COMMERCIAL PROPERTY MARKET GERMANY/TOP /Q1-2

Transcription

1 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT/OFFICE LETTING COMMERCIAL PROPERTY MARKET GERMANY/TOP /Q1-2

2 LOKALE LOCAL EXPERTISE KOMPETENZ ACROSS DEUTSCHLANDWEIT GERMANY ABOUT US GERMAN PROPERTY PARTNERS Each of us being a leading commercial real estate company in its respective region, we have joined together to form a Germany-wide real estate network. We are five strong partners. In Northern Germany, Grossmann & Berger offers its real estate services out of its locations in Hamburg and Berlin, while ELLWANGER & GEIGER Real Estate covers Southern Germany from its bases in Stuttgart and Munich. ANTEON Immobilien is the firm to contact about property matters in and around Düsseldorf, while GREIF & CONTZEN Immobilien are your eyes and ears in the metropolitan area of Cologne and Bonn. blackolive guarantees full market coverage in the Frankfurt region. We have founded German Property Partners with the aim of providing our special services in all of Germany s major real estate centres. That way, whatever your commercial real estate requirements, wherever you are in Germany, you can obtain your advice from a single provider, and that is us. Via our network and thanks to our respective market positions, we can offer you outstanding local knowledge and preferential market access throughout Germany. The many years of service our employees have put in with us, and the affiliation of Grossmann & Berger and ELL- WANGER & GEIGER Real Estate with reputable regional banks, make German Property Partners a reliable partner for long-term collaboration in the fields of commercial real estate and finance. Partner Grossmann & Berger A real estate consultant with experience stretching back for over 80 years, Grossmann & Berger is one of the leading service providers for the sale and letting of commercial and residential real estate in Northern Germany, and is an affiliate in the HASPA-group of companies. ANTEON ANTEON is an owner-managed real estate consultancy firm that specializes in brokering lets and investments in commercial, logistics and residential properties. In addition, as one of the market leaders, ANTEON offers property marketing, project support and research services. GREIF & CONTZEN This owner-managed service company has been providing consultancy, evaluation, brokering and management services for commercial and residential properties in the metropolitan region of Cologne Bonn for over 40 years, and is experienced in the entire value chain of real estate transactions. blackolive blackolive is an owner-managed real estate consultancy firm that focuses on office letting and investment. The managing directors both have more than 26 years of experience and stand for an in-depth understanding of the market. ELLWANGER & GEIGER ELLWANGER & GEIGER Real Estate offers a full range of services in connection with commercial property assets. With the resources of the parent company s private banking business, this service provider has over 100 years of experience. 2

3 MARKTBERICHT MARKET SURVEY INVESTMENT/BÜROVERMIETUNG INVESTMENT/OFFICE LETTING 2016/Q /Q1-2 LOCAL EXPERTISE ACROSS GERMANY GERMAN PROPERTY PARTNERS Dear Readers, Germany s top 7 markets for office letting and property investments closed the first half of 2016 with excellent results. However, it is hard to tell whether individual locations will be able to equal their record results of a year ago. Apart from the unforeseeable consequences of Brexit, Germany s real estate industry has good prospects for the second half of the year. This market survey provides a review of the first half of 2016 as it played out on Germany s top 7 markets. In addition to drawing comparisons between the top 7 markets, we offer a detailed look at the investment and office letting markets in Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt/Main, Stuttgart and Munich. The process of preparing and interpreting the data was made possible thanks to a partnership between four of the leading service providers specialized in commercial properties based in north, central and south Germany - the nationwide network German Property Partners (GPP). Our knowledge of local markets is as broad as it is deep, giving us access to data on the entire market, the top 7 locations and the sub-markets within each one. The present survey offers you a general view of the market. We would be happy to hold personal talks with you and answer your specific questions about property matters. Kind regards GERMANY/TOP HAMBURG... 8 BERLIN DÜSSELDORF COLOGNE FRANKFURT STUTTGART MUNICH Björn Holzwarth Spokesman for German Property Partners 3

4 LOCAL EXPERTISE ACROSS GERMANY FACTS & FIGURES This good result is a hopeful sign that the letting market will be as brisk in the second half of the year. The only cloud on the office markets horizon is uncertainty about the effects of Brexit. The way investments have developed is not very surprising. Cash for investment is out there, but there are too few properties. Björn Holzwarth, spokesman for German Property Partners Investment: strongest buyer groups by location Office letting: strongest industries by location (share of take-up of space) (share of transaction volume) Hamburg 28 % Open-end/specialized funds Hamburg 19 % Services to business Berlin 49 % Asset managers Berlin 35 % Public administration Düsseldorf 21 % Open-end/specialized funds Düsseldorf 22 % Industrial and trading companies Cologne 59 % Funds Cologne 34 % Insurance Frankfurt 34 % Open-end/specialized funds Frankfurt 25 % Financial services providers Stuttgart 59 % Open-end/specialized funds Stuttgart 29 % Industrial companies Munich 31 % Open-end/specialized funds Munich 16 % Public administration Key figures top 7 Hamburg Berlin Düsseldorf Cologne Frankfurt Stuttgart Munich Top 7 Take- up of space [m²] 240, , , , , , ,000 1,692,900 Year-on-year change -4% +15% -2% +52% +21% -26% +32% +13% Average rent [net /m²/mth] Year-on-year change +2% +8% -1% +26% -8% -2% +3% - Premium rent [net /m²/mth] Year-on-year change +2% +11% +2% 0% -2% +9% +5% - Vacant space [m²] 723, , , ,000 1,378, , ,600 5,221,900 Year-on-year change -1% -10% -3% -12% +1% -12% -21% - 8 % Vacancy rate [%] Year-on-year change [percentage points (pp)] -0.1 pp -0.5 pp -0.3 pp -0.9 pp +0.2 pp -0.5 pp -1.0 pp -0.5 pp Transaction volume [million ] 2,000 1, , ,000 9,203 Year-on-year change +3% -34% -6% -15% -42% +2% -31% -25% Premium yield Office [%] * Share of asset class Office [%] * Net initial return

