Munich Office MarketView

Transcription

1 Munich Office MarketView Q2 213 GDP Q1 GER +.1% Q-o-Q GDP Q4 GER -.6% Q-o-Q IFO BUSINESS CLIMATE INDEX 1.9 June 213 CBRE Global Research and Consulting GFK CONSUMER CLIMATE INDEX 6. June 213 UR MUC.% June 213 OVERVIEW Quick Stats Q2 213 Q-o-Q Take-up 16,2 sq m Vacancy 1.1m sq m Prime rent 31. /sq m Prime yield 4.7% Completions 17, sq m Hot Topics Good take-up result in the first half-year, favoured by a high proportion of owneroccupiers Vacancy below the level of the previous year Prime rent up by 2% Net initial yield for premium office properties stable since last year Economy According to the Federal Statistics Office, the German economy trended slightly positive at the start of the year, with.1% growth quarter-on-quarter. The ifo business climate index also increased by two basis points between May and June, with business expectations in particular being more positively assessed than in the previous month. The Munich economy continues to benefit in particular from the strong local employment market: the unemployment rate of only.% is the lowest of all German cities. Coupled with the high liquidity in the region and the positive demographic trend, this provides an ideal context for the office letting market, as well as for stable real estate investments. Office market In the first half-year, also due to the high proportion of owner-occupiers of 23%, take-up in the Munich office letting market reached the respectable level of 321,1 sq m. Nevertheless, this was slightly lower than both the figure for the same period in 212 (324, sq m) and the average of the first six months of the previous five years (28 to 212: 323,3 sq m). Mainly due to the interplay between the continuing low volume of speculative completions and the solid take-up results (also in projects), office vacancy declined by around 2% year-on-year, to 1.m sq m. Although the currently achievable prime rent of 31. /sq m/month is unchanged since the start of the year, it is 2% higher than the comparable figure in the second quarter of 212. Investment market The Munich investment market experienced a dynamic first half-year. A total of 1.6bn was invested in commercial property in the Bavarian Capital and its periphery, around 2% more than in the same period in 212. The number of transactions, in particular, was % higher - a considerable increase. Office property, accounting for 72% of the investment volume, was the most actively traded asset class, by a wide margin. Investors continue to concentrate primarily on core and core-plus properties, although they are slowly becoming more willing to take risks. The prime office yield of 4.7% remained stable at the same level as last year. Table 1: Office market key data Q2 212 Q2 213 Y-o-Y 1 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) % 213, CBRE GmbH

2 1, sq m % 1, sq m Q2 213 Munich Office MarketView TAKE-UP In the first half-year, the take-up in the Munich office market totalled 321,1 sq m. This result was slightly lower than both the comparable figure for the previous year and the average of the previous five years. Nevertheless Munich registered the highest take-up of all the top German office property markets in the first half-year. A comparison of the last two quarters shows that, between April and June, takeup rose by around 6% on the first quarter. The average deal size (823 sq m) was around 4% lower than in the first half of 212 (861 sq m). As well as a total of eight large-scale lettings of more than, sq m, including the letting, advised by CBRE, of around 14, sq m of office space in the Arnulfpark to Google, take-up in the first half-year was particularly based on an unusually high proportion of owner-occupiers. At 23%, this was the highest of any half-year since recording take-up statistics began. In terms of pure letting performance, a year-on-year decline of 18% was registered. The largest transaction in the last six months was the extension building for Allianz Versicherung in Unterföhring. This is included in the take-up figures as construction began in the second quarter. Together with seven other major transactions, this had a decisive influence on the breakdown of take-up by sectors and submarkets. As a result, in a comparison of submarkets, the 76,3 sq m in Periphery North-East (23%) was considerably more than in City North-West, where take-up was 4,9 sq m (14%), and the 4, sq m (13%) in Urban Area South-West. The analysis of take-up by business sectors was led by the Insurance sector, with 4,2 sq m (14%), followed by Industry/Construction with 4, sq m (13%) and firms in the IT sector with 39,3 sq m (12%). Chart 1: 1, Office space take-up 1 year average: 6,4 sq m Chart 2: Office space take-up (cumulated, %) by sectors* - Top - Remaining sectors 41% Q1 Q2 Q3 Q4 Insurance 14% Industry, Construction 13% IT 12% 2 VACANCY Office vacancy in Munich has declined by 2% in the last year, to the current approx. 1.m sq m. This was mainly due to the 3% lower volume of completions and the high proportion of pre-lets (76% in the first half of 213), based on the consistently solid take-up figures, even in projects. The total office stock in Munich has modestly increased, by approx. 41, sq m, in the last year. This results in a current vacancy rate of 7.2%, which is 2 basis points lower year-on-year. Within the city limits the office vacancy rate is currently.9%, while outside the city boundaries it is 12.4%. Comparing submarkets, the highest figure, 14.9%, is still being registered in Periphery North-East. In contrast, the vacancy rates are lowest in the City Centre (2.9%) and City North- East (2.%) submarkets, which are heavily sought-after but offer only a limited office supply. The overall office supply in Munich, comprising vacancy, space available for sub-letting and speculative completions in the next twelve months, currently totals over 1.6m sq m. Chart 3: 2, 1,8 1,6 1,4 1,2 1, R&D, Pharma, Biotech 8% Legal Adv., Chart. Acc. 12% Office space vacancy 1 year average: 8.% *in total 2 sectors Q2 213 Vacancy Vacancy rate. 213, CBRE GmbH

