BuyerSide takes stock of Q1 2022

With the first quarter of 2022 behind us, BuyerSide, your real-estate purchasing consultant, takes stock of current affairs in its various departments and of the market trends in Belgium.

An excellent start to 2022 for BuyerSide’s B2B department

BuyerSide’s B2B department has got off to a flying start in 2022, with several offers and letters of intent (LOI) signed, or to be signed shortly.

BuyerSide’s ‘professional’ clients are focusing on several asset types:

  • Office redevelopment plan covering approximately 10,000 m² – competitive process under way
  • Residential block in the Walloon Region comprising 42 units (share deal)
  • Residential block in the European district (12 units, 1 house and 25 parking spaces)
  • New residential block in the city centre with 28 units
  • Serviced apartments (large volume / confidential)

BuyerSide staff have issued offers totalling around € 40 million. Negotiations to conclude these transactions are still ongoing. We will be sure to keep you informed.

BuyerSide, your real-estate consultant, is hiring!

BuyerSide is launching an intensive recruitment policy. The following positions need to be filled in our various departments:

  • Urgent: BuyerSide is looking for an Executive Assistant – Office Manager – Marketing Manager (m/f). As the management’s right hand, the executive assistant ensures that the company runs smoothly. He/she manages diaries and appointments as well as internal and external communication actions, helps guide the structure, prepares and manages the management's commercial dossiers, organises events and handles marketing and the social networks.
  • The business department (BtoB) is looking for a Senior Account Manager (m/f). Our future colleague will have two to five years’ professional experience in the business real-estate sector. He/she advises BuyerSide's business clients active in the field of corporate real estate. The Senior Account Manager will join an extremely dynamic professional team. He/she can be sure of forming an integral part of its future development and taking on major responsibilities.
  • The residential department (BtoC) is seeking an Account Manager Residential to boost the commercial team.
  • Meanwhile, OwnerSide, our rental management division, is on the lookout for an Assistant to the CEO (m/f) to help manage the real-estate portfolio.

Real-estate market development and trends at the start of 2022

Our fundmentals have literally been turned upside down over the past few months:

  • Interest rates are rising
  • The cost of raw materials is soaring
  • Inflation is at its highest for 40 years.

The rise in interest rates combined with the increase in the cost of construction is impacting significantly on our feasibility studies for development projects. Our basic assumption as regards construction costs has gone up by € 250/m2. A project that was once profitable can turn out to be unprofitable today.

Fortunately, galloping inflationis correcting our rent assumptions for block sale projects. One question remains, however: will 24 months’ indexation on future rents be sufficient to offset the construction and the financing costs? The next few months will be decisive.

In BuyerSide's view, an existing building, already built, already let and already financed can only increase in value under these particular market conditions. We are therefore advising our clients to focus on this type of existing product.

Inflation and rent indexation in 2022

Given the current rate of inflation, which has now reached approximately 7%, many of BuyerSide’s investor clients are wondering this year whether or not to apply in full the rent indexation that they receive.

Rent indexation has to be maintained for several reasons:

  • Investors have, quite rightly, bought real estate as a safe investment against inflation because of rent indexation;
  • Not indexing rents could create confusion for your tenants who may not understand why rents are indexed one year and not another. The same applies if one of your tenants is indexed and the others are not;
  • Indexing rents means increasing the value of your property. In fact, when a property is valued by capitalising the rents at a certain rate of return expected by the investor, combining the biggest rents, then the value is immediately higher.

However, there are exceptions to indexation. This is why is it important to ask the right questions so as to take a decision ‘case by case’:

  • If my tenant decides to leave further to the indexation, could he move to a similar property at a lower rent?
  • Would my indexed rent become too expensive compared with the market rent?
  • Has my tenant been there for many years? Is the relationship good?
  • Is my tenant very hands-on? Does he deal with most of the problems himself?
  • Are there any problems in the building that affected my tenant last year?
  • etc.

BuyerSide recommends considering each case individually rather than simply applying the indexation automatically. It is important to bear in mind the emotional aspect before adopting a purely mathematically approach and to give preference to a balanced relationship with tenants, sometimes being able to ‘make a gesture’ if they deserve it.

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