5 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 GERMANY/TOP 7 KEY FIGURES 2016/Q1-2 HAMBURG 240,000 m² (-4 %) /m² (+2 %) /m² (+2 %) 5.4 % (-0.1 pp) 2.00bn (+3 %) 4.00 % (-0.50 pp) BERLIN 345,000 m² (+15 %) /m² (+11 %) /m² (+8 %) 4.1 % (-0.5 pp) 1.90bn (-34 %) 3.80 % (-0.80 pp) DÜSSELDORF 165,000 m² (-2 %) /m² (+2 %) /m² (-1 %) 10.0 % (-0.3 pp) 0.67bn (-6 %) 4.40 % (-0.35 pp) COLOGNE 205,000 m² (+52 %) /m² (0.0 %) /m² (+26 %) 5.5 % (-0.9 pp) 0.43bn (-15 %) 4.20 % (-0.40 pp) FRANKFURT 235,900 m² (+21 %) /m² (-2 %) /m² (-8 %) 11.9 % (+0.2 pp) 1.61bn (-42 %) 4.15% (-0.45 pp) STUTTGART 109,000 m² (-26 %) /m² (+9 %) /m² (-2 %) 3.3 % (-0.5 pp) 0.60bn (+2 %) 4.25 % (-0.50 pp) MUNICH 393,500 m² (+32 %) /m² (+5 %) /m² (+3 %) 3.9 % (-1.0 pp) 2.00bn (-31 %) 3.50 % (-0.50 pp) KEY FIGURES OFFICE LETTING/INVESTMENT: Take-up of space (year-on-year change) Premium rent (year-on-year change) Average rent (year-on-year change) Vacancy rate (year-on-year change) Transaction volume (year-on-year ch.) Prime yield office (year-on-year ch.) 5

6 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT The volume of commercial property transactions (excluding buy to let investment) in Germany s top 7 locations totalled some 9.2bn by the end of the 2nd quarter. Year on year, the result was 25 % lower. This development is not very surprising. Investors have capital to spend, but there are too few properties. Prices are now being named unlike any seen before the financial crisis. TRANSACTION VOLUME Reporting total transactions of some 2.0bn, Hamburg and Munich were the investment hot-spots as the 2nd quarter came to an end. Berlin s transaction volume of about 1.9bn owed a great deal to the 2nd-quarter sales of two big, expensive hotels from the Brookfield/Starwood portfolio - the Park Inn and the Westin Grand. Of the 7 cities, Frankfurt s volume of transactions fell most steeply, dropping 42 % to 1.61bn. In Düsseldorf commercial property was traded for a total of 671m, about 6 % less than before because so far no transactions valued at much more than 100m have been registered. In Stuttgart the sales volume rose slightly year on year (2 %) to 602m. With a transaction volume of 425m, the Cologne market was rather more sluggish than in the same quarter a year ago, dropping by 15 %. Year on year it was clear that office buildings remain the most popular class of assets, posting a nearly identical market share of 65 % ( 6.0bn) at the close of the 2nd quarter. Hotels dislodged retail properties from second place with a share of 13 % ( 1.2bn). Portfolio sales accounted for some 13 % of the market ( 1.2bn). International investors accounted for some 33 % of the total volume of commercial property investment transactions in the top 7 locations ( 3.0bn). Berlin was by far the most popular city with foreign investors, who accounted for 76 % of the city s property trading. Brexit could perhaps mean that international investors turn their backs on Europe or invest less. And if they do invest, then in France and Germany. This situation could especially benefit Frankfurt as a banking centre and Berlin as the capital city with big-ticket properties to offer. YIELDS By the end of the half year prime yields on office properties had fallen further in all top 7 locations, settling at between 3.50 % (Munich) and 4.40 % (Düsseldorf). The largest decline was a drop of 80 basis points in Berlin. A large number of big properties are in the process of being sold. The total volume of transactions in the top 7 cities could thus approach the 26bn recorded for last year. However, that will happen only if market parameters stay as they are. Brexit could further reduce the number of properties on the market and thus further increase the price to rent ratios. Competition for core products is likely to intensify and more investors will move into other risk classes and locations. INVESTORS AND VENDORS Transaction volume Germany/top 7 Transaction volume by asset classes Germany/top 7 (in bn ) (in %) Logistics (2 %) Other (3 %) ca bn Undeveloped land Retail 10 % 7 % Hotel 13 % 65 % Office

