Office Space Market Cologne February 2016

Transcription

1 Office Space Market Cologne Neue Direktion Köln Greif & Contzen 2016 Greif & Contzen Beratungsgesellschaft mbh 2016

2 High take-up of office space, potential for increasing rents Around 290,000 square metres of office space were let in Cologne in an increase of around twelve percent over The total amount of newly completed space dropped to around 49,000 square metres and the vacancy rate decreased to 5.7 percent. Supply continues to become ever more scarce as a result. Demand continues to be strong, average rental levels at the very least are therefore likely to increase in A general increase of the prime rent, however, cannot be predicted at this point. Nevertheless, a detailed consideration of leases concluded during the past few years, shows that for very well located office space of particularly high quality, some tenants are willing to pay maximum rents that are considerably higher than the prime rent of EUR per square meter. Office space market Cologne keyfigures development and forecast Year Employees contributing to social insurance (000's)* Unemployment rate* Take-up/Turnover (000's m²) Existing space (million m²) Vacancies (000's m²) Vacancy rate (per cent) Average rent ( /m²) Prime rent ( /m²) Highest rent ( /m²) Completions (000's m²) Devel- lop- ment Trend Greif & Contzen Research, Cologne ; note: *as of 30 June 2016: estimate Greif & Contzen Beratungsgesellschaft mbh 2016, 2

3 Pricing potential in Cologne s office letting market Rent prices for office space in Cologne are moderate, compared to Germany s other top locations. Tenants of premium properties that best meet the requirements of the modern business world, featuring top quality amenities in first rate locations, are the group of users that is most willing to pay high rent prices. This applies to newly constructed high-quality buildings as well as revitalised buildings and a few older properties that have been modernised continuously. The pricing structure outlined in the table below is the result of an analysis of office space leases for premium units in around 60 high-quality office buildings in Cologne, concluded between 2007 and Maximum rent price structure according to property types and quality of location New Revitalised Up-to-date buildings buildings older buildings Top quality location Good quality location² Average quality location³ Listed as monthly base rent per square metre 1 city centre locations with very good traffic links, high visibility and an established business environment, such as Bankenviertel, Mediapark, Rheinauhafen, Rheinufer ² city centre locations with certain drawbacks regarding factors such as visibility or neighbours ³ locations outside of the city centre including business parks such as Airport Business Park, Braunsfeld, Ehrenfeld, Kalk, Ossendorf In top quality office locations, maximum rents of up to EUR per square metres are realised in individual cases. In order to achieve rental prices on this scale, however, the properties need to feature exceptional qualities. Examples of such properties are the modernised top storeys of KölnTurm or the elaborately refurbished building Kaiser-Wilhelm-Ring Newly constructed buildings in top locations usually generate rental prices in excess of EUR per square metre. Examples of other property types suggest that the current figure of EUR per square metre is likely to be exceeded with future construction projects featuring appropriate amenities and location qualities. Greif & Contzen Beratungsgesellschaft mbh 2016, 3

4 Premium property nearing completion: Neue Direktion Köln Greif & Contzen 2016 Development of rent levels Cologne s rent levels remained stable in 2015, despite the fact that vacancies decreased considerably. The average rent remained at EUR per square metre and the average rent weighted according to unit size stood at EUR per square metre. Based on the guidelines issued by the Society of Property Researchers, Germany, the prime rent amounted to EUR per square metre. While a number of rental contracts featuring top rents well above this figure were concluded, their share of the total take-up was not significant enough to account for an increase of the prime rent according to the guidelines mentioned above. Rent levels have proved to be extremely stable over time. Considering a further considerable decrease of vacancies and assuming that demand will continue to be strong in 2016, it is to be expected that average rent prices at the very least are going to increase. Greif & Contzen Beratungsgesellschaft mbh 2016, 4

