MarkEt REPORT Berlin 214/215 Office Leasing and Investment Accelerating success,
Office leasing Berlin STATISTICS Population 3,422, Unemployment rate 11.1 % Employees paying social security contributions 1,269, Purchasing power index Berlin office leasing market posts record results in 214 12,6 Trade tax assessment rate 41 % Gross domestic product/ resident 19.796 Sources: Statistisches Bundesamt, Statistische Landesämter, Bundesagentur für Arbeit, infas geodaten Fast Facts OFFICE LEASING (INCLUSIVE OWNER-OCCUPIERS) Office space take-up 71,3 m² Lease take-up 661,7 m² Premium rent 23./m² Average rent 13.7/m² Vacancy rate After a strong last quarter of 214, the Berlin office leasing market recorded a take-up result that exceeded all expectations. A total of 71,3 sqm of office space was snapped up by new tenants, reflec ting a significant increase of 21 % year over year. This record result can be attributed to the large number of new leases signed by telcos and consulting firms, which accounted for more than one-third of total take-up. 4.9 % Existing space (incl. periphery) 18,5 m m² Take-up of space in 1, m2 8 6 65 88 1 4 35 4 2 477 519 637 553 71 21 211 212 213 214 Leases 2 Owner-occupiers Market Report Berlin 214/215 Office Leasing and Investment
Take-up of space A total of more than 1, leases were signed in 214, roughly 1 more than in the previous year. This tremendous increase in takeup was spurred by the large number of leases signed in the space segment of 5, sqm and up. An impressive 16 new leases were signed in this space segment (156,6 sqm). The smallest space segment of up to 5 sqm continues to be one of the main pillars of the Berlin office leasing market. With total take-up of 176,4 sqm, this space segment accounted for one-quarter of total take-up. Takeup in the space segment of between 51 and 1, sqm recorded an increase of roughly 35, sqm. The space segment of between 2, and 5, sqm posted an increase of 24, sqm, while the space segment of between 1, and 2, sqm dropped slightly year over year by around 3,5 sqm. Last year s significant deals included leases signed by Lieferheld GmbH at Forum Museumsinsel for around 1,7 sqm, Mytoys online shop at former BVG headquarters for almost 1, sqm and Deutsche Bahn for around 5, sqm at the EUREF Campus on Torgauer Straße in Schöneberg. Supply and vacancies In 214, office vacancy once again dropped. This can be attributed to the comparatively low number of new-build completions in combination with a high pre-leasing rate. Vacancy in the German capital is currently recorded at around 9, sqm, reflecting a vacancy rate of slightly below 5. %. By the end of the year, we expect around 143, sqm of office space to be completed, 7 % of which has already been pre-leased. Only a limited amount of space is scheduled to hit the market in 216 with 148, sqm. 6 % of this space has already been taken up. This space comes from projects primarily located in the submarkets of Mitte, Hauptbahnhof and Friedrichshain-Kreuzberg. Another landmark building will be added to City West with the completion of Upper West in late 216. More premium office space in all space segments will become available over the next few years, thanks to additional project developments at Kurfürstendamm (Kudamm Karree and Palais Holler), near Hauptbahnhof and in Friedrichshain between Ostbahnhof and the o2 Arena. Demand City East remains the most coveted office leasing submarket, once again posting a year-on-year increase in take-up of 219,6 sqm, an impressive 47 %. This considerable increase can be attributed to the large number of large-scale leases signed in the Hauptbahnof submarket. In contrast, the top locations in City East took a hit. This submarket recorded 62,7 sqm, reflecting a year-on-year decrease of 4 % in new leasing activity. The top locations around the Kurfürstendamm and City West submarkets roughly matched previous year results with around 215 new leases signed for 135, sqm. Berlin is particularly popular among innovative start-ups. Berlin is hip; everyone wants to be part of the action. A large number of businesses are expanding or relocating their company headquarters to the German capital. Since the availability of adjoining office space in top locations is slowly but surely reaching its limits, business are increasingly moving into neighboring areas. Demand for commercial space in one of the many GSG business parks, in particular in the city s periphery, is higher than ever. This is reflected in the above-average increase we experienced in the City Periphery and City Outskirts submarkets where new leases were signed for a total of 128.6 sqm (+43 %) and 124,6 sqm (+17 %), respectively. Market overview LOCATION Office Space Take-up in m² incl, owner-occupiers Lease take-up in m² Number of lease contracts Sustainable Rents in /m² Average Rent in /m²/month Vacancy ¹) in m² Centre West 1 46,3 46,3 12 8.-23. 16.95 42,6 Centre East 2 62,7 6,4 117 1.-23. 16.7 71,8 Potsdamer Platz/ Leipziger Platz 3 31, 21, 31 12.-25. 19.4 35, City East 4 219,6 196,3 254 6.5-23. 14.8 121,1 City West 5 88,5 88,5 18 5.9-18. 13.2 126,4 City Margins 6 128,6 128,6 184 6.3-16. 12.4 36,3 Periphery 7 124,6 12,6 196 3.5-15.5 8.9 196,8 Total 71,3 661,7 992 3.5-25. 13.7 9, ¹) Vacancy: obtainable new buildings and nascent inventory spaces within 3 months Research: Margit Lippold, margit.lippold@colliers.com Colliers International 3