7 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 GERMANY/TOP 7 OFFICE LETTING By the end of the first half year some 13 % more office space had been taken up in Germany s top 7 cities than in the same period a year before. Overall, take-up of office space totalled 1.7m m², of which some 894,000 m² relates to turnover in the 2nd quarter. TAKE-UP OF SPACE The greatest surge was in Cologne, where a 52 % increase in take-up of space was posted (to 205,000 m²). The Zurich insurance company s decision to rent 60,000 m² of space made a major contribution to this figure. In terms of absolute take-up of space, Munich was again the leading city with turnover of 393,500 m² and year on year growth of 32 %. The significant rise in take-up could be traced to an above-average number of leases for large office suites signed by government departments. Take-up of space rose by 21 % in Frankfurt to 235,900 m². The majority of leases were for mid-sized properties. The only large transaction was the lease for 17,800 m² taken by the ECB. With an increase of 15 % to 345,000 m², Berlin returned a result that was even better than in the same period of 2015, a record year on the office market. This owed much to the biggest rental agreement signed in the 2nd quarter in Berlin, when the State Office for Migrant Affairs (LAF) chose 17,700 m² of space at Darwinstrasse 18. The result for Düsseldorf was almost as good as in the prior year, dropping 2 % to 165,000 m² of office space. To accommodate their headquarters, Douglas Holding signed the largest lease in this period, taking 8,600 m² of space in the DUO development project (Hans-Günther-Sohl-Strasse 5-11). In Stuttgart 109,000 m² office space was taken up, 26 % less than in the prior year. No agreements were recorded in the 4,000 to 9,000 m² size segment and so far no owner-occupier contracts have been concluded. Due to the absence of agreements for large amounts of space, Hamburg s result contracted by 4 % to 240,000 m². The biggest rental agreement to date was concluded in the 2nd quarter when Axa, an insurance firm, signed for 9,750 m² of space in the Fleet Office, Heidenkampsweg RENTS In terms of both premium and average rents, the highest rates for office space were posted in Frankfurt ( and 17.50/m²/month respectively) and Munich ( and 16.00/m²/month). The steepest rise in average rents was the 26% seen in Cologne, where the new figure is 15.40/ m²/month. This is attributable to the big lease signed by insurance company Zurich Versicherung and to other sizeable rental agreements for expensive properties. In Berlin the premium rent soared 11 % to 25.00/m²/month, the sharpest rise in any of the 7. Rents increased in almost every top 7 location. This is because less space is available. If the fit-out and micro-location are right, tenants are increasingly willing to pay rents over 20.00/m²/month for properties in central locations. AVAILABLE AND VACANT SPACE During the first six months the overall vacancy rate for offices in Germany s top 7 cities saw another year on year drop of 0.5 percentage points to 5.8 %. With vacancy rates plummeting to 3.3 % in Stuttgart, 3.9 % in Munich and 4.1 % in Berlin, one may certainly speak of all-time lows. The continuing dearth of new construction and constant demand for offices are putting added pressure on rents in the top 7 cities. The likely figure for completions in the years 2016 and 2017 is some 2.0m m² of space in 214 developments. New-build activity is strongest in Hamburg with 466,000 m², followed by Berlin, with 330,000 m². The good half year results posted in the top 7 locations indicate that the year will end with take-up of office space standing at 3.4m m². It is hard to tell whether individual locations will be able to equal their record results of a year ago. Apart from the unforeseeable consequences of Brexit, the economic climate in Germany is good for the real estate industry. Frankfurt could become a considerably more important centre of European banking and stock market activity. Even though the UK has not yet formally declared its desire to leave, the Frankfurt office market could see some overreaction as a number of companies are keen to secure large, contiguous suites of offices on favourable terms. Take-up of space Germany/top 7 (in 000s m 2, incl. owner-occupiers) ca million m

8 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT HAMBURG By the end of the first half of 2016 the volume of transactions in Hamburg had set another record - at 2.0bn. This was some 3 % higher than the same period of the year before. Altogether 77 commercial properties and plots of building land within the borders of Hamburg city-state changed hands, but 44 of these pieces of real estate lay outside central locations. INVESTMENT PROPERTIES Of the top 3 transactions, each involving an amount of more than 100m, two were properties in Hamburg City East that are still classed as confidential and one was the Telekom Campus (Überseering 2), which Amundi bought from the developer TAS KG in the 1st quarter. The preferred asset class was the office property, and 44 such buildings were traded for a total amount of 1.3bn. Retail properties were second in popularity, accounting for a share of 15 % and a transaction total of 300m. Comprising around 11 % hotels were in third place. Compared with the first half of 2015 the prime yields on office and retail investments fell from 4.3 % to 4.0 %. and accounting for the biggest share (52 %) of the transaction volume. Business is expected to be equally brisk in the next six months. As some portfolio sales are still pending, it could well be that the final figure for the year will equal the record Hamburg set in In view of the impending Brexit the stability of the German property market could attract more attention from international investors. That would heighten demand for real estate in Hamburg too. The predictable consequence would be a further slump in yields. Transaction volume Hamburg (in bn ) INVESTORS AND VENDORS In the 1st half of 2016 national players dominated the market for commercial property investments in Hamburg. Only some 26 % of the volume of transactions may be traced to foreign investors, mostly from the UK and France. In the 1st half of 2015, by contrast, far more international players invested in Hamburg, accounting for 53 % of the volume of transactions. The biggest single group of investors was comprised of open-end/specialist funds with a share of some 28 % of the transaction volume. The biggest vendors of property were project developers/builders selling commercial real estate in Hamburg for a total of over 1.0bn, ca. 2.9bn

