Bringing stakeholders together to better connect capital and ideas

It was in the auditorium of A&O Shearman, which hosted this conference, that LuxReal’s members gathered on January 21st. In his welcome speech, Romain Muller emphasized that Luxembourg’s success as a leading financial center owes much to its pioneering attitude in many fields. "If real estate has always reflected the economy, we realize that the world is changing. In the current context, whether as investors or developers, we must adopt new visions, rethink how we plan, build, manage, and experience real estate," commented the President of LuxReal. "To remain relevant and maintain our leadership position, it is essential to explore new horizons."

Investing in the Future by Building on Our Strengths

For the occasion, the Luxembourg Minister of Finance was invited to outline his vision for the future of the country’s financial center. After emphasizing the importance of strengthening relations between the various stakeholders contributing to the development of the financial center, Gilles Roth highlighted its crucial role in Luxembourg’s economy and prosperity. "While we must keep an eye on global developments, particularly following the election of Donald Trump, Europe, Luxembourg, and its financial center must first and foremost recognize their strengths. More than ever, we must invest in the future by bringing stakeholders together and connecting ideas," commented Mr. Roth.

Luxembourg as a Major Hub for Alternative Funds

Currently, Luxembourg’s alternative funds represent 60% of the European market. In 2022, 65% of capital raised in real estate funds was channeled through Luxembourg. This appeal is no coincidence. "We have provided additional flexibility to fund promoters by enhancing our toolbox to meet investors’ expectations. Today, Luxembourg is a strategic hub for private equity, infrastructure, real estate, and private debt funds. The challenge is to continue enriching our value proposition with expertise in valuation, risk management, and transaction structuring. Luxembourg is ideally positioned to capture future growth in the global alternative market," continued the minister.

The Pillars of Tomorrow’s Financial Center

In a constantly evolving world, Luxembourg must not rest on its laurels. "Climate change, technological advancements, and geopolitics are reshaping the socio-economic landscape. We must understand these changes to better accompany them and, in doing so, evolve our financial center," assured Gilles Roth. According to him, the future of the financial center will be built on five key pillars: innovation, connectivity, stability, sustainable development, and value creation.

Emerging Real Estate Assets

Luxembourg attracts not only fund managers but also real estate investors. However, the market has experienced recent disruptions. The widespread adoption of remote work has impacted office real estate, while the growth of e-commerce has affected retail real estate. Additionally, interest rate trends and rising housing prices are prompting investors to rethink their strategies.

"Luxembourg remains a very resilient market. However, it is crucial to consider these evolutions. Investors are looking to diversify their portfolios. Beyond offices and residential assets, logistics, data centers, and various forms of commercial real estate are generating increasing interest," comments Emna Rekik, Country Lead & Head of Markets at JLL Luxembourg.

Diversified Strategies Tailored to Market Needs

Managers like Real IS Group are diversifying their investments with funds focused on logistics, micro-living, or co-living. "In the current environment, investors seek opportunities that guarantee stable returns over time. While retail is set to reinvent itself, logistics demands are growing, offering real opportunities," explains Alexandre Guignard, Head of Investment Management, France, Belgium, Luxembourg at Real IS Group.

Removing Barriers and Enhancing the Toolbox

Although Luxembourg remains attractive, certain administrative hurdles persist, particularly for redevelopment and logistics projects.

"While some barriers remain also in structuring, we must stay optimistic and support change by adapting our approaches and enhancing our toolbox. To achieve this, it is essential to draw inspiration from best practices internationally and continuously enhance our product offering, to remain competitive and meet investors’ expectations," concludes Tamas Mark, Global Head of Real Assets at IQ-EQ Luxembourg.