Institutions, taxes and no towers - how the Brussels office market works

Transcript

I recently started publishing short videos with data from the Polish office market, and I will keep the series going. But every day I meet interesting people with first-hand knowledge - and I want to share that too. Today we talk about the Brussels office market, in my view the most unique in Europe.

My guest is Krzysztof Pradota, a senior adviser at Business Space (part of the Exis Global network), who provides end-to-end advisory for office tenants in Belgium and Luxembourg. We know each other from Exis Global, an international organisation of firms that represent tenants only, in renegotiations and relocations.

Krzysztof studied architecture in Brussels and worked there as an architect, returned to Poland in 2012 (hotel and logistics real estate), and moved back to Brussels three years ago - now permanently in office advisory.

Brussels is very culturally diverse, but the everyday language remains French (alongside Dutch as an official language). Belgium is a federal country: Brussels, francophone Wallonia and Dutch-speaking Flanders - in Flemish business, e.g. in Antwerp or Ghent, Dutch is key.

Brussels office supply with its metro area is about 14M sqm - roughly the same as the combined stock of Poland's eight largest markets (Warsaw has about 6.7M sqm). The European quarter alone is 3.5M sqm.

Why so much supply? Belgium has a complex federal system - a multitude of federal, Flemish and Walloon institutions, most of which also keep offices in Brussels. That generates far more tenants than a country without three independent governments.

EU institutions account for about 1.9M sqm (just under 15% of the market). On top of that come entities serving the Commission and Parliament, lobbying, industry federations, specialised law firms, large private companies and media - all of which must be physically present. The NATO HQ alone is a single building of about 250k sqm.

Brussels has no towers in the Warsaw sense - a hard height limit applies. The tallest building, South Tower, is more than half the height of Varso Tower; it is closer to the old Intraco. The European quarter consists of low buildings, 7-12 storeys.

Rents depend on the district. In the European quarter prime rent is about €400/sqm/year plus VAT (about €33/sqm/month), slightly above Warsaw prime; vacancy is very low, 4-5%, so good space is hard to find. It is a market of small modules (300-600 sqm); large, uniform floorplates are usually taken by the Commission - which can lease a whole building at once, even 20k sqm.

An important quirk: in Belgium property tax is paid by the tenant. In Brussels it is about €70/sqm/year, but in Zaventem by the airport (Flanders) only about €10-12/sqm/year. On several thousand sqm over a 9-12 year lease, the difference means huge savings.

Beyond the European quarter there are: the strict centre and the northern district (part of the CBD, where the towers stand) - about 4.5M sqm in total, roughly 11% vacancy, prime rent about €365; here large spaces are leased to banks and insurers. The belt around the CBD has 12-13% vacancy, but many offices are being converted to housing. The periphery (2.5M sqm, by the airport) has about 16% vacancy and a lot of new supply in the pipeline; there prime rent is about €215 - practically half of the European quarter.

Krzysztof points to three trends that matter for a tenant adviser. First, post-COVID space optimisation - pressure to reduce and adapt to hybrid work (usually 2-3 days in the office). Second, a move away from long leases towards flexibility - coworking and serviced offices. Third, an ageing 1960s-80s stock that needs refurbishment, which raises standards and affects rents.

Unlike Warsaw, where most buildings are 10-15 years old, Brussels has many properties from the 1960s-80s. Paradoxically, Poland's economic lag can be an advantage: our stock is new, ESG-certified and better prepared for EU directives.

New supply in Brussels is about 230k sqm a year (2025 and similarly 2026) - in Warsaw roughly half of that. Good, high-quality buildings can take years to lease up, while on the periphery new supply keeps being added despite high vacancy.

One indicator is telling: International Workplace Group (Regus) plans to grow in Belgium from 60 to 200 centres by 2030 - more than threefold. Clients range from small firms to larger organisations taking a whole or half floor for themselves, valuing flexibility and keeping fit-out off their balance sheet.

Outlook: high fit-out costs and the lack of flexibility in long leases will push more and more companies towards flex models. It is a feature of a mature market whose elements may in time appear in Poland too.

We recorded the conversation while Krzysztof was in the US. A personal note at the end: Krzysztof is also a supplier of Belgian chocolates, which - according to both of us - beat the Swiss hands down. In the next episode we plan to cover Belgian developers active in Poland, including Ghelamco.