9 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING HAMBURG Total take-up of space in the first two quarters was some 240,000 m². Compared with the same period a year before, the result has slipped by around 4 %, although this is only a minor fall considering that no agreements for large amounts of space were signed. TAKE-UP OF SPACE Overall, we have observed a great deal of activity on the letting market. This reflects the comparatively low ratio of owner-occupiers, which was about 9 %. The biggest contract of the year thus far was that signed by AXA insurance to rent some 9,700 m² in the Fleet Office new-build development (Heidenkampsweg 74+76). City and HafenCity were together the top-ranking sub-markets with some 34 % of the total take-up of space. RENTS Over the past twelve months a number of high-priced contracts for large amounts of space caused a rapid rise in the average rental figure. With an increase of 30 cents compared with the prior quarter, the average rent, weighted by area occupied, rose to 14.90/m²/month at the end of the 1st half year to stand at the highest rate yet seen in Hamburg. On the other hand, the premium rent fell from to 24.50/m²/month. AVAILABLE AND VACANT SPACE The vacancy rate fell from 5.5 % in the same quarter of 2015 to 5.4 %. 723,400 m² of space was available at short notice. The volume of completions reached a new high of 288,000 m² in However, less than 30 % of this total will go on the market as speculative space. In 2017 too, considerably more office space - 178,000 m² - will be completed than in the years 2014 and Here too, however, only the relatively low level of 50 % of space is still available. The British have voted for Brexit. At present there is no telling what the consequences for the German economy might be. But so far, Hamburg s companies show little sign of the uncertainty that has gripped financial markets. Only in isolated cases has the result of the Brexit referendum had an effect on current negotiations. Experts therefore expect to see further dynamism on the market in the second half of the year and forecast that take-up of space for the full year will be more than 450,000 m². TOP 3 SUB-MARKETS (take-up of space / average rent) CITY / 67,000 m² / 18.90/m²/month CITY SOUTH / 53,300 m² / 11.90/m²/month HAMBURG EAST / 20,400 m² / 9.40/m²/month TOP 3 CONTRACTS 1. AXA Fleet Office Heidenkampsweg / ca. 9,750 m² 2. HEK (Purchase Owner-Occupier) Wandsbeker Zollstraße 91 / ca. 6,450 m² 3. TUI CRUISES Doppel XX, Heidenkampsweg 58 / ca. 6,350 m² Take-up of space Hamburg Rents Hamburg (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 495,000 m average rent /Q2 9

10 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT BERLIN The Berlin market for investment in commercial properties had gained fresh momentum by the end of the first half of 2016, although not quite as strongly as at the same point in Some individual big-ticket trades boosted the volume of transactions to 1.9bn, 34 % lower than the prior year. INVESTMENT PROPERTIES Accounting for 48 % of the volume traded, office properties were the most sought-after assets. Investors showed little interest in retail properties during the first half year and accordingly they made up only 6 % of the total. The focus of interest shifted to hotels instead. The weightiest transaction in this sector was the sale of the Interhotel portfolio, purchased by FDM Management from a consortium comprising Brookfield and Starwood Capital. Portfolio properties included the Park Inn by Radisson (Alexanderplatz 7), and The Westin Grand Berlin (Friedrichstraße ). These two big-ticket sales also ensured that portfolio trades made up 45 % of the volume of transactions in Berlin. Discounting the previously named outlier, private investors were the most active buyers of property in Berlin with a share of 12 %. The degree of foreign interest in investing in commercial properties in Berlin is apparent from their 76 % share of the transaction volume. Being the capital of Germany, international investors are likely to focus more intently on Berlin because Brexit has now increased the risks of making investments in Great Britain. Increased competition could drive prices even higher. However, a lack of properties is what now holds the market back, so that the likely volume of transactions for the year is 5.0bn and thus below the record set in Transaction volume Berlin (in bn ) Most of the properties put up for sale on the Berlin market passed through three rounds of bidding, so that the price to annual rent multiples have risen even further. Against this backdrop the prime yield on office properties fell by 0.8 percentage points over the course of one year to 3.8 %, although the decline has now slowed considerably. ca. 4.3bn INVESTORS AND VENDORS Since the Interhotel portfolio was bought by asset managers, their share of the volume of transactions reached 49 %, whereas opportunity/equity funds were the biggest group of vendors with a share of 40 % of the market

11 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING BERLIN The Berlin office market continues to make good progress, and is slightly ahead of where it was at the same time in the record-breaking year Growth of 15 % compared with the same period of the prior year boosted total take-up for the first half of 2016 to 345,000 m². TAKE-UP OF SPACE 35 % of this good half-yearly result was due to take-up by public administration departments. The biggest share of turnover stemmed from a construction start - the Federal Ministry of Health (BMG) is building 27,200 m² of offices at Mauerstrasse 28. The second-biggest rental agreement was signed by the State Office for Migrant Affairs (Darwinstrasse 18). In total, some 14 agreements related to premises sized 5,000 m² or more (about 131,000 m²), a year on year increase of 73 %. Due to the construction start for the Health Ministry already mentioned, Mitte 1a topped the ranking of sub-markets with a 19 % share of total take-up of space, followed by Periphery South with 14 % and Kreuzberg with 13 %. RENTS A growing shortage of office space in the first half of 2016 led to further rises in rates. Year on year the premium rent rose by 11 % to 25.00/m²/month. Within the space of a year the average rent rose too, increasing by 8 % to 15.50/m²/month. Tenants are even prepared to pay higher rents in peripheral locations, or to go well above the 20- euro mark for premises in central locations if the property s quality and fit-out are right. This trend is borne out by the figures, because year on year the take-up of space in the price category 20.00/m²/month or more rose by 176 % in the second half of AVAILABLE AND VACANT SPACE By the end of the half year the vacancy rate had fallen to just over 4.0 %. The lack of speculative new building and a high level of take-up combine to aggravate the shortage of space. The volume of completions for 2016/2017 is some 330,000 m² (38 developments) of which only 40 % is still available on the open market. The take-up of rental space will again reach a very high level by the end of the year. In all probability, however, take-up will remain below the record figure of 810,000 m² posted in Rents are set to rise further as the overall business environment will not change in the medium term. TOP 3 SUB-MARKETS (take-up of space / average rent) MITTE 1A / 56,700 m² / 19.10/m²/month PERIPHERY SOUTH / 42,800 m² / 11.50/m²/month KREUZBERG / 37,700 m² / 15.90/m²/month TOP 3 CONTRACTS 1. FEDERAL MINISTRY OF HEALTH (OWNER-OCCUPIER) Mauerstraße 28 / ca. 27,000 m² 2. STATE OFFICE FOR MIGRANT AFFAIRS (LAF) Darwinstraße 18 / ca. 17,700 m² 3. EINSTEIN FOUNDATION Dorotheenstraße / ca. 11,100 m² Take-up of space Berlin Rents Berlin (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 631,800 m average rent /Q2 11

