The Grand Duchy of Luxembourg’s employment market is faring well and there is set to be a significant increase in the country’s workers, both in terms of its residents and cross-border workers. Does this point to major office development? We calculated the amount of office space which would theoretically need to be developed to accommodate this economic growth and analysed the potential barriers.

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Luxembourgers: an additional 74,000 Luxembourger workers by 2035

• In 2021, the number of Luxembourger workers in Luxembourg rose to 266,000, according to the country’s General Inspectorate of Social Security, some 41.2% of the population.
• Sustained population growth is expected in Luxembourg, with an estimated 181,000 additional inhabitants by 2035.
• The unemployment rate (for the labour force) in Luxembourg is 6.5%; this is significantly lower than in other neighbouring regions:
  • 7.2% for North Rhine-Westphalia;
  • 7.9% for the Grand Est region;
  • 8.9% for Wallonia.
• La carte ci-après représente d’une part, la répartition du taux de chômage par commune, et d’autre part le volume total de travailleurs au lieu de travail, par commune.

The map below shows the different unemployment rates by municipality and the total number of workers by workplace by municipality.

Taking all these figures into account, it is estimated that there will be 74,000 additional Luxembourger workers by 2035.

Cross-border workers: an expected increase of 236,000 workers

In addition to these Luxembourger workers, there will also be more cross-border workers. According to Global Finance, the Grand Duchy of Luxembourg will be the richest country in the world in 2022, with a GDP per capita which will be more than double that of its neighbouring countries. The labour market in Luxembourg has been particularly robust in the wake of the Covid-19 pandemic; according to a study by Indeed.com, the country is second in a ranking of the most resilient European countries, post-Covid.

It’s not surprising that the Grand Duchy of Luxembourg is the most attractive country in Europe for international jobseekers. As we mentioned in a previous article:

• In 2020, there were 200,000 cross-border workers;
• 236,000 more are expected by 2035!

Offices in the Grand Duchy of Luxembourg: +2.16 million m² in 2035?

Including Luxembourg residents and cross-border workers, an additional 310,000 workers are therefore expected in the Grand Duchy of Luxembourg by 2035.

Based on this data and this outlook, our calculations show the potential for the development of 2.16 million m² of office space by 2035. This amounts to more than 166,000 m² of additional space per year, a truly phenomenal figure. But this increase is theoretical: as with retail development, the potential for office development should probably be reassessed and put into perspective in view of certain trends.

The barriers to office development

We believe that this estimated growth in offices could be affected by two main barriers:

• Changing working habits: the increase in remote working should reduce demand for office space, although cross-border workers can only work from home for a limited number of days for tax reasons.
• The pressure on land: this risks limiting the development of new housing, retail and office space.

Let’s look at this pressure on land in more detail. As we have seen, the potential estimate of 2.16 million m² of additional office space is based on the assumption of strong growth in the number of inhabitants and cross-border workers. However, in view of the current rate of construction, it would be impossible for all these potential new residents to find somewhere to live. Even if it were possible, it seems unrealistic that the country would be able to simultaneously develop the quantity of offices theoretically required by such growth in the population and cross-border workers.

This is supported by the fact that Luxembourg’s authorities want to move towards more sustainable land use, as we are seeing in neighbouring countries. They will therefore prioritise areas which are already densely built-up for new development; ultimately, this further limits the availability of land.

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In view of this pressure on land, we believe that this strong growth is likely to have been overestimated; the estimations should be revised downwards.

Analysing the development potential, municipality by municipality

So, where should hubs of economic activity be developed to meet the demand? What are the reasons for and against office development in these areas? How does local mobility affect demand?

To answer this question properly, it’s best to carry out detailed micro-geographical analysis, taking into account the specificities of different sites and areas. Besides the local differences between municipalities, other factors also come into play: accessibility, competition, projects already under development, the number of workers, etc. All these elements must be considered to ensure a successful office development project.

What’s more, we are fervent supporters of mixed-use projects, like Roüt Lens in the Grand Duchy of Luxembourg and Morland Mixité Capitale in Paris. In our view, these two projects are exemplary in several ways, particularly because they reclaim urban wastelands and unoccupied buildings. We believe that this is key to addressing the pressure on land, along with rationalising the use of spaces by ensuring that they are used by different kinds of users at different times of the day. It’s all about doing better with less: this is an ecolonomic view of project development and that’s what we need to focus on in the future.