5 Prime rent and average rent ( /m²) development 2003 to 2016* Greif & Contzen Research, Cologne ; *forecast for 2016 Office space in Cologne is outstandingly cost effective, compared to Germany s other top business locations. Even Stuttgart features a higher prime rent nowadays. This means that Cologne will remain competitive, even with an increased pricing structure. Prime rents in Germany's top office locations 2015 ( /m²) Frankfurt Munich Düsseldorf Hamburg Berlin Stuttgart Cologne Source: gif e.v.; Greif & Contzen Research; various market reports, Cologne Major office space lettings in 2015 The two biggest units taken up in 2015 had a size of around 11,000 square metres each. HRS signed a rental contract for the building CoeurCologne that is currently under construction at Breslauer Platz. Construction work commenced for the Bundeswehr Personnel Office s new premises in the district of Longerich. Next up was the letting of around 10,000 square metres to Malteser Hilfsdienst in the Deutzer Feld area. Further major lettings Greif & Contzen Beratungsgesellschaft mbh 2016, 5

6 included the Federal Employment Agency renting a unit in the submarket of Ehrenfeld and Deutsche Post taking up new premises on the right bank of the river Rhine. The law firm DLA Piper signed a lease for around 5,300 square metres in soon to be completed Gürzenich-Quartier. Selection of significant units taken up in 2015 Tenant (location) office space (m²) HRS Hotel Reservation Service (Innenstadt Nord) 11,000 Bundeswehr Personnel Office (Köln-Nord) 11,000 Malteser Hilfsdienst (Kalk) 9,900 Jobcenter Mitte, Federal Employment Agency (Ehrenfeld) 7,600 Office for Information Processing (Bankenviertel) 6,900 Deutsche Post (Köln Ost) 6,500 Jobcenter Süd, Federal Employment Agency (Ehrenfeld) 6,500 SNIPES (Mülheim) 5,400 DLA Piper (Innenstadt Nord) 5,300 avocis / Tricentis (Kölner Ringe) 5,300 Greif & Contzen Research, Cologne, With around 290,000 square metres, the take up of office space in 2015 has been on a high level compared to long-term standards. Considering the currently favourable demand situation, turnover may well increase further in , , , , , ,000 50,000 Take-up of office space (m²) development and forecast 2007 to Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2016, 6

7 Seilerei on Schanzenstraße Greif & Contzen 2016 Tenants from four strong industries The most important industries regarding the rental turnover in 2015 were authorities/administration, general services, consulting and the media industry. These four industries accounted for more than half of the total space let. At around 20 per cent, public facilities were the most significant group of tenants. This is the result of a number of major contracts by the City of Cologne and the Federal Employment Agency as well as the construction project for the Bundeswehr Personnel Office. Take-up of office space according to industries in 2015 Real Estate 3% Insurance Transport 3% Construction 3% Industrial, Manufacturing 3% Finance 2% Authorities, Administration 20% 4% Healthcare 6% Education 6% Software, IT Retail Media Consulting Services 7% 8% 10% 10% 15% Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2016, 7

8 Completions: Scarce availability of newly constructed space A total of around 49,000 square metres of new office space was completed in This is the lowest figure since 2001 when only 40,000 square metres were completed. Construction projects concluded during the past year included the property Holzmarkt 1, the office ensemble KUBIKON Ehrenfeld and a number of buildings belonging to Gerling Quartier. Only about one quarter of the newly constructed space is currently still available. Office buildings with a total area of around 100,000 square metres are scheduled to be completed in However, even now only about one third of the space is still vacant. A substantially higher construction volume has not been realised since ,000 Completed office space (m²) development and forecast 2007 to , , , ,000 50, Greif & Contzen Research, Cologne, In the already densely built city centre, potential for development projects is limited mostly to small, underused properties and consolidation projects as well as refurbishment and modernisation measures for existing buildings. Major urban development projects are increasingly gaining significance for Cologne s office space market. Concepts for urban development that have been presented so far, such as Mülheim-Süd, Parkstadt- Süd and Deutz Harbour provide for mixed-use developments including both residential and office buildings. Greif & Contzen Beratungsgesellschaft mbh 2016, 8

