Against a background in which the office market will change dramatically in the months and years ahead, new investment opportunities are now emerging. Michael Despiegelaere, Partner and Head of Capital Markets Office, underlines this: "The economic issues caused by the COVID-19 crisis will force many owner-occupiers to dispose of their property to release liquidity so that they can relaunch their business as soon as possible. As a result, the number of sale and leaseback transactions could increase in the coming months, opening up great opportunities for investors. It also appears that "forward fundings" or "forward commitments" are getting more popular. More and more investors are looking for office projects with planning permission to invest in brand-new developments of high quality meeting the highest standards in terms of ESG and efficiency such as the The First transaction in the Leopold district and with a delivery date in 2023 which we closed recently ...

Against a background in which the office market will change dramatically in the months and years ahead, new investment opportunities are now emerging. Michael Despiegelaere, Partner and Head of Capital Markets Office, underlines this: "The economic issues caused by the COVID-19 crisis will force many owner-occupiers to dispose of their property to release liquidity so that they can relaunch their business as soon as possible. As a result, the number of sale and leaseback transactions could increase in the coming months, opening up great opportunities for investors. It also appears that "forward fundings" or "forward commitments" are getting more popular. More and more investors are looking for office projects with planning permission to invest in brand-new developments of high quality meeting the highest standards in terms of ESG and efficiency such as the The First transaction in the Leopold district and with a delivery date in 2023 which we closed recently at a record high price. As the Brussels office pipeline is important for the coming years, we will certainly observe other transactions of this type".It clearly appears that investors refocus on the so-called "core" products, i.e. assets with a better location, of higher quality and offering greater security in terms of their occupancy. Michael Despiegelaere concludes: "We get daily calls from parties looking for investments in Belgium. While travel restrictions have forced us to reinvent ourselves in terms of how to market a property, it has not slowed down the investor's appetite. As a result, today's prime yields at 3.75% for offices (3/6/9 years lease) could see further cuts in 2021 or 2022." Long-term prime yields stand at 3.25% and will observe further compression in the coming months, as a direct result of fierce competition for prime and long-term leased assets. Furthermore, conversely to other European cities where we will observe a yield increase (between 50 and 100 bps depending on the city) in the coming 12 to 24 months, Brussels should be more resilient with a prime yield forecasted at 3.70% up to the end of 2024, thanks namely to the important presence of public bodies (Regional, National and European ones)."Korean investors started to invest in Europe when the profitability of their real estate investments in Seoul fell around 2013," says Marc-Antoine Buysschaert, the new Country Head of Cushman & Wakefield Belgium. "It is important to know that they are looking for annual rates of return of 8 to 10% (after leverage), which are only realistic when the market is not under too much pressure. In Seoul, a limited market with a lot of capital available, the returns (after leverage) had fallen to around 6%. After London, Paris and the major German cities, Korean investors have set their sights on Brussels offices. In the capital of Europe, they have acquired properties with long-term leases - at least 12 years - generally to public occupiers, which guarantees recurrent indexed income. Koreans are Cash-on-Cash driven investors targeting core assets with a long lease and creditable or investment grade tenants. Conversely, Anglo-Saxon investors calculate their profitability at the exit, in terms of IRR: internal rate of return.Despite a smaller market size, the Korean investors particularly appreciate Belgium, mainly the Brussels office market, compared to other large gateway or Capital cities in Europe for a number of reasons as stated below:- Lease terms are longer than most of other cities in Europe, at least 12 years in Brussels when a public tenant is concerned.- The presence of a large number of AAA tenants including European Union offices, the Government departments and large corporate's HQs had met the investment requirement of Korean investors.- Furthermore, cheap financing combined with a hedging premium of 150bps to 200bps on top further increased the Cash-on-Cash return for Korean investors.Since 2016, Korean investors acquired amongst the biggest and most iconic office schemes on the Brussels market: Egmont, Astro Tower, TDO, North Light & Pole Star, Square de Meeus, Finance Tower, PassPort... for more than EUR 2.8bn on a total of around EUR 15bn invested in Brussels. As such, Korean investors represent 18% of the total volumes these last years. But for some months now, the exchange rate has favoured dollar transactions more than euro transactions.Given the fact that the first Korean transactions are now 5 to 7 years old, they may be tempted to dispose some of their properties in Brussels. This can only open up new opportunities for European investors, who are once again at the forefront of the investment market. All this in a real estate context that remains buoyant despite the health crisis: prices of long-term rented properties continue to rise as the macroeconomic parameters remain well oriented.