3 1, sq m Index Q = 1 /sq m/month Chart 4: Prime rent/ Weighted average rent Q2 213 Prime rent Weighted average rent Chart : Rent index RENT Rental values in Munich have been stable or slightly rising since last year. The achievable prime rent for first-class office space in the prime city centre locations in Munich has increased by 2% year-on-year, to 31. /sq m/month. It must be borne in mind that this is an estimate of the highest sustainably achievable nominal rent. The highest rents actually paid in premium office properties in Munich are sometimes considerably higher. The achieved prime rent, the median rent of the 3% highest value lettings, was at 33, /sq m/month at the end of the second quarter. The weighted average rent of the last twelve months has declined slightly since last year, although there was an increase of 2%, to /sq m/month, between the first and the second quarter. The largest year-on-year increase, 11%, was in the City Centre submarket. This was primarily attributable to high-value lettings in Munich s most expensive premium properties, which moved into the period under observation for the first time this year. Rents have also risen inter alia in the Urban Area North-West (+8%), Periphery North-West (+6%) and City North-West (+%) submarkets. In contrast, the heaviest declines in rental value were in the Urban Area North-East (-18%), Periphery South-West (-14%) and Urban Area South-West (-12%) submarkets. The CBRE Rental Value Index (Q1 1986=1) for Munich has risen from 22 to 228 index points in the last year, while the index for the whole of Germany has risen from 26 to 29 index points. Q2 213 Munich Office MarketView Germany Munich Chart 6: Office space future supply 4 PIPELINE In the first six months of 213, in Munich only 63,3 sq m of office space was completed and added to the office stock as new buildings or completed full refurbishments. This was the lowest volume of completions in the first half-year in Munich since 26. It was also 4% lower than the average of the first halves of the last ten years. By the end of 213, it can be assumed that there will be further completions in Munich, with a total volume of around 134,9 sq m. The proportion of pre-lettings (including owner-occupiers) is currently 84%. Projects about to be completed include e.g. the TakeOff office building in Messestadt Riem year average: 289,4 sq m Based on current information, the forecast of completions in 214 is for around 249,8 sq m, so that by the end of the year the 213 figure is expected to be slightly exceeded. Almost 67% of the space is already pre-let or will be owneroccupied In 21 a total of around 232,4 sq m of new buildings and refurbishments is foreseeable, which equates to slightly fewer completions than in 214. Currently, around 31% of the accommodation is already under construction. The proportion of pre-lettings is however still low Completed Speculative Pre-let Owner-occupied 213, CBRE GmbH

