LUXEMBOURG Trends and Developments Contributed by: Torsten Sauer and William Tanguy, Norton Rose Fulbright
changes noted in Q4. The overall prime rent for Luxembourg City is held at EUR54 per square meter/month. A rebound in activity is anticipated for 2025, primarily because the State of Luxembourg and European institutions are taking on large surface areas. Given this expected rebound, the State of Luxembourg and European institutions, rather than private companies, are likely to be the key players in the office leasing market for 2025. This shift may not reflect positively on the Luxem - bourg economy. Retail market trends The retail market in Luxembourg has shown resilience despite economic uncertainties. The Cushman & Wakefield report from H2 2024 indi - cated that retail sales maintained a stable yet gradual increase throughout the year. Prime high street rents remained stable at EUR145 per square meter/month, while shopping cen - tres and out-of-town retail saw slight increases in prime rents. The European Central Bank’s interest rate cuts in 2024 and the potential for further cuts in 2025 are expected to benefit the retail market, provid - ing favourable borrowing conditions and sup - porting investor confidence. One of the key challenges facing the Luxem - bourg real estate market is housing affordability. The high cost of housing has made it difficult for many residents to get on the housing lad - der, leading to increased demand for afford - able housing solutions. The STATEC report from March 2025 highlighted that the prices of resi - dential properties in Luxembourg remain among the highest in Europe, with the average cost of a Challenges and Opportunities Affordability and housing supply
100-square-meter home equivalent to 246 times the average salary after taxes. As mentioned above, the government has imple - mented various measures to increase the supply of affordable housing, including the construction of new housing units and the provision of hous - ing aid. These efforts are expected to continue in 2025, providing opportunities for developers and investors to contribute to a more affordable housing market. Environmental and sustainability considerations Environmental sustainability and decarbonisa - tion have become increasingly important consid - erations in the real estate market. The Emerging Trends in Real Estate Europe 2025 report high - lighted that more than two-thirds of respondents are concerned about meeting environmental and decarbonisation requirements by 2025. It also indicated that property owners without a net- zero pathway for their assets may struggle to obtain financing (or may only be able to obtain higher interest rates). In response to these challenges, developers and investors are increasingly focusing on sustain - able and energy-efficient buildings. Adopting green building practices and integrating renew - able energy sources are expected to become more prevalent in the Luxembourg real estate market in 2025. Geopolitical and economic uncertainties Geopolitical and economic uncertainties contin - ue to pose challenges for the real estate market. The Emerging Trends in Real Estate Europe 2025 report highlighted concerns about political insta - bility, increased regulation, and the availability of finance – all key factors impacting investor confidence and market stability.
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