12 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT DÜSSELDORF In 2015 some 2.7bn was invested in commercial properties in Düsseldorf, state capital of North Rhine-Westphalia, and strong investor interest continued in the 1st half of In this first six months of this year the volume of transactions reached 671m, only 6 % below last year s figure. INVESTMENT PROPERTIES Accounting for 81% of the volume traded, office properties were the preferred class of asset. The biggest known sale in the 1st half of 2016 was the La Tête (Toulouser Allee 25-29) in the Quartier Central, for which an insurance company paid around 100m. Accounting for 9 % of the volume traded, building land was the second-biggest selling asset. Only 3 % of the total was invested in retail properties. No hotels were sold at all. The prime yield on offices fell by 0.35 percentage points within the space of one year to 4.4 %. During the half year yields for top retail properties reached 4.0 % in the prime segment. The prime yield on offices was 5.25 %. INVESTORS AND VENDORS Once again, national investors were the biggest players on the market for commercial real estate. Trading by foreign investors was much reduced year on year, falling from 59 % to 28 % of the volume of transactions. Open-end/specialist funds were the single biggest group of buyers with some 21 %. Project developers and builders were predominant on the selling side of the equation with some 24 % of the total. Portfolio sales totalled around 73.0m, which translates into a share of about 11 %. Düsseldorf will remain an attractive market for private and institutional investors. They continue to rate the city s property market as a profitable, alternative place in which to invest is expected to close with a total transaction volume of 2.5bn. Prime yields on office properties will remain stable. Transaction volume Düsseldorf (in bn ) ca. 1.7bn

13 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING DÜSSELDORF In the 1st half of 2016 take-up of office space in Düsseldorf was some 165,000 m², slightly lower (2 %) that in the same period the year before (2015/Q1-2: 169,000 m²). Industrial and trade/retail companies were the biggest group of new tenants, signing agreements for 35,800 m² (a good 21 % of the total). TAKE-UP OF SPACE The 2,500 to 5,000 m² size category accounted for the lion s share of take-up (48,100 m²). Douglas Holding signed a lease for 8,600 m², the biggest in this half year. The most popular sub-market was Media Harbour where total lets came to 26,500 m², followed by Grafenberg (about 26,000 m²) and City (about 22,300 m²). RENTS The premium rent has stabilized at the high rate of 26.50/ m²/month. In isolated agreements, for example for offices in the Kö-Bogen, rents went as high as 27.50/m²/month. On average, companies in Düsseldorf paid 13.80/m²/ month in rent, or 0.10 less than at the same time a year ago. AVAILABLE AND VACANT SPACE The amount of empty space has shrunk further - from 785,000 m² in the 2nd quarter of 2015 to 762,000 m² at the end of June Based on a total stock of office space of 7.6m m², the corresponding vacancy rate is 10 %. The foreseeable volume of completions in 2016 is 95,000 m², well above the 65,000 m² recorded a year before. The prospects for the commercial property market in Düsseldorf are very promising. Although the total result for 2016 is not expected to match that of 2015, which was an exceptional year (420,000 m²) a realistic figure, taking into account the fact that several clients are seeking large premises, would be 350,000 m². TOP 3 SUB-MARKETS (take-up of space / average rent) MEDIA HARBOUR / 26,500 m² / 15.80/m²/month GRAFENBERG / 26,000 m² / 10.80/m²/month CITY / 22,300 m² / 13.30/m²/month TOP 3 CONTRACTS 1. DOUGLAS HOLDING DUO, Hans-Günther-Sohl-Straße 5-11 / ca. 8,600 m² 2. JOB CENTRE DÜSSELDORF Hafenpforte, Reisholzer Werftstraße / ca. 5,600 m² 3. FEDERAL OFFICE FOR MIGRATION AND REFUGEES Graf-Recke-Straße / ca. 4,800 m² Take-up of space Düsseldorf Rents Düsseldorf (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 323,400 m average rent /Q2 13

14 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT COLOGNE In the first half of 2016 commercial real estate to a value of some 425.0m changed hands. This volume of transactions was about 15 % lower than the especially good result returned in INVESTMENT PROPERTIES Office properties comprised nearly three quarters of the volume of transactions. The media firm DuMont, for example, sold its company headquarters on Amsterdamer Strasse for about 60.0m. Year on year the prime yield on office properties softened by 0.4 percentage points to 4.2 %. Several hotels also passed into new ownership. Barely any retail properties were traded because hardly any were on offer. The prime yield on this asset class fell by 0.2 percentage points within the space of one year to 3.7 %. Most of the logistics properties traded were located in the environs of Cologne. The prime yield on logistics properties in Cologne shrank most, falling by 1.05 percentage points to 5.25 %. INVESTORS AND VENDORS A range of different funds made up by far the biggest group of buyers, with a 59 % share of the total volume. They were also prominent vendors, accounting for 31 % of the total sold. Very frequently project developers also featured as vendors, albeit selling real estate in smaller lots. One example of such a sale is the Holiday Inn Express, still under construction at Perlengraben 2, which the developer, GBI, sold to a Deka-Bank fund. Foreign investors were involved in 38 % of the investment turnover. Assuming that more large properties are traded, it is very possible that foreign investors will play a bigger role on the Cologne market in the 2nd half of the year; in 2015 their year-end share topped 50 %. A large number of transactions are in preparation or being finalized, so that it seems likely that far less than half of this year s investment business has been completed to date. Depending on the available properties, the volume of transactions is set to reach 1.7bn by the end of Developments on the capital market and turbulence on international stock exchanges serve to enhance the appeal of real estate assets. A further compression of yields is foreseeable. Transaction volume Cologne (in bn ) ca. 1.16bn

