Luxembourg’s Real Estate Market Shows Signs of Recovery in 2025, With Logistics Leading the Way
After a period of hesitation, Luxembourg’s real estate market demonstrated positive momentum in 2025, with increasing transactional volumes across various sectors. While caution remains due to global geopolitical uncertainties, investors are increasingly optimistic about the market’s prospects for 2026.
Recovery Driven by Increased Transaction Volumes
Total transaction volume in Luxembourg rebounded almost 39% in 2025, reaching €841 million. JLL Luxembourg reports this rebound encompassed offices, industry, shopping centers, and residential properties – an unprecedented sectoral mix for the Grand Duchy. Belgium also experienced a significant surge, with a 42% increase to €4.5 billion, primarily driven by logistics and retail real estate.
Office Market Dynamics
The office market is showing signs of improvement, supported by financial institutions and pre-lettings in projects connected to the tramway network. JLL notes that recently completed projects are filling up, leading to a decline in vacancy rates to below 4%. Prime rents in Luxembourg City remained stable at €54/sq.m./month, while average rents increased by 6% to a new high of €34.8/sq.m./month.
According to JLL, key tenant preferences are shifting towards properties with public transport access, wellness amenities, and flexible, high-quality spaces. Howald (connected to the tramway) and Findel (with infrastructure investments) are emerging as viable alternatives to the central business district.
Investment Trends and Yields
Investment volume rose in 2025, with a mix of core and non-core transactions. Yields compressed to 4.5% and are expected to stabilize at that level in 2026. Approximately 44% of investors are prepared to increase their real estate exposure in 2026, while another 44% intend to maintain their current exposure. Only 12% plan to decrease their investment.
Logistics and Alternative Assets
Logistics remains the preferred asset class for investors, both currently and for the future. Data centers have experienced a significant rise, becoming the top alternative asset, surpassing student housing. The segment of multifamily properties (apartment buildings for rent) is also viewed favorably. However, affordable housing has seen a decline in investor interest, despite its prioritization in public policies.
Yield Outlook and Investor Concerns
For 2026, 46% of investors anticipate a reduction in office yields, particularly in Belgium. The outlook for logistics and retail yields is expected to remain stable.
Investors remain concerned about geopolitical tensions, with 69% identifying them as a significant source of worry. Economic growth (63%) and inflation/interest rates (47%) are also key concerns. However, the stabilization of financing conditions and the availability of reference transactions are reducing uncertainty for “value-add” investors.
Looking Ahead
JLL anticipates a positive year for offices and shopping centers, with the hospitality segment also expected to perform well. As uncertainty fades, the Luxembourg real estate market is poised for increased liquidity and continued recovery in 2026.