Dusseldorf Office MarketView

Transcription

1 Dusseldorf Office MarketView 214 Q3 GDP 214 Q2.2% Q-o-Q GDP 214 Q1 +.7% Q-o-Q IFO BUSINESS CLIMATE INDEX 14.7 Sept. 214 CBRE Global Research and Consulting BA-X 17 Sept. 214 UR DUS 8.6% Sept Quick Stats 214 Q3 Q-o-Q Take-up 67,4 sq m Vacancy 1.m sq m Prime rent 26. sq m Prime yield 4.7% Completions 24,2 sq m Hot Topics Office space take-up slightly below previous year s level Surrounding communities extraordinarily strong Fall in achievable prime rent Vacancy continues to decrease Outlook remains positive Prime yield for office property under pressure, but remains still stable OVERVIEW Economy Despite the recent slight downward adjustment in forecasts, German economic growth will continue to lie significantly above the Eurozone average. According to the current report published by Oxford Economics, growth of 1.4% is expected for the current year and 1.7% in 21. This marginal downward adjustment is due in part to the geopolitical uncertainties and the resulting lower level of export activity. The labour market and domestic economy still appear strong; Dusseldorf s unemployment rate recently fell to 8.6% (down.2% compared to September 213). The NRW.BANK.ifo Business Climate Index recovered in September due to the generally more positive assessment of the current economic situation, even if future development is viewed rather more sceptically, particularly in view of developments in the export trade due to the current political uncertainties. Office market Office space take-up in the Dusseldorf market area totalled 237,8 sq m in the first nine months of 214. More than 7% of space take-up was within the Dusseldorf city area. At over, sq m, the proportion attributable to owner-occupiers was significantly above the first three quarters average of the past five years. The scarcity of supply of suitable space in prime locations meant a fall in the sustainably achievable prime rent at the end of the third quarter to 26. /sq m/month (down 4% compared to Q3 213). The weighted average rent in the market area fell by almost 1% compared with the previous year to its current level of /sq m/month. The vacancy rate remains at 1.6%, compared to 1.8% in the third quarter of 213. Investment market In the first nine months of the year, 2.4bn was transacted in the German commercial property investment market. The share of the total volume attributable to the top five markets was 48%. The around 1.62bn transacted in the Dusseldorf market meant a significant increase of 2% was registered compared with the previous year. Over half of the transaction volume was attributable to office property and almost one third was retail property. The 27% share transacted by way of portfolios was significantly above the previous year s level. International investors accounted for 44% of the total volume. Compared with the previous quarter, the net initial yield for first class office properties in Dusseldorf s prime locations remained stable at 4.7%. Table 1: Office market key data 213 Q3 214 Q3 Y-o-Y Stock, million sq m % Take-up, cum. 1, sq m % Vacancy, million sq m % Vacancy rate, % %-Pts. Prime rent, /sq m/month % Prime yield, % %-Pts. Capital value index (Q = 1) % 214, CBRE GmbH

2 1, sq m % 1, sq m 214 Q3 Dusseldorf Office MarketView TAKE-UP Despite the stable economic situation in Dusseldorf and Germany as a whole, many users are currently exercising caution in terms of their locational decisions, which has resulted in postponements or lease renewals. However, the latter are not included in the office space take-up statistics. It must be noted that there are many international companies located in the state capital and its surrounding communities and thus rental decisions are also affected by European or global developments. Therefore, the 237,8 sq m takenup in the Dusseldorf market area in the past nine months is a comparatively low figure. Take-up fell by 19% compared with the previous year. The 179,8 sq m taken-up in the Dusseldorf city area alone was around 32% below the previous year s level. With a share of 24%, the surrounding communities were extraordinarily strong, which was due in the most part to the owner-occupier deal by Mitsubishi in Ratingen. At over, sq m, the proportion attributable to owner-occupiers in the market area was significantly above the average of the first three quarters of the last five years (16, sq m). In addition to Mitsubishi, this high level was due in part to the owner-occupier deals by Rheinmetall and the FOM Hochschule für Ökonomie & Management in the Dusseldorf North submarket. In the year to date, large-scale transactions above, sq m were rare in the Dusseldorf market area. The three transactions registered in this size category were due to the three owner-occupiers mentioned above; in the previous year, there had already been eight transactions of this size category by this point in time. The average size of space per letting was around 6 sq m at the end of the third quarter and therefore one fifth below the previous year s level. The city of Ratingen and the Dusseldorf North submarket were the strongest submarkets in terms of take-up in the year to date, due in part to the owner-occupier deals. VACANCY Only, sq m of speculative office space was completed in the third quarter of 214, which meant that the volume of vacancies in the market area was hardly affected in a negative way. Vacancy remained relatively stable compared with mid-year 214; the vacancy rate (excluding space available for sub-letting) remained at 1.6%. Compared with the previous year, vacancy as a proportion of total stock fell by 2 %-points. In the Dusseldorf city area alone, the current vacancy rate is 1.1%, which equates to.1 %-points below the previous quarter and.3 %-points below the previous year s level. There are still a few speculative completions expected for the final quarter, which are anticipated to be quickly absorbed by the Dusseldorf market because of the high fit-out specification and continued high level of demand for modern space. Chart 1: Office space take-up Chart 2: Office space take-up (cumulated, %) by sectors* - Top - Chart 3: 1,2 1, 8 1-year average: 34,4 sq m Remaining sectors 1% Q1 Q2 Q3 Q4 Public Services % Trade 2% Real Estate % Office space vacancy 1-year average: 1.3 % Industry, Construction 12% Legal Adv., Chart. Acc. 7% *in total 2 sectors The supply, composed of vacant space, space available for sub-letting and speculative completions over the next 12 months, has risen slightly over the course of the year, which is mainly due to the higher volume of space available for sub-letting, resulting from a change in space requirements by occupiers whose leases had often commenced a number of years ago. In terms of the total stock, the space available to let remained at 11.%, as in the previous year. The lion s share of supply is average-quality space (3%). A further 42% is top-quality space. Space with out-of-date fitout specification plays a very limited role in the Dusseldorf market Q3 Vacancy Vacancy rate , CBRE GmbH