15 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING COLOGNE There was brisk demand for offices in Cologne during the first two quarters. The lease for about 60,000 m² signed by the Zurich insurance company is especially noteworthy. The group is merging its previous locations in Cologne and Bonn into one site in Cologne-Deutz, thus providing the starting signal for work to commence on the MesseCity project. TAKE-UP OF SPACE Altogether about 205,000 m² of office space was let, a year on year rise of 52 %. Near the MesseCity site the municipal government signed a lease for some 13,000 m² of space in Deutz. RENTS Agreements for large premises at the higher end of the market pushed the average rent, weighted by area let, to 15.40/m²/month, about 26 % more than in the same period a year before. The premium rent remained stable at 21.25/m²/month. Especially good quality premises in excellent locations can command rates of up to 24.80/m²/ month. AVAILABLE AND VACANT SPACE In recent years the shortage of attractive space in citycentre locations has become steadily more acute. Within one year the vacancy rate in Cologne fell by another 0.9 percentage points to 5.5 % at the end of the 1st half of 2016, which translated into around 430,000 m² of empty space. In 2016 and 2017 around 160,000 m² of office space will be completed in 25 developments; however, only a small proportion of this space is freely available on the market, the rest having been pre-let or reserved for owner-occupiers. In view of strong demand the year 2016 is expected to close with total take-up of some 350,000 m², a high not seen on the Cologne office market for many years. Empty space is expected to fall to 420,000 m², which would mean a vacancy rate of 5.4 %. TOP 3 SUB-MARKETS (take-up of space / average rent) DEUTZ / 88,000 m² / 17.00/m²/month MÜLHEIM/ 18,000 m² / 10.70/m²/month EHRENFELD / 16,000 m² / 10.50/m²/month TOP 3 CONTRACTS 1. ZURICH VERSICHERUNG MesseCity / ca. 60,000 m² 2. FACILITY MANAGEMENT OF COLOGNE CITY Ottoplatz / ca. 13,000 m² 3. YAZAKI EUROPE LIMITED Richard-Byrd-Straße 4-6a (Köln Ossendorf) / ca. 4,000 m² Take-up of space Cologne Rents Cologne (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 286,000 m average rent /Q2 15

16 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT FRANKFURT Year on year the volume of investment transactions involving commercial real estate in Frankfurt fell by 42 % to some 1.6bn. Yields have slipped further. INVESTMENT PROPERTIES The three biggest transactions add up to a total of some 650.0m. The biggest transaction was the sale of the ibc (Theodor-Heuss-Allee 70-74) for which GEG German Estate Group paid RFR Gruppe 400.0m. The second biggest trade involved the Aculeum (Hahnstrasse 43e) which Tishman Speyer Properties Deutschland GmbH sold to AGC Equity Partner for 143.5m. For a sum of 105m the Meandris (Euopa-Allee 48-50) also changed hands in the 2nd quarter; it was sold by the project developer Strabag Real Estate GmbH to the open property fund Triuva Kapitalverwaltungsgesellschaft mbh. Office properties were the most popular class of assets, accounting for 80% of total demand. The lack of core properties is increasingly leading investors to turn to core-plus properties; this risk class comprised 60% of the total volume of transactions. Yields have again slipped back slightly. The prime yield on office properties is 4.15% or 0.45 percentage points lower than in mid Prime yields on retail and logistics properties have also softened by 0.25 percentage points to 3.8 % and 5.8 % respectively. A scarce good generates good profits. INVESTORS AND VENDORS International investors are currently taking a close look at many properties, but this has not yet translated into more transactions, and so far their share of the market is only 20 %. The sale of the ibc to a national open-end fund points to where the biggest group of buyers is to be found, namely among the open-end/specialist funds, which accounted for a third of total transactions. Despite a weak 1st half year, the total by the end of 2016 could well be 5.0bn, because some big-ticket properties are still on the market. These include, for example, THE SQUARE next to Frankfurt Airport with an asking price of over 600m. Brexit could also mean that international investors will take a greater interest because they regard Germany as a safe haven. The strong demand for core segment properties is unabated, but the growing shortage of available products is making other risk classes and locations more acceptable. Transaction volume Frankfurt (in bn ) ca. 4.0bn

