Market Report 2011 GerMany - Europe Real Estate

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12 Frankfurt: steady increase in vacancies throughout 2011 The Frankfurt office market in 2010 was also marked by a recovery in demand in the large building segment. Major transactions in excess of 5,000 m² during the past year amounted to 47% of the total take-up of 472,000 m² (including ECB 104,000 m², ING-Diba 38,700 m², Allianz Global Investors 28,800 m²). Take-up therefore equalled the mean value of the previous ten years. Comparatively scarce letting activity both in the first and fourth quarters prevented a more positive annual take-up. Nevertheless, the players remain optimistic regarding the performance of the market in the immediate future. This is reflected in the joint decision by Tishman Speyer and Commerz Real to commence construction of the TaunusTurm in Frankfurt’s financial district, a speculative office project with 170,000 m² of floor space. Against the background of a completion volume of around 285,000 m² during the year, the vacancy rate in Frankfurt has steadily increased from 14.1% to 14.7% (1.77 million m² of vacant stock). The proportion of modern buildings of the total vacancy is around 43%. In view of the completion of some 210,000 m² of floor space during the current year – including 95,000 m² in THE SQUAIRE at the airport as well as 97,000 m² in Tower 185 in the west of Frankfurt – we do not expect to see any significant reduction in vacancies. Consequently, any upside potential is confined to the rents in the prime segment in central locations such as the financial district. The top monthly rent here rose 2.9% during the fourth quarter to reach €35/m² and is set to rise further. Hamburg: rental market has recently gathered momentum With a take-up of around 500,000 m² during 2010, the Hamburg rental market rapidly gained momentum and almost closed the gap to the record years of 2007/2008. Following restrained growth in letting activities during the first three months, the office market recorded the strongest half-year take-up of the decade during the second half of the year with 313,400 m². This was attributed to six major transactions above the 10,000 m² mark (City of Hamburg 40,000 m², Allianz 29,000 m², DB 19,000 m², E.ON 12,500 m², Bigpoint 11,000 m², Evotec 11,000 m²) as well as various transactions ranging between 5,000 and 10,000 m². Among the beneficiaries of the most recent market developments was City Nord following the relocation of the Allianz Group from the city centre to the former Esso building (30,000 m²). Brisk new construction activity resulted in vacancies rising by 14.3% to 1.24 million m² notwithstanding the dynamic increase in demand during 2010. Nevertheless, the Hanseatic city’s vacancy rate of 8.8% is moderate when compared with the other real estate strongholds. A total of around 245,000 m² of office space was completed in Hamburg last year, 56% of which was of a speculative nature. This will be followed by up to 316,000 m² in 2011, over half of which is located in Hamburg city centre and HafenCity. In view of the extensive stock of modern office space available, it was not possible to achieve any increase in prime rents on the rental market during the past year. Quite the contrary, the second quarter saw prime monthly rents fall by as much as 2.2% to €22.5/m². Given that the fresh stock of new office space on the Hamburg office will not diminish this year, we are only likely to see significant rental increases from 2012 onwards. in 1,000 m 2 in 1,000 m 2 Office market Frankfurt 2000 1750 1500 1250 1000 750 500 250 0 Office market Hamburg 1250 1000 750 500 250 0 '0 0 '02 '0 4 '06 '0 8 '10 '1 2e Take-up '0 0 '02 '0 4 '06 '0 8 '10 '1 2e Take-up Vacancy Rent Source: CW/JLL et. al., forecast by IVG Research Vacancy Rent 27 26 25 24 23 22 21 20 19 in €/m² monthly in €/m² monthly Source: BNP Paribas RE/JLL et. al., forecast by IVG Research 50 45 40 35 30
Cologne: the city has coped well with the economic crisis and the wave of new construction Cologne’s take-up of 234,000 m² last year was broadly in line with the previous year’s result (+3%). However, the demand dynamic increased noticeably during the second half of the year. Accordingly, the first transaction since 2007 