3 1, sq m Index Q = 1 /sq m/month Chart 4: Prime rent/ Weighted average rent Q3 Prime rent Weighted average rent, gif Chart : Rent index 3 RENT The scarcity of supply of suitable space in the prime locations at the end of the third quarter meant a fall in the sustainable achievable prime rent to 26. /sq m/month, which is the price achievable in the CBD. Year-on-year, this equates to a fall of almost 4%, which is not due to a lack of demand, but rather to the fact that the influential trophy buildings Dreischeibenhaus and Kö-Bogen have reached such a high degree of letting in the meantime that there are now no large areas of space available in the CBD at the same prime rent as hitherto. The weighted average rent in the market area, based on all letting deals over the last 12 months, has fallen by almost 1% compared with the previous year, to its current level of /sq m/month. This decrease is due to a number of larger transactions at prices between 1. and 1. /sq m/month. In the city area of Dusseldorf alone, the weighted average rent has fallen by almost 6% to /sq m/month. The realised prime rent, which corresponds to the median of 3% of the most expensive lettings of the past 12 months, has fallen by around 9% to its current level of 24. /sq m/month. The overall fall in rents is the result of the increasing scarcity of high-quality space in good locations which means that some users have to either relocate to space in peripheral locations, to space with less high specification fit-out, or make the decision to extend their existing lease contract. 214 Q3 Dusseldorf Office MarketView 2 2 Due to the fall in prime rent in the Dusseldorf market, the CBRE Rent Index fell slightly in the third quarter from 168 index points at the mid-year point (Q = 1) to 162 points Germany Dusseldorf Chart 6: Office space future supply PIPELINE Over the last nine months, a total of 114, sq m new or refurbished office space has come onto the Dusseldorf market. Of those, just 16% were still un-let on completion. The largest properties to come onto the market were in the Kö-Bogen and Dreischeibenhaus in the CBD submarket, but there is now hardly any space still available; this also accounts for the fall in the achievable prime rent. Furthermore, in the Left of the Rhine submarket, the completion of the Silizium on Hansaallee and the two buildings Lavista and Belmundo in Belsenpark Oberkassel significantly increased the total stock year average: 118,1 m² Completed Speculative Pre-let Owner-occupied Around 18,6 sq m is expected to be completed in the final quarter of the year, of which to date, one third has not been let. A total volume of 162,2 sq m is expected for the coming year, which is a similar completion level to 214. The proportion of speculative space is still rather high at 4%; the consistently high demand for high-quality space should mean that this proportion is likely to be considerably lower at completion. The projected volume of 69,3 sq m currently expected for 216 is well below the current volume. This is the result of the cautious (wait-and-see) behaviour of project developers who, now more than in the past, but still very selectively, do not commence work on a new-build project without a critical mass of space already pre-let , CBRE GmbH