17 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING FRANKFURT Although only one lease was signed for more than 10,000 m², take-up of office space in Frankfurt rose by 21 % to 235,900 m². TAKE-UP OF SPACE The biggest agreement was signed in the 1st quarter by the European Central Bank (ECB), which is renting 17,800 m² in the Japan Center (Taunustor 2). About 30,000 m² of space was let in the 5,001 to 10,000 m² size category, three times the amount registered a year ago. A 33 % increase in take-up was also noted in the 2,001 to 5,000 m² segment. In addition to the ECB lease, the third-biggest rental agreement was also concluded with a financial services provider (Union Investment), so that this sector of the economy accounted for 25 % of the total. IT firms placed second with 17 %. The most sought-after part of the city was the banking district, scene of the two previously named lets. Software manufacturer SAP has boosted the Eschborn sub-market by renting in a development there. In the north of Frankfurt the amount of space let since the beginning of the year (about 18,300 m²) is almost equivalent to the annual totals of past years. This excellent half year result may be traced to leases for Police stations nos. 14 and 15 (about 6,700 m²) and to two leases taken by the Job Centre in the Merton Quarter totalling some 5,200 m². RENTS Increasing numbers of lets in existing buildings and new developments in peripheral locations have slightly reduced rental rates. The average rent was 17.50/m²/month; the premium rent has dropped by 75 cents in the course of one year to 38.00/m²/month. AVAILABLE AND VACANT SPACE There was a considerable reduction in the amount of empty space in the past few years, but stagnation set in during the first half of The vacancy rate was 11.9 % and thus slightly higher than a year ago. Lets in new developments and the slightly higher rate of completions (about 152,800 m² in 2016) are putting additional space onto the market. The ongoing high level of demand is likely to bring total take-up of space to over 450,000 m² by the end of the year. An agreement for more than 45,000 m² is in the pipeline and its anticipated conclusion will add to the good result. Whether Brexit - if it actually happens - will have any effect on the office market in Frankfurt remains to be seen. TOP 3 SUB-MARKETS (take-up of space / average rent) FINANCIAL DISTRICT / 61,200 m² / 27.00/m²/month NIEDERRAD/ 22,000 m² / 11.50/m²/month ESCHBORN / 21,700 m² / 11.00/m²/month TOP 3 CONTRACTS 1. EUROPEAN CENTRAL BANK (ECB) Japan Center, Taunustor 2 / ca. 17,800 m² 2. SAP GERMANY Frankfurter Straße 1-5, Eschborn / ca. 9,000 m² 3. UNION INVESTMENT Neue Mainzer Straße / ca. 7,800 m² Take-up of space Frankfurt Rents Frankfurt (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 432,600 m average rent /Q2 17

18 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT STUTTGART Some 602.0m were invested in commercial real estate in Stuttgart during the 1st half of This figure was 2 % higher than in the 1st half of Transactions were equally divided between the first two quarters of the year, with turnover of 300.0m in each. INVESTMENT PROPERTIES This high volume of transactions stems partly from the sale of Europe Plaza (Stockholmer Platz 1) and City Plaza (Rotebühlplatz 21-25) and partly from several transactions for sums in the tens of millions. Altogether, 35 transactions were completed in the 1st half year, about 50 % of which were priced in the double-digit millions. Investors focussed - partly due to the sales just mentioned - on office properties, which made up around 57 % of the volume of transactions, followed by building land (about 20 %) and retail (about 14 %). Portfolio sales made up a mere 4 % of the total trades in Stuttgart. Year on year the prime yield on office and logistics assets each slipped by 0.5 percentage points to 4.25 % and 5.75 % respectively. The prime yield on retail properties fell by 0.25 percentage points to 4.0 %. INVESTORS AND VENDORS Amounting to 59 % of the total, open-end/specialist funds dominated the buying side of the equation, followed by private investors/family offices with a share of 21 %. Other groups of buyers played only a minor role. The biggest vendors on the market were project developers and builders with a share of about 32 % of the transaction volume, followed by private investors/family offices with about 20 % and open-end/specialist funds with about 18% of total transactions. Compared with last year, the proportion of overseas buyers on the market has once again climbed a little. These investors accounted for some 31 % in the first half of When it came to selling properties, overseas players featured in 21 % of the volume traded, a much smaller share than in the past. A similarly high level of trading activity is expected in the 2nd half of 2016 and by the end of the year Stuttgart s volume of transactions could total around 1.5bn. Transaction volume Stuttgart (in bn ) ca. 1.05bn

19 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING STUTTGART Take-up of office space in the 1st half of 2016 was some 109,000 m² and thus some 26 % lower than the 147,000 m² posted in the same period of The main reason was that few agreements for large amounts of space were completed. TAKE-UP OF SPACE During the 1st half year only three leases were signed for more than 5,000 m² of office space. The biggest rental agreement thus far was signed at the very the start of the year when Trelleborg Sealing Solutions Germany took 13,700 m² in the Vaihingen industrial estate. The second biggest agreement, for around 9,800 m² in Stuttgart Weilimdorf, was concluded in the 2nd quarter by the health insurer Techniker Krankenkasse, followed by Robert Bosch with some 9,300 m² in Stuttgart Feuerbach. Industrial companies were the biggest group of new occupants, accounting for about 29 % of total take-up of space. The most popular sub-markets in the 1st half of 2016 were Stuttgart City, where some 23,400 m² of office space was let, and Vaihingen/Möhringen with around 20,800 m². RENTS Within the space of a year the premium rent rose by 9 % to 22.80/m²/month. The average rent for all city districts stabilized at 12.80/m²/month, slightly below the prior year s level. A large proportion, 44 %, of rental agreements were concluded for premises renting at between and 15.00/m²/month. In some 7 % of new leases the agreed rent was over 17.00/m²/month. AVAILABLE AND VACANT SPACE By the end of the first half of 2016 the vacancy rate had reached an all-time low of 3.3 %. Some 252,000 m² of office space is now available at short notice. The southern sub-market Fasenenhof posted the biggest tightening of available space with a drop of 26 %; Stuttgart City and City Centre also posted declining availability of 19 % and 14 % respectively. In 2016 some 169,000 m² (13 projects) and in 2017 some 142,000 m² (9 projects) are scheduled for completion but the majority of new space is already earmarked for owner-occupiers. In the 2nd half year letting activity in Stuttgart will gather greater momentum, so that 2016 is expected to end with a total of let space in excess of 250,000 m². Rents will remain stable. The small amount of available space causes delays in the selection process. This can only be countered by new developments in peripheral locations. Top quality newbuild space in the City is already a scarce commodity. TOP 3 SUB-MARKETS (take-up of space / average rent) CITY / 23,400 m² / 15,60/m²/month VAIHINGEN/MÖHRINGEN / 20,800 m² / 12,60/m²/month DOWNTOWN / 16,800 m² / 12,50/m²/month TOP 3 CONTRACTS 1. TRELLEBORG SEALING SOLUTIONS GERMANY Schockenried-/Ruppmannstraße / ca. 13,700 m² 2. TECHNIKER KRANKENKASSE Ingersheimer Straße 18 / ca. 9,800 m² 3. ROBERT BOSCH Wiener Straße / ca. 9,300 m² Take-up of space Stuttgart Rents Stuttgart (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 260,500 m average rent /Q2 19

