38

Vooruitzicht

Ethias

2012 3

Industrial

Ghent

Trading Places II

26

Revcap

BPA

2012 3

Office

Antwerp

Antwerp Tower

25

Family Klene

Matexi

2012 2

Retail

Kapellen

Shopping Centre Promenade

25

CBRE Global Investors

Private

2012 3

Office

Ghent

Rijksarchieven

21

Kairos

Ethias

2012 3

Retail

Dendermonde

Ros Beiaard & August De Boeck

17.5

Revcap

Private

2012 2

Industrial

Puurs

Pullaar, Brabantstraat

12.5

Goodman

Vandeputte Safery

2012 3

Retail

Leuven

Esprit

11.8

Tollet

Baltisse

2012 3

Retail

Zaventem

Infradis Real Estate

10.2

Unknown

Retail Estates

2012 3

Retail

Antwerp

Huidevettersstraat 2-4

10

Unknown

Bermaso

2012 3

Retail Retirement Homes

Antwerp

Huidevetter

10

Private

Bermaso

Antwerp

Familiehof

9

Private

AWP

2012 2 2012 2

2012 3

Source: Jones Lang LaSalle Research, based on publicly available data

Red: Deal advised by JLL

www.jll.be

22. On Point • Office Market Report • FLANDERS • Autumn 2012

Definitions Take-up Take-Up – New: Represents take-up of floorspace in new or substantially refurbished buildings of less than five years since completion. Take-Up – Modern: Represents take-up of floorspace built or renovated between 5-15 years ago. Take-up – Old: Represents take-up of floorspace built more than 15 years ago and not renovated. Rent Prime Office Rent represents the top open-market rent that could be expected for a notional office unit of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 500 m² of lettable floorspace, which excludes rents that represent a premium level paid for a small quantity of space. Top Quartile Office Rent represents the average mean value of the top (25 %) quartile of all known face rents achieved on leasing transactions completed within a market during the survey period (normally calculated annually, or quarterly on a 12 monthly rolling basis). It excludes any unrepresentative deals. Weighted Average Rent represents the average mean value of all known face rents achieved on leasing transactions completed within a market during the survey period weighted with the floorspace (normally calculated annually, or quarterly on a 12 month rolling basis). It excludes any unrepresentative deals. Prime Yield Represents the best (i.e. lowest) “rack-rented” yield estimated to be achievable for a notional office property of the highest quality and specification in the best location in a market, as at the survey date (normally at the end of each quarter period). The property should be let at the prevailing market rent to a first class tenant with an

occupational lease that is standard for the local market. The prime initial net yield is quoted, i.e., the initial net income at the date of purchase, expressed as a percentage of the total purchase price, which includes acquisition costs and transfer taxes. Vacancy Vacancy represents completed floorspace offered on the open market for leasing or sale, vacant for immediate occupation on the survey date (normally at the end of each quarter period), within a market. It includes all vacant accommodation irrespective of the quality of office space or the terms on which it is offered. Vacancy excludes “obsolete” or “mothballed” office property, i.e. floorspace held vacant and not being offered for letting, usually pending redevelopment or major refurbishment. Vacancy Rate The Vacancy Rate represents immediately vacant office floorspace in all completed buildings within a market as at the survey date (normally at the end of each quarter period), expressed as a percentage of the total stock. Stock Stock represents the total amount of completed office space in buildings mainly used for office purposes within a market that is capable of occupation regardless of the type of ownership or type of building quality, as at the survey (normally at the end of each quarter period). Completions Completions represent floor-space completed during the survey period (normally annually). Completions include new development and refurbished accommodation, speculative developments, pre-let floor space and space for owner-occupation. www.jll.be

On Point • Office Market Report • FLANDERS • Autumn 2012 • 23.

www.jll.be

For more information, please contact: Pierre-Paul Verelst Head of Research Belux +32 (0)2 550 25 04 [email protected]

Ann Vanderwegen Senior Research Analyst Belux +32 (0)2 550 26 81 [email protected]

Jones Lang LaSalle Offices - Belgium Avenue Marnixlaan 23 b1 B – 1000 Bruxelles Brussel T +32 (0)2 550 25 25 F +32 (0)2 550 26 26 Jan Van Gentstraat 1 b 402 B – 2000 Antwerpen T +32 (0)3 232 39 30 F +32 (0)3 233 76 85

Other contacts Erik Verbruggen (*) Head of Office Agency Belgium +32 (0)2 550 25 28 [email protected]

Ralph Schellen (**) Head of Agency Antwerp +32 (0)3 201 59 46 [email protected]

Jean-Philip Vroninks (*) Head of Capital Markets Belgium +32 (0)2 550 26 64 [email protected]

(*) Bvba / Sprl (**) Allres bvba

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