9 Major construction projects in 2016 Construction work to Neue Direktion Köln is due to be concluded this year, allowing the European Aviation Safety Agency (EASA) to move into their new premises. The building has around 21,400 square metres of floor space, making it the biggest single-tenant building to have been let since the former Lufthansa premises were refurbished into today s LANXESS Tower. Gürzenich-Quartier near Heumarkt and Leitradlofts in Ehrenfeld are also due to be completed in Further construction projects that are scheduled for completion this year include the premises for the Bundeswehr Personnel Office, the Archiepiscopal Vocational College and the Natural and Medical Sciences Institute of the German Sport University Cologne. Building under construction Office space (m², approx.) Completion Neue Direktion Köln (Rheinufer Nord) 21, CoeurCologne (Innenstadt Nord) 12, Leitradlofts (Ehrenfeld) 12, Gürzenich Quartier (Innenstadt Nord) 11, Bundeswehr Personnel Office (Köln-Nord) 11, UoAS Public Administration (Köln Ost) 10, Archiepiscopal Voc.l College Cologne (Köln West) 9, Nawi Med (Köln-West) 8, Bank für Sozialwirtschaft (Rheinufer Nord) 8, GHU 88 (Rheinufer Süd) 5, ADAC Premises Köln Deutzer Feld (Kalk) 5, Greif & Contzen Research, Cologne, Strong decrease of vacancies - trend slowing down During 2015 the total of vacant space decreased from around 510,000 to only around 440,000 square metres. Vacancies therefore account for around 5.7 per cent of the total stock of office space. In the submarkets Kölner Ringe and Ossendorf, vacancies decreased by more than 30 percent. This was due partly to a small number of major contracts but in particular to various small to mid-sized leases. Greif & Contzen Beratungsgesellschaft mbh 2016, 9

10 Halle 11 in Rheinauhafen Greif & Contzen 2016 It is to be expected that the supply of vacant space will decrease further in 2016, owing to the solid demand situation. However, during the year, a number of large office units in existing high-quality state-of-the-art buildings will become available due to changes on the part of the tenants. It is therefore to be expected that the vacancy rate will not drop as dramatically as in recent times. An estimated vacancy rate of 5.4 percent is likely to be reached towards the end of Vacancy rate, office space development and forecast 2007 to % 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 8.0% 8.1% 8.0% 7.7% 7.6% 7.6% 7.4% 6.6% 5.7% 5.4% Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2016, 10

11 Overview of submarkets Location Innenstadt (City Centre) Available space 1 (m²) Vacant space (m²) Average annual take-up² (m²) Benchmark rent³ ( /m²) Bankenviertel 27,000 6,000 8, MediaPark 13,000 13,000 11, Rheinauhafen 26,000 18,000 7, Kölner Ringe 37,000 33,000 23, Deutz 98,000 16,000 21, Innenstadt Nord 64,000 42,000 30, Innenstadt Süd 6,000 6,000 12, Rheinufer Nord 2,000 2,000 8, Rheinufer Süd 16,000 12,000 7, Subtotal 289, , ,000 Districts on the left bank of the Rhine Innere Kanalstraße 14,000 14,000 7, Ehrenfeld 41,000 38,000 17, Braunsfeld 67,000 42,000 12, Ossendorf 19,000 19,000 17, Köln Nord 15,000 15,000 19, Köln West 23,000 23,000 18, Köln Süd 45,000 42,000 18, Subtotal 224, , ,000 Districts on the right bank of the Rhine Gremberghoven 39,000 39,000 12, Mülheim 95,000 24,000 14, Kalk 31,000 2,000 8, Köln Ost 37,000 34,000 10, Subtotal 202,000 99,000 44,000 Total 715, , ,000 1 The supply of available space consists of vacancies, space under construction and a certain amount of space that is still in planning stages. 2 Specified as average value of the past five years 3 The listed figures are base rent prices. Considerably higher or lower rents are occasionally agreed upon in individual cases. Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2016, 11

12 Particularly sought after submarkets An annual average of around 127,000 square metres was let in the city centre in the years 2011 through to The five year average for the entire city amounts to around 279,000 square metres. This means that almost half of all market activities are focused in the city centre. In addition to major city centre lettings such as to HRS and DLA Piper, it is the submarket Bankenviertel that stands out in particular. The City of Cologne and the IT company Cleverbridge took up a total of more than 10,000 square meters of office space in this area alone. With a total of more than 27,000 square metres, turnover of office space has proved very dynamic in Ehrenfeld in The Federal Employment Agency moved two of their job centres to this part of Cologne. There have also been successful lettings in the construction projects KUBIKON Ehrenfeld and Leitradlofts. KUBIKON Ehrenfeld Greif & Contzen 2016 Another submarket with a letting performance well above average was Mülheim with more than 19,000 square metres let in The district is characterised by the creative inustries. A number of major lettings were accomplished on Schanzenstrasse. Among those were the new headquarters for the retail company SNIPES with around 5,400 square metres and 3,700 square metres of expansion space for REWE digital. Greif & Contzen Beratungsgesellschaft mbh 2016, 12

