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MARKET ANALYSIS 2013

DRAFT VERSION – FOR DISCUSSION PURPOSES ONLY

BUSINESS CENTER MARKET IN BELGIUM

BOBCA, 23 oktober 2014

I. Introduction

II. The broader ‘OFFICE MARKET’

III. The ‘BUSINESS CENTER MARKET’I. Scale of the business centre groupsII. Business centres by cityIII. Business centre by type of shareholderIV. Ownership of buildings

IV. Financial figures of business centres in BelgiumI. Turnover (Estimated)II. ProfitabilityIII. Advantages of scale

V. Conclusions

INTRODUCTION

Business centers in Belgium : See list in annex Research by a maximum of means

Growing market if you know new centers, please let me now.

What is a business center ? Uses this as name of his business Including ‘bedrijvencentra’, excluding ‘innovation centers’/incubation centers For profit, registered company Serviced offices = full time reception services

Used figures : Published financial data (Belgian National Bank)

INTRODUCTION“Definitions and limitations”

II. THE OFFICE MARKET IN BELGIUM2.1. Estimation of ‘total office market’

4

Office-market in Belgium

Market of ‘larger cities’ very well documented

Own, rough estimation of market in regional cities

Total ca. 21 Mio m², accommodation for appr. 1 Mio collaborators (employees + civil servants in office environments)

Decreasing market volume due to NWC (- 2-3 % / year)

Business center market

Definition of ‘business center : ‘

Flexible contracts

Including services

Excluding ‘joint-office-buildings’ with no ‘reception’

Total : ca. 170 business centers, appr. 300,000 m² office space.

Accounts for appr. 1,40 % of total office space in Belgium, growing market-share.

Co working market

New, upcoming market

Total of appr. 50 Coworking spaces in Belgium, totaling appr. 10,000 m² office space.

Growth rate of market > 30-50 %, but limited examples of viable business models.

The business center market is a niche market of the ‘Office market’

Offices (x 1,000 m²)Brussel 13.000 Antwerpen 1.900 Gent 1.200 Liège 500 6 'centrum' cities' : 300 - 500

(Charleroi, Namur, Hasselt, Leuven, Mechelen)15 'regioinal cities' 100 - 250

(f.ex. Kortrijk, Roeselare, Brugge, St. Niklaas, Aalst, )Total office spaces in 'cities' : 21.250

# Business centers (in m²)Number : 172 Average surface : 1.708 Total surface occupied : 293.744

in % of offi ce market : 1,38%

# Co working centersNumber : 50 Average surface : 373 Total surface occupied : 18.640

in % of offi ce market : 0,09%in % of business center market : 6,35%

II. THE OFFICE MARKET IN BELGIUM2.2. The ‘office market’, a giant on small feet …

5

?? How will the occupation rate evolve the following years

Fundamentals are ‘not good’ :

# employees will decline from 2015-20 on (80,000 Belgians are 50 yrs, 65,000 are 10 yrs !)

Needed office space per employee is act. 28 m², could go down to 15-20 m²

A ‘decrease’ of the market need with 15-25 % the following 20 years can be expected.

Actual occupation – rate is underestimated :

Growing vacancy of offices in more and more cities

First in Brussels/Mechelen (> 15 % actually)

Expanding to other cities (Antwerp, Hasselt, …

…

And, Dutch studies indicate that ‘silent’ vacancy is higher than visual vacancy :

‘Measure’ vacancy – rate : 13 – 17 % in the Netherlands

‘Unused’ but occupied office space : 15 -22 %

Total ‘available’ office space : 25-30 % of total office space

A surplus of 30 – 40 % of the office space in most cities by 2030 seems a logic expectation

This will have an effect on the rent of offices spaces, where a decrease of 30 % and more for ‘used buildings’ is not abnormal

We expect declining office-rents the following years in most of the cities in Belgium

Total appr. 170 business centers in Belgium :

28 ‘BC’s’, bedrijvencentra

12 Regus

5 Multiburo

Ca. 15 ‘groups’ with 2-4 centers, the fastest growing

part of the market.