Take-up of space by size (in 1, m² and %) and number of lease contracts incl. owner-occupiers 2 15 1 5 648 211 73 44 16 176,4 25% 21% 14% 18% 22% up to 5 up to 1, Take-up Space by Size Take-up by industries Top Five (in m²) and share of total office space take-up (in %) 131,9/19% 97,8/14% 64,6/9% 62,4/9% 62,4/9% 143,9 95,6 up to 2, 128,8 up to 5, 156,6 from 5,1 Number of Lease Contracts Rents Weighted average rent throughout the city registered a slight yearon-year increase of 5 % to 13.7 per sqm. We are seeing a general trend toward rent increases throughout the city with rents in top downtown locations rising more steeply than in other areas. Signings in the high-priced segment on the Berlin market show that businesses are willing to pay rents of between 17. and 23. per sqm for office space located in prime central locations. However, these prime rents can only be expected for premium new-build space in top locations. Both weighted average rent and prime rent have recorded a steady increase over the past 5 years. Most leases, or 62 % of total lettable area, were signed at rents of up to 15. per sqm. The higher and high-price segments were able to match previous year results, starting at 17.5 per sqm (14 %). Prime rent also experienced a slight 5 % increase over the course of the year to 23. per sqm. New leases were signed for 43,7 sqm of office space in the past 12 months at more than 2. per sqm, up year-on-year from a modest 25, sqm. This upward trend in both average and prime rents can be attributed to low supply and high demand. We expect this trend to continue in 215. Property Index Immax Information and Telecommunication Consulting Firms Banking and Finance 5 1 15 Retail and Food Service Public Administration, Organisations, Social Institutions The Colliers IMMAX property index indicates the supply and demand trend on the office market. It shows the relationship between supply at the time of data collection and take-up over the previous 12 months. This relationship is currently 2.1 for the German capital, indicating a 55 % decrease compared to its peak at the end of 29 (3.4). Prime and average rents (in /m²) As a result of increasing lease performance combined with the fact that office space is becoming scarcer, the IMMAX continued to drop year over year. This value indicates that 2.1 square meters of office space are available for every square meter of office space currently under lease. 2.45 22. 22. 22. 23. Due to the low new-build completion volume, we expect the IMMAX to continue to drop slightly in 215. 12.4 12.5 13. 13. 13.7 21 211 212 213 214 Prime Rent Average Rent 4 Market Report Berlin 214/215 Office Leasing and Investment
Summary and outlook The 214 leasing results once again showed the popularity of the Berlin office market. Colliers International remains optimistic regarding activity in 215 as well. The attractiveness of the German capital in connection with a stable economic trend remains unchanged. A considerable number of companies are planning to expand, bringing a number of tenants in the small and mid-sized segments into the mix in addition to large-scale tenants, which will accelerate market activity. If new office properties become available or are completed in 215, we could see leasing take-up of 65, sqm. Vacancy (in 1, m2) and vacancy rates (in %) 2, 1,5 1, 5 8.4% 7.9% 7.% 6.% 1,511 21 1,4 211 1,27 212 1,9 213 4.9% 9 214 Property Index IMMAX 1/15 7/14 1/14 7/13 1/13 7/12 1/12 7/11 1/11 7/1 2.1 2.1 2.2 2.3 2.2 2.2 2.4 2.5 2.9 3.3..5 1. 1.5 2. 2.5 3. 3.5 Volume of new space (in 1, m²), thereof preleased / owner-occupied 3 25 2 15 1 144 83 119 173 143 148 5 211 212 213 214 215 216 Research: Margit Lippold, margit.lippold@colliers.com Colliers International 5