13 Business survey: Higher expectations for the future In their survey conducted at the beginning of 2016, the Cologne Chamber of Commerce and Industry found the mood among local enterprises to have improved since last autumn. Expectations for the future improved despite a slightly more negative outlook on the economic situation. Companies from the areas of construction and real estate, the hotel and catering industries and the healthcare industry tend to be particularly optimistic. Staff hiring plans decreased in the industrial sector but increased among services companies since the last survey was conducted in autumn. On the whole, however, there are more companies who are planning to expand their workforce than there are companies planning staff reductions. 550, , , , ,000 Employees contributing to social insurance in Cologne development and estimate 2007 to , Source: Landesdatenbank NRW, estimate by G&C Research, as of 30 June respectively Increasing employment Over the past nine years, the number of employees contributing to social insurance has increased by an average of around 8,600 individuals each year. Around 522,000 employees were registered at the end of June 2015, about 17 percent more than in June The Chamber of Commerce and Industry found personnel planning to be slightly more cautious than it had been in autumn On the whole it is to be expected that employment will continue to increase in 2016 but not at the same rate as before. Greif & Contzen Beratungsgesellschaft mbh 2016, 13

14 View of the left bank of the river Rhine Greif & Contzen 2016 Outlook for 2016 According to various institutes for economic research, the growth of the German GDP is expected to range between 1.6 and 2.2 per cent in The overall economic development is encouraged by low oil prices and interest rates as well as by strong domestic consumption. There is, however, reason for concern regarding a general decrease of export opportunities for domestic products, owing to an economic downturn in China and a number of emerging countries. The ifo Business Climate Index has been declining recently. The survey carried out by the Cologne Chamber of Commerce and Industry, however, shows an optimistic overall mood among local enterprises. The economic conditions for demand in Cologne s office space market are largely favourable, even though there are certain limitations. Taking into account that a number of companies is currently looking for large office units as well as Zurich Versicherung s intended lease in MesseCity, it is likely that the take-up of office space will increase in 2016 compared to the previous year. Greif & Contzen Beratungsgesellschaft mbh 2016, 14

15 Should you have any questions, please contact: Theodor J. Greif Managing Director / Owner GREIF & CONTZEN Immobilien GmbH Tel: gl@greif-contzen.de Florian Schmidt Head of Office Rental Division GREIF & CONTZEN Immobilienmakler GmbH Tel: florian.schmidt@greif-contzen.de Frank Pönisch Managing Director GREIF & CONTZEN Beratungsgesellschaft mbh Tel: frank.poenisch@greif-contzen.de Dr. Jan Schubert Consulting, Research GREIF & CONTZEN Beratungsgesellschaft mbh Tel: jan.schubert@greif-contzen.de Address: Pferdmengesstraße 42, Köln Greif & Contzen Beratungsgesellschaft mbh 2016, 15

16 The information contained in this report is in part based on public sources, information provided by third parties and our own calculations. We have compiled this information with the greatest care and attention and are providing the information to the best of our knowledge. However, any liability for the completeness and correctness of any of the information, contents or citations contained shall be excluded. The information compiled and provided in this report shall not establish any kind of consulting relationship with the recipient. Greif & Contzen Beratungsgesellschaft mbh, All rights reserved. These documents are our intellectual property and subject to our copyright. They are intended solely for the recipient. Any form of reproduction, amendments or distribution to third parties, in whole or in part, shall require our prior explicit agreement in writing. Where we do not hold the copyright on grounds of third-party-copyright, we refer to the copyright of the third party. Greif & Contzen Beratungsgesellschaft mbh 2016, 16