Julien Pillot (INOWAI): China links help stoke Luxembourg’s real estate boom

The commercial and residential property markets are booming in the Grand-Duchy, says INOWAI head of office agency Julien Pillot, strengthened by the blossoming of business relationships between Luxembourg and China.

What is INOWAI’s background in Luxembourg’s real estate market?

INOWAI is a real estate service provider with Luxembourg roots and a subsidiary in France - that will celebrate its 20th anniversary next year. We have 50 experts in areas including brokerage and advisory, real estate investment, capital markets, property management, accounting, valuation and project management, for the office, retail, logistics and residential markets. Since its creation in 2012, INOWAI’s  residential department has grown exponentially, mainly thanks to property management activity. The office brokerage department is the national market leader in terms of completed transactions, accounting for 32% of all agency transactions in the first three quarters of 2018.

 

How has the Luxembourg market performed in recent years?

 

Overall, the real estate sector is at its strongest since the financial crisis – its dynamism can be seen in the cranes at work throughout Luxembourg City and other parts of the country. Office rental take-up exceeded 200,000 square metres for the fourth year in a row, and it should match this again in 2018. The vacancy rate is now below 4%, prime rents in the central business district are now at €50 per square metre per month, and yields have fallen to 4.25% for prime city centre space. Many developments currently under construction - 60% of 128,000 m² due for delivery this year - are already rented. The same dynamism is driving a steady rise in residential market prices. The gap between supply and demand is growing with

the delivery of 3,000 new residential units annually, while demand increases by 5,000.

 

What role are Chinese businesses playing in the Grand-Duchy?

 

The relationship between China and Luxembourg has been developing for many year, and the country is now a European hub for Bank of China, ICBC, China Construction Bank, Agricultural Bank of China, Bank of Communication, China Merchants Bank and China Everbright Bank, with others such as Shanghai Pudong Development Bank considering a Luxembourg base.

Luxembourg is now the second-largest domicile for funds investing in

China, just behind Hong Kong. Chinese groups are also investing in the Grand-Duchy -

witness Legend Holding’s ownership of Banque Internationale à Luxembourg, HCNA’s 35% stake in freight airline Cargolux, and Chinese investment in auto technology firm IEE. Chinese e-payment firm PingPong has established its EU headquarters in fintech hub

Luxembourg too. Given the open communication and friendship between the two governments, there’s every reason for business relationships to keep growing over the next five years.