Appr. 90 ‘individual business center owners (53 %)

In 2011 : ca. 135 BC, which means an annual growth of

appr. 10 %/year

Failure rate limited (< 5 % of market)

Listing B.C.’s is not ‘clear-cut’

No innovation/incubation-centers

No ‘co-working-spaces’

No Incubation/Innovation centers

In Belgium, we observe appr. 170 business centers of which more than 50 % are stand-alone centers.

III. BUSINESS CENTERS IN BELGIUM3.1. Number of Business Centers

Appr. 60 % of Belgium’s business

centers are located in Brussels,

Antwerp en Gent

40 % located in Brussels

10 % located in Antwerp

8 % located in Gent

Is comparable with the importance of

the relative office market.

The biggest city of Wallonia, Liege, has

only 5 business centers.

Some cities, like Brugge have limited

offer of business centers.

2/3th of all business centers in Belgium are located in the three main cities (Brussels, Antwerp and Gent)

III. BUSINESS CENTERS IN BELGIUM3.2 Business centers by location

Cities Busines Centers Co working TotalBrussel 59 12 71Antwerpen 17 7 24Gent 12 6 18Liège 5 3 8Leuven 6 1 7Hasselt 5 2 7Louvain La Neuve 6 1 7Kortrijk 5 1 6Charleroi 2 2 4Mechelen 3 1 4Namen 2 1 3Turnhout 2 1 3Nivelles 2 1 3Oostende 2 1 3Sint-Niklaas 3 3Geel 2 2(leeg)Total 170 50 220

Only 12 % of the business centers belong to

international owners, mostly within an

international chain of business centers :

Regus (12)

Multiburo (5)

Servcorp, Halldis, Taminiau, …

25 % of the business centers are public of semi-

public initiatives

Bedrijvencentra, incubators, innovation-

centers, …

2/3th of all business centers are private initiatives

Most business centers in Belgium are ‘private’ owned, 25 % have ‘public ownership’ and only 12 % belong to international chains.

III. BUSINESS CENTERS IN BELGIUM3.3. Ownership – types of the Belgian business center market

35 % of the business centers own the building they are operating

Most (> 70 %) of the public initiatives own the building they are running

30 % of the private owners also own the business center building

No international (experienced ?) player on the market owns his building

We see different ‘exploitation’ formula’s in the business center market

Renting the building, which has clearly a declining market share

Formula’s with ‘variable’ rent prices are more and more used

Management-contracts are actually more and more common in the ‘business

center market

Limited long-term-risk for the managing business center

No risk of ‘declining’ rent prices in the future

Owner needs to fill the building …

We see a clear transfer from exploitation - risk from the

‘manager’ to the ‘owner’ of the building.

Only 1 out of 3 business centers operates the building they own – management contracts are increasing in importance.

III. BUSINESS CENTERS IN BELGIUM4.4. Type of business center model : ownership vs. rental/management

IV. FINANCIAL DATA OF BUSINESS CENTER MARKET4.1. Turnover evolution

• Turnover – Total market turnover appr. 80 Mio €– 1/3th is done by international players

• Own only 12 % of the business centers

– 20 % is done by the ‘semi-public-initiatives– The private owners serve appr. 50 % of the

market.

• Growth rhythm – From 1995 – 2005 : no substantial growth of

the market (< 2 %/yr)– 2006-2008 : growth with more than 10 % per

year, not abnormal for this market compared with international studies

– 2010 – 2014 : growth 2-5 %, relatively low growth in comparison with international growth ratio’s of 5 – 10 % for EMEA-region’s.

• To low ‘entrepreneurship’ level in Belgium ?