4 Index Q = 1 % 1, sq m Q2 213 Munich Office MarketView PIPELINE BY SUBMARKETS Based on current information, the highest proportion of the office completions expected by the end of 21 are in the Periphery North-East submarket. Around 126,8 sq m is in the pipeline, 29% of which is currently speculative. Eight of the nine new projects are already under construction. The largest projects are the new building of the Allianz Versicherung in Unterföhring and the eighth phase of the Business Campus Garching. In the Urban Area North-West, the volume of completions, around 126, sq m, is similar: somewhat more than half of this is not yet let. Projects in this submarket include e.g. the 88North in the Moosach district and the office and retail property forum am Hirschgarten, in Neuhausen/Nymphenburg. In the Urban Area North-East 79,6 sq m of office space is planned, 4% of which is speculative. Projects to be completed there by mid-214 include e.g. the Arabeska in the Arabellapark and the second phase of the NuOffice in the Parkstadt Schwabing. INVESTMENT Following an extremely active first quarter, the dynamic trend of the Munich investment market continued in the second quarter. 739m was invested in commercial property between April and June. Although this was 11% less than in the first quarter, there were 6% more transactions. In total, the half-year investment volume in Munich was 1.7bn. This was around 2% more than in the same period of 212, which was largely dominated by two major transactions, each for well over 2m. Chart 7: Office space future supply (Q ) by submarkets* -Top - Chart 8: Prime yield, capital value and benchmark yield *in total 2 submarkets Office property was the most traded asset class in the market, with an investment volume of 1.1bn (72% of the 1 total) and more than 6% of all investment transactions. A further 22m (16%) was invested in warehouse, logistics Q2 213 and production buildings, which therefore also rate highly with investors. Due to the very limited supply in Munich, Capital value index Prime yield (%) 1y government bond (%) retail property accounted for only 7% of the total investment volume. As in 212, hardly any portfolio assets were sold in Munich, so that single transactions, 94% of the total, continued to dominate the market. Purchasers from Germany accounted for the largest proportion (7%) of the turnover, although the total investment volume placed by foreign investors was 27% higher year-on-year. The sale of the office and retail building Twenty2nd in Marsstraße, advised by CBRE, also contributed to this. Aberdeen sold the property to a Canadian investor for well over 6m. Private investors, who invested a total of 487m (31% of the total turnover) in commercial property, were the most active group of investors in the market. Next were Open-ended Funds/Special Funds, with investments totalling 277m (18%). In particular the Special Funds, designed for institutional investors, took centre stage. The third most active group of purchasers were Asset/Fund Managers, placing 26m (13%). The net initial yield for premium office properties in best city centre locations in Munich has remained unchanged at 4.7% since the last year. In the short to medium term it shows a stable to slightly decreasing tendency Periph. N/E Urb.A. N/W Urb.A. N/E Speculative Pre-let Owner-occupier City N/W City N/E FORECAST The continuing solid take-up figures of the last quarters confirm the strong demand for office space in Munich, also from owner-occupiers, who, particularly in the second quarter, contributed a considerable proportion of the total take-up. Taking into account the existing inquiries, we consider that our take-up forecast of up to 6, sq m by the end of the year is still realistic. Even at the start of the year, it was already foreseeable that the strong letting performance in 212 might well decline by up to 1%. In view of the excess demand in the centre of Munich, we assume that there will be a further rise in the achievable prime rent in the second half of the year. Office vacancy is expected to be stable to slightly increasing by the end of the year. 213, CBRE GmbH

5 Table 2: Submarket key data Cumulated Take-up sq m Future supply Q sq m Vacancy rate % Rental band /sq m/month Weighted average rent /sq m/month City North-East 17,1 6, City North-West 4,9 73, City South-East 16,8 37, City South-West 21,7 3, City Centre 13,, Urban Area North-East 3,7 79, Urban Area North-West 29,4 126, Urban Area South-East 17,2 34, Urban Area South-West 4, 29, Periphery North-East 73,6 126, Periphery North-West 3, Periphery South-East 6,4 2, Periphery South-West 4,4 33, TOTAL 321,1 617, Q2 213 Munich Office MarketView 213, CBRE GmbH

6 Q2 213 Munich 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: Tobias Brandt Senior Analyst CBRE Isartorplatz Munich t: e: tobias.brandt@cbre.com Agency Munich Rainer Knapek Managing Director Head of Agency Munich CBRE Isartorplatz Munich t: e: rainer.knapek@cbre.com + 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