20 LOCAL EXPERTISE ACROSS GERMANY INVESTMENT MUNICH In the 1st quarter of 2016 Munich posted investment turnover of just over 1.0bn. Contributing to this total were numerous transactions priced at between 30.0 and 60.00m and one really big trade, the m sale of the Baywa Building (Arabellastrasse) to WealthCap. In the 2nd quarter of 2016 it became obvious that the shortage of properties is starting to show. Trades in the mid-cap investment segment remained stable, but only one transaction for more than m was registered, namely the sale of Richard-Strauss-Strasse 76 to the Bayerische Versorgungskammer, a pension fund manager. The volume of turnover in Munich dipped below 2.0bn for the 1st half of 2016, about 31 % less than in the same period a year before. INVESTMENT PROPERTIES Accounting for about 60 % of total turnover, the office building was again the most traded asset. The biggest investments were the Baywa-Zentrale (Arabellastraße) acquired by WealthCap for 280.0m; Richard-Strauss- Strasse 76, sold by Siemens AG to the Bayerische Versorgungskammer for about 120.0m; and Kistlerhofstraße 75 sold by JP Morgan to WealthCap for 100.0m. The prime yield on office properties has fallen year on year by 0.5 percentage points to 3.5 %. As in the past, by far the greatest amount of investment is concentrated inside the city borders. INVESTORS AND VENDORS Open-end/specialist funds are still the biggest group of buyers, accounting for about 31 % and also the most active sellers on the market, with a share of around 28 %. Within one year the share of foreign investors fell from 30 % to around 12 % at the end of the first half of The shortage of investment properties will curtail market activity rather more than in the past. There is still more than enough capital to hand and the Brexit decision means that the German market can expect to see even more cash pouring in. Despite all, the volume of transactions will reach the forecast 5.5bn. Some interesting trades, including bigticket transactions, are still in the pipeline for the 2nd half of Transaction volume Munich (in bn ) ca. 4.2bn

21 MARKET SURVEY INVESTMENT/OFFICE LETTING 2016/Q1-2 OFFICE LETTING MUNICH In the 1st half of 2016 Munich s office letting market delivered an above-average performance. Take-up of space at about 393,000 m² was some 100,000 m² higher than the year before. This represents an increase of 32 %. Take-up was distributed fairly evenly between the two quarters. TAKE-UP OF SPACE With twelve contracts involving over 5,000 m² and five for more than 10,000 m² this size segment posted a year on year increase of 33 %. Leases for large amounts of space needed by government departments greatly contributed to this good result. Further leases for well over 10,000 m² are expected to be signed by the end of the year. The 1,001 to 3,000 m² size category was as popular as ever, again contributing about 29 % (some 114,000 m²) to the total take-up figures. The most sought-after sub-market was Downtown West, accounting for 13 % (49,500 m²) of total take-up, followed by Downtown North (12 %) and the City South (10 %). The biggest lease in the 1st half year was signed by the Bundesanstalt für Immobilienaufgaben (BImA), a Federal real estate corporation, which took more than 15,000 m² in Munich-Obersendling. Moreover, the Bavarian State Capital Munich leased about 14,900 m² in the Obergiesing district and biotech firm MorphoSys AG rented some 13,500 m² in Planegg. Breaking down take-up by business sector, public administration was, unsurprisingly, the front runner with a share of about 16 %. The construction and property industry followed close behind with 15 % and the IT and computer industry took about 12 % of the total. RENTS Due to several agreements for high-priced properties, including some large suites of offices, the premium rent rose by about 5 % to 34.45/m²/month. The average rent rose slightly too, increasing by 3 % to 16.00/m²/month. AVAILABLE AND VACANT SPACE The volume of empty space has fallen by a further 21 % to about 896,000 m². With the total stock of office space standing at 22.9m m², the vacancy rate was 3.9 % or 1.0 percentage point lower than a year ago. In view of stable demand, the final total for the year is expected to be around 780,000 m². Even less space will stand empty as the shortage of properties grows more acute. TOP 3 SUB-MARKETS (take-up of space / average rent) DOWNTOWN WEST / 49,500 m² / 15.80/m²/month DOWNTOWN NORTH / 45,700 m² / 15.90/m²/month CITY SOUTH / 39,700 m² / 10.40/m²/month TOP 3 CONTRACTS 1. INSTITUTE FOR FEDERAL REAL ESTATE (BIMA) Hofmannstraße / ca. 15,200 m² 2. STATE CAPITAL OF MUNICH Werinherstraße 109 / ca. 14,900 m² 3. MORPHOSYS Semmelweißstraße 7 / ca. 13,500 m² Take-up of space Munich Rents Munich (in 000s m 2, incl. owner-occupiers) (net in /m 2 /mth) premium rent ca. 704,840 m average rent /Q2 21