The Belgian business center market is lagging behind on the international growth rates of the market of appr. 10 %/year

IV. FINANCIAL DATA OF BUSINESS CENTER MARKET4.2 Operational profit (EBIT) of business centers

• The decline in turnover has halved (!) the profitability of the market from 4 % in 2012 to 2 % in 2013.

• The private and mainly the international players have profitable business models since 2008

• The (semi-)public players have never been profitable as a segment on operational level.

– Most of the public and semi-public business centers do not have a profitable business model.

The decline in turnover by center has halved the profitability of the business center market in 2013 !

IV. FINANCIAL DATA OF BUSINESS CENTER MARKET4.3. Advantages of scale ?

• There are clearly a lot of advantages of scale in the business center market

– Commercially (website, referrals, …)– Purchasing power, also on management-level– Strategically and– After a strong increase of their turnover from 2005-2009,

we see a stabilization of turnover the last years.

• But, the medium size of a business center is declining ….

• We have put the ‘profitability’ of a center compared with the ‘size’ of each center.

– Profitability = profit margin on turnover– Size = turnover by center

• The ‘regression-line’ clearly demonstrates– The substantial losses that a business center makes in his 1-2 starting years

(between 100 and 500 k€)– A ‘break-even’ level of a ‘median’ center around 500 k€ turnover– Most profitable centers have more than 600-700 k€ of turnover.

Conclusions • The market is covered by 3 types of owners :

– International players focus on the big cities, with an international network and they are operationally performing very well, including a minimization of assets used.

– The semi-public market players invest a lot of money in their buildings but do have a structural problem with ‘operational profit’ – partially due to their ‘subsidized’ business model.

• (They use 5 x more equity recourses than the private sector to realize the same level of activity)

– The growth is realized by the smaller, private players in the market, who want to make a ‘bridge’ with the coworking-growth – but this could limit their profitability in the future since their scale is mostly to small to cover the ‘fixed costs’ of a business center.

• The market has ‘new’ challenges the following years : – The ‘business center market’ is not growing anymore

• Price decreases nearly faster than the growth of the market• Which means that the profitability of the market comes under pressure

– Growth of the coworking market could give expansion-possibilities, but given the small scale of these initiatives, these are not helping the profitability of the market

– The ‘challenges’ of the ‘Office-market’ can create opportunities but certainly also threats for the business center market the following years : how will we manage the over-capacity of offices ?

Annexe

List of business centre and coworking places inventoried for this study

Locatie Naam Locatie Naam Locatie NaamBC Geel 4Wings BC Mechelen Bedrijvencentrum Regio Mechelen C Fosses La VilleBusiness One

BC Aalter Aalters Bedrijvencentrum BC Oostende Bedrijvencentrum Regio Oostende BC Brussel Business People Services

BC Lier Accentis business center BC Waregem Bedrijvencentrum Regio Waregem BC Liège CAP Business Center

BC Egezée Accortise Pactech Business Center BC Roeselare Bedrijvencentrum Roeselare C Nivelles Capinnove

C Antwerpen Acospace BC St Truiden Bedrijvencentrum Sint Truiden BC Louvain La NeuveCEI Louvain

BC Brussel Acte BC Tienen Bedrijvencentrum Tienen BC Brussel Centre d'Entreprises de Saint-Gilles

BC Gent Adequat BC Tongeren Bedrijvencentrum Tongeren BC Liège Centres d'Affaires Afinis

BC Brussel Agence 86 'creative business center' BC Veurne Bedrijvencentrum Veurne BC Louvain La NeuveCercle Du Lac

BC Gent Ajuinlei 1 Business Center - Growth Phase BC Brussel Bedrijvencentrum Vilvoorde BC Brussel Chambre d'affaire CFCI

BC Brussel Alnair Business Center BC Oudenaarde Bedrijvencentrum Vlaamse Ardennen C Kontich Clubhouse Coworking

BC Louvain La NeuveAlternative Business Center BC Sint-Niklaas Bedrijvencentrum Waasland BC Genk C-Mine Crib

