Will small, sleepy Luxembourg be able to cope with a post-Brexit influx of business? That’s the question prompting reports of booked-out hotels, traffic jams and bankers fleeing Brexit forced to find homes in Luxembourg’s red light district. Such stories prompt wry smiles among some locals.
The red light zone falls within a swathe of ongoing redevelopment that has transformed the streets around the central train station. ING is among institutions to have established a new headquarters in the area boasting some of the most expensive commercial property rental rates in the Grand Duchy. Although at €35 per square metre a month for a prime location, rents seem reasonable compared with the City of London. Prices are on a par with Kirchberg where many financial institutions are based and below the central business district.
The cranes spiking up out of Luxembourg’s historic skyline indicate disruption and noise. But construction is a necessary component of a government strategy to boost capacity. Other business zones rising from the ground include near the airport, where JPMorgan and Schroders have established bases, and Cloche d’Or, a fast growing district where PwC has just moved and Deloitte is building a new headquarters.
All this is to keep pace with GDP growth of 4-5 percent over the past five years, ahead of many other European markets. Employment has risen on average 3 percent over the past 10-20 years, says Luxembourg for Finance’s Tom Theobald, who believes the impact of Brexit will be “part of the natural growth of the financial centre”.
However, in the already notoriously expensive Grand Duchy, some costs are rising, for instance for housing, which has been increasing 4 percent year-on-year, according to Theobald. Bankers will need their bonuses.
A 73 square-metre, one-bedroom apartment in the Royal-Hamilius residence with city centre views was being marketed by JLL Residential in April at more than €1 million. The apartment will not be available until the third quarter of 2019.
A rise in the labour force will put more cars on the road in the city where many already moan about the traffic. Going some way to address this is the completion of the first phase of a tram project that will eventually link the airport and the train station with other areas.
“That will help with any increase in employment as a result of Brexit. We have people commuting into the city from three countries. We have to deal with traffic jams but this is nothing compared to London or Paris,” says Theobald.
He concedes that the Grand Duchy would benefit from more hotels, particularly during peak occupancy times in June and October when the European Council meets. But visiting managers pining for the nightlife in London or Paris will not be totally disappointed. With the highest number of Michelin stars per capita, those dining out on expenses should not have to fight for a table.