Luxembourg Real Estate Market Outlook 2023

Rising inflation, energy threats and interest rates resulting from the war in Ukraine challenged the Luxembourgish economy and real estate markets in 2022. The rapid changes to financing costs negatively impacted the commercial real estate investment market, with total volume notably down from recent years. Still, most investors are positioned to ride out the volatility until price stability returns. Office occupier markets were also subdued on account of the market uncertainty, but the lack of EU activity and limited available space were also obstacles. Retail markets continued on their post- Covid high for a banner year, even seeing rental growth. Sharply-priced residential markets met the reality of rising interest rates, with sales slowing and prices under threat in the second half of the year. 

In 2023, real estate markets should emerge from this period of uncertainty. No major changes in Investment market dynamics are expected until the second half of 2023. Occupiers are demanding ESG space, with an equal enthusiasm coming from the ongoing office project developments. Retail demand will continue to be stable in 2023 thanks to strong socio-economic fundamentals. Residential is expected to see a decrease of activity, with sales declining and commercialization times lengthening, though the case for more diversity in housing options, such as coliving, will strengthen.