Investment 214 posts above-average results on commercial investment market exceptional transaction volume at 4. billion Margit Lippold Dipl.-Ing. Geodäsie M. Sc. REM Head of Research Berlin Tel +49 3 22993-43 E-Mail margit.lippold@colliers.com Fast Facts INVESTMENT Transaction volume Largest buyer group: Open-ended funds/special funds Largest seller group: Asset/Fund Manager Commercial Transaction Volume (in billion ) 4. billion 31. % 23. % Most requested type of property: 59. % Office Prime yield office 4.75 % 5 4 3 2 1 3.1 2.2 4.1 3.5 4. Transaction Volume The Berlin commercial investment market finished up 214 with above-average results. Transaction volume recorded more than 4. billion at the end of Q4, almost matching the record results from 212. This reflects a year-on-year increase of roughly 14 %. The Upper West sale to RFR Holding for more than 25 million and Deka Immobilien s purchase of the Hackescher Markt building complex for around 15 million contributed significantly to this increase. Activity on the Berlin investment market picked up again at the end of the year. Commercial properties changed hands in the German capital for almost 1.5 billion in Q4 alone. Kudamm Karree was the largest deal in Q4, selling for around 17 million. Large-volume deals like these, which are typical for the German capital, combined with a large number of transactions in the small and mid-sized segments, were responsible for the excellent results we saw on the Berlin investment market. This high transaction volume can also be attributed to a considerable year-on-year increase in the share of portfolios by around 4 %. More than 1.6 billion was invested in package sales. Seller and Buyer Groups Asset / fund managers were particularly active when it came to buying property. They accounted for more than one-third of total transaction volume, generating over 1.23 billion. Open-ended real estate funds / special funds purchased more than 7 million (18 %) worth of property in Berlin. These investors were followed in third place by project developers and development companies, who invested more than 47 million (12 %) and were considerably more active than in the previous year. Asset / fund managers also clinched first place among the seller groups with a transaction volume of around 911 million (23 %), followed closely by project developers and development companies with around 812 million (2 %). Open-ended real estate funds / special funds and opportunity funds / private equity funds each posted a 12 % share of total transaction volume in terms of property sold. Over the course of 214, we saw more and more signs of international investors putting their trust in the Berlin investment market. International buyers purchased more property, increasing their 213 share of 28 % to more than 4 % in 214. 21 211 212 213 214 6 Market Report Berlin 214/215 Office Leasing and Investment
Investment Properties Developments over past years have shown that office property is by far the most popular investment property type. This was again confirmed in 214. 2.35 billion, or almost 6 % of total transaction volume, was invested in office property. Retail property came in second with a 21 % share, followed by hotels (7 %), commercial sites (6 %) and logistics/industrial property (5 %). Weighted average gross initial yield for prime office property in the German capital remained stable year over year at a low 4.75 % thanks to ongoing demand, putting Berlin third in the ranks of Germany s most expensive real estate locations after Munich and Hamburg. An impressive 1.2 billion of investment capital was poured into prime locations in the City East and West submarkets in 214. Investment properties located in peripheral areas of Berlin were highly coveted as well. Primarily retail, industrial and commercial properties as well as commercial sites changed hands in these areas for almost 1 billion. We recorded seven deals over the course of 214 with a volume of considerably more than 1 million. A number of deals signed for up to almost 1 million were followed by a solid midfield of almost 5 properties, which sold for between 2 million and 5 million. Transaction Volume Buyers (in million ), share (in %) 1,5 1, 5 Transaction Volume Sellers (in million ), share (in %) 1.5 31% 18% Asset/Fund Manager Open-ended Funds/ Special Funds Other Companies 14% 12% 5% Developers/ Constructors Private Investors/ Family Offices Summary and Outlook The Berlin commercial property investment market recorded an above-average year in 214 with numerous large-volume transactions. Investors continued to focus on core properties in coveted downtown locations in 214. Due to the fact that domestic and foreign investors continue to show interest in the German capital with its increasing popularity and ongoing favorable conditions combined with low interest rates, we expect to see a similar transaction volume in 215 of around 4 billion. 1, 5 23% 2% Asset/Fund Manager Developers/Constructors Open-ended Funds/ Special Funds 12% 12% 11% Opportunity Funds/ Private Equity Funds Private Investors/ Family Offices Types of properties (in %) Building Sites Hotel Logistic/Industry 7 6 5 Mixed used Properties 2 Retail 21 59 Offices Research: Margit Lippold, margit.lippold@colliers.com Colliers International 7
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