BC Antwerpen Antwerp Business Center BC Brussel Bedrijvencentrum Zaventem C Mons Co nnexion - coworking

BC Antwerpen Antwerp Business House BC Brussel Bedrijvencentrum Zennevalei C Brussel Coworking Business Center Brussels

BC Sint-Niklaas Astrid Business Center Sint-Niklaas BC Brussel Belgium Business center C Hasselt Coworking Hasselt

BC Brussel Ateac Business Center BC Antwerpen Benelux Business Center C Namen Coworking Namur

BC Brussel Ateliersdes Tanneurs C Brussel Beta Group Coworking C Liège Cristal Hub Coworking

BC Louvain La NeuveAxisparc business center BC Brussel BG3 BC Leuven de Hoorn

C Brussel Bar Buro BC Leuven Bio Incubator Leuven C Brugge De Huyskamer

C Brussel Bar D'Office Brussel (Voka) BC Brussel Bisschofsheim business center BC Antwerpen De Wolkammerij

C Leuven Bar D'Office Leuven BC Brussel Bizzcenter BC Brussel Diegem Grensstraat

C Oostende Bar D'Office Oostende BC Kortrijk Bizz-Init BC Brussel Double Digit Zaventem

BC Nivelles BCS Group BC Brussel BLSI BC Gent Easy Office Center

BC Aalst Bedrijvencentrum Aalst BC Antwerpen BNO 'The factory' BC Brussel EEBIC Business Center

BC Beringen Bedrijvencentrum Beringen BC Brussel BPS Ad Hoc BC Louvain La NeuveEinstein Business Center

BC Gent Bedrijvencentrum De Punt BC Brussel Brussels Airport Corporate Village C Brussel Enclume&Co

BC Antwerpen Bedrijvencentrum De Winkelhaak BC Brussel Brussels Village C Tournai ESCO Expace Coworking

BC DendermondeBedrijvencentrum Dendermonde C Sint-Truiden Bur O Bar BC Brussel Espace Moselle

BC Genk Bedrijvencentrum Genk BC La Louvi!re Buro Business du Centre BC Brussel EU Business Centre

BC GeraardsbergenBedrijvencentrum Geraardsbergen BC Namen Burogest Bouge BC Liège Euregio Business Center Liège

BC Hasselt Bedrijvencentrum Hasselt BC Namen Burogest Office Park C Brussel Factory Forty

BC Ieper Bedrijvencentrum Ieper C Antwerpen Burooz BC Dienze Filad Ondernemingscentrum

BC Zelzate Bedrijvencentrum Kanaalzone BC Brussel Burotel BC Brussel Flagey Digital

BC Leuven Bedrijvencentrum Leuven BC Brussel Burotel 367 C Gent Floating Desk Coworking

BC MaasmechelenBedrijvencentrum Maasmechelen BC Brussel Burotel Congres BC Antwerpen Fountain business park

BC Malle bedrijvencentrum Malle BC Antwerpen Business Center Amerikalei BC Herentals Frame 21

BC Maldegem Bedrijvencentrum Meetjesland BC Charleroi Business Center Charleroi BC Tournai Futur Orcq

BC Overpelt Bedrijvencentrum Overpelt BC Nivelles Business center services BC Mouscron Futur X

BC Brugge Bedrijvencentrum Regio Brugge BC Waver Business Center Wavre Nord BC Oostende Greenbridge incubatiecentrum en wetenschapspark

BC Kortrijk Bedrijvencentrum Regio Kortrijk BC Kortrijk Business Centrum Kortrijk Pottelberg BC Houthalen Greenville Cleantech Campus

BC Willebroek Business centrum Rivium BC Sint-Niklaas Heptagon business center

Locatie Naam Locatie Naam Locatie NaamC Antwerpen Het Bolwerk / Bar d'Office (Fort 5) C Gent Oneoffice BC Mechelen T - Offices

