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Flanders Commercial Real Estate Investment Market

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Belgium is heading to an attractive real estate investment market in 2014

The press release on EY’s annual Real Estate Assets Investment Trend Indicator early 2014 announced that Belgium would be heading for an attractive real estate investment market. These words were translated into deeds as the Belgian commercial real estate market recorded its strongest first year half since the financial crisis in 2008. During the first year half of 2014, €1.3 billion has been invested in Belgian commercial real estate, up 20% from H1 2013. The increased transaction volume is mainly due to the steadily improving economic environment, favorable financing conditions as interest rates are at a historical low, less risk aversion and an increasing number of international investors.

Market composition

We particularly witnessed a revival of the core office markets and logistics real estate market. Offices remain the largest asset class, accounting for 60% of total investment volume in H1 2014. Due to less risk aversion from investors, numerous large investment deals were completed (e.g. North Plaza (€475 million) and Kievitplein (€195 million)), and the average deal size increased to €23 million in H1 2014. Some large shopping center transactions are still in the pipeline for 2014. However, the Belgian shopping center market is still underdeveloped and offers substantial potential for international investors. The bulk of investment activity takes place in the Brussels Capital Region (60% of total investment volume in H1 2014). The share of Belgian investors has been steadily decreasing from almost 80% in 2010 to 51% in H1 2014, while an increasing interest of Asian investors is observed (e.g. €300 million investment of Ginkgo Tree in the Belair office development).

Tax horizon on the move

Although the general trend in Europe to increase tax collections also hits the real estate market in Belgium (e.g. through the introduction of a broader anti-abuse provision in income taxes and real estate transfer taxes), Belgium remains an attractive country for foreign investors to step into real estate. Its broad international income tax treaty network, including the favorable treaty with China, opens interesting opportunities e.g. to obtain withholding tax reductions or even exemptions on profit or interest repatriations from real estate vehicles (conditions to be fulfilled). Recent legal changes expanding the favorable tax status of Belgian REITs to a new legal form of regulated investment companies confirms the willingness of the Belgian legislator to support the real estate sector in Belgium and opens new opportunities, also for foreign investors.


Given the absence of speculative developments and increased investor demand, investment yields are expected to remain under pressure for the foreseeable future. This evolution will force real estate investors to shift towards more peripheral locations and opportunistic real estate investments. Important to note is that the Belgian commercial real estate market is less volatile and at the same time less transparent than most of its international peers. Combined with a complex regulatory and tax landscape, when considering a commercial real estate investment in Belgium, we recommend to rely on the advice and assistance of a local professional expert to investigate and review the transaction parameters and to guide you through the regional differences in legislation and opportunities.

Source: Ernst & Young