4 Index Q = 1 % 1, sq m 214 Q3 Dusseldorf Office MarketView PIPELINE BY SUBMARKETS Up to the end of 216, the Dusseldorf North submarket in particular will see a high volume of new-build office space coming onto the market: around 73, sq m. Of this, approx. 73% has been already pre-let or has been allocated to an owner-occupier, including the new-build for Technip in Theodorstrasse and the Clara & Robert project. Two projects by Capricorn Development GmbH, with a combined total of around 46, sq m, mean that the second highest volume is expected in the Harbour submarket; however, no building works on the project have yet commenced. In the Airport submarket, in addition to the developments of the airport authority and the AirPark project with over 1, sq m each which are both already under construction, a number of smaller projects will come onto the market, but these are currently still at the planning stage. Furthermore, the A-ERO on Flughafenstrasse should be completed by the end of the current year. Of the total of 39,4 sq m of projected space in this submarket, just under half is still available on the market. A total of 43, sq m new space is expected in the city centre submarkets (CBD and the several City submarkets), all of which are being constructed speculatively. This comprises mainly the refurbishment project of the Andreasquartier in the old town (Altstadt). Chart 7: Office space future supply (214 Q4-216) by submarkets* -Top D-North Harbour Airport Ratingen City Speculative Pre-let Owner-occupier Chart 8: Prime yield, capital value and benchmark yield 2 *in total 17 submarkets 6 INVESTMENT At 1.6bn, there was a significantly higher transaction 2 volume registered in the Dusseldorf commercial property 4 investment market in the last three quarters than in the same 1 period in 213 (+2 %). Investment was mainly in office property with a share of 7% or 92m. In second place 3 was retail property with 29% or 473m, which included the 1 Kö-Galerie purchased by Allianz and the Karstadt purchased 2 by the Zech-Gruppe. The share of investment transaction 1 volume attributable to portfolios was almost three times higher than before. Aside from the Domus-Portfolio purchased by Blackstone in the first quarter, this was mainly due to properties belonging to nationwide portfolios being Q3 located in the Dusseldorf market area, including a hotel Capital value index Prime yield (%) 1Y Bund portfolio purchased by Accor and the participation by the South Korean Public Officials Benefit Association (POBA) in an office portfolio owned by Dream Global REIT from Canada. The proportion attributable to foreign investors overall was just under 72m or 44% of the total volume, which was significantly higher (21% or 27m) than in the same period in 213, due in part to the portfolio transactions mentioned. In addition to US and British investors, there was also increased activity from Asian players in the Dusseldorf market, including the above-mentioned POBA and the owneroccupier purchase by Mitsubishi in Ratingen. Such investors are now increasingly seeking foreign property investment opportunities due to the limited supply in their own markets, recent deregulation in particular in terms of the property allocation for institutional investors and the more attractive yield levels. The net initial yield for top-quality office property in the Dusseldorf market s prime locations has remained stable since the previous quarter at 4.7%, due to the continued high demand for core products combined with very limited supply. Further yield compression is expected by the end of the year, even in good secondary locations. 4 FORECAST Despite the restrained space take-up result in the Dusseldorf market area in the year so far, the forecast in terms of full year performance is not entirely negative. A few large-scale transactions are still expected in the next few months, even though not all these will be completed in the fourth quarter. However, more than five large-scale potential lettings currently in the market totalling more than 12, sq m create prospects that are looking good. The office space take-up over the full year 214 could well reach around 3, sq m as forecast earlier and therefore slightly exceed the 1-year average. A further slight fall in the achievable prime rent is expected for the year-end, even as demand for prime space remains high; nevertheless, there is currently a scarcity of adequate supply. As only a small volume of speculative space will come onto the market by the end of the year, vacancy is anticipated to remain stable. 214, CBRE GmbH

5 Table 2: Submarket key data Cumulated Take-up sq m Future supply 214 Q4 216 sq m Vacancy rate % Rental band /sq m/month Weighted average rent /sq m/month CBD 18,7 19, City 9, 21, City-North 4,2 2, City-East 2, City-South 1, Airport 16, 39, Grafenberg/East 13, Harbour 17,4 46, Kennedydamm 16,8 14, Left of the Rhine 16, D-North 32,3 73, Seestern 6, D-South 1,, Neuss 1, Ratingen 36,2 23, Hilden 2, n/a Erkrath 4,1, TOTAL , Q3 Dusseldorf Office MarketView 214, CBRE GmbH

6 214 Q3 Dusseldorf Office MarketView For more information about this MarketView, please contact: Research Germany Dr. Jan Linsin Senior Director Head of Research Germany CBRE Bockenheimer Landstr Frankfurt t: e: Anja Scholz Senior Analyst CBRE Königsallee Düsseldorf t: e: Agency Dusseldorf Hubert Breuer Senior Director Head of Agency Düsseldorf CBRE Königsallee Düsseldorf t: e: + FOLLOW US GOOGLE+ FACEBOOK Global Research and Consulting This report was prepared by the CBRE Germany Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. 6 Disclaimer Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CBRE GmbH clients, and cannot be reproduced without prior written permission of CBRE GmbH , CBRE GmbH