BC Hasselt Huis Vanstraelen BC Bierges Optimalis Business Center BC Antwerpen Talentarena

BC Gent Huize Minne BC Brussel Oriona Group Cinquantenaire C La Louvi!re the cowork Factory

BC Leuven I & I Leuven BC Brussel Oriona Group Louiza BC Gent The Crescent Ghent

BC Gent IBBT-Incubator BC Brussel Oriona Group Schumann BC Brussel The Crescent Riverside

C Gent Icubes BC Brussel Paepsem Business Center C Brussel The Flex

BC Gent I-Cubes BC Gent Parkoffice BC Brussel The Hub Brussel

C Gent Ihub BC Kortrijk Parkoffice C Brussel the Library

BC Estaimpuis Impact Centre Européen d'affaires et de services BC Brussel Plug &Work C Brussel The Loft

BC Leuven In volle Vaart BC Antwerpen Q4 Central Park Building C Brussel The Mug

BC Gent Incubatie en Innovatiecentrum Ugent BC Charleroi Quadrature Business center C Kortrijk The Studio's

BC Brussel Innovatie en incubatiecentrum Brussel BC Brussel Quartier Latin C Ronse TIO3 Textiles Open Innovation Centre

C Antwerpen K85 BC Eupen Quartum Business Center C Brussel Transforma

BC Hasselt Kaai 16 BC Brussel Regus Airport Meeting Center BC Kortrijk Twelve

BC Geel Kempens Bedrijvencentrum BC Braine lalleudRegus Braine Lalleud BC Antwerpen Universitair bedrijvencentrum

C Liège La Forge BC Brussel Regus Brussels South Station BC Brussel VIP Offices Headquarter

C Louvain La NeuveLauvain Coworking Space BC Brussel Regus Brussels West Basilix BC Hasselt Wetenschapspark Limburg

C Tubize Le Centre d'Entreprises Chapagne Landas BC Brussel Regus EU Parliament/Leopold BC Louvain La NeuveWetlands Business Center

C Antwerpen Level 9 BC Gent Regus Gent Zuiderpoort BC Brussel Workspaces

BC Liège Liège business center BC Brussel Regus Midi BC Antwerpen WTC business center

BC Liège Liège Spatiopôle BC Brussel Regus Park Atrium C Charleroi Wup Coworking

C Gent Like Birds BC Brussel Regus Pegasus C Hasselt Zelfies

C Gent Loft169 BC Antwerpen Regus Rubens BC Zellik Zellik.biz

BC Gent Maaltecenter BC Brussel Regus Schuman

BC Brussel MC Square BC Brussel Regus Stephanie Square

BC Mechelen MC Square Mechelen C Liège Rogier Espace Coworking

BC Antwerpen Multiburo Antwerpen Centraal Station BC Brussel Science14 Atrium

BC Brussel Multiburo Brussels Airport BC Brussel Seed Factory

BC Brussel Multiburo Louise BC Brussel Servcorp Bastion Tower

BC Brussel Multiburo Quartier Européen BC Brussel Servcorp Schuman

BC Antwerpen NOA Bedrijvencentrum Nood Oost Antwerpen BC Antwerpen Silver Square

BC Diest Office 21 BC Brussel Silver Square

BC Brussel Office services Brussels BC Brussel Sint Annacenter

BC Leuven Officener Leuven C Antwerpen Social Media Club Kube8

BC Hasselt Officenter BC Brussel Solaris Business Center

BC Antwerpen Officenter A12 C Turnhout SPK - Bar D'office

BC Turnhout Officenter Turnhout BC Turnhout Square Point Business Center

C Mechelen Ondernemershuis/Bar d'Office C Brussel Studio 28

C Ieper Ondernemingscentrum Ieper/ Bar D'Office C Antwerpen Swenst

C Charleroi Switch Coworking Charleroi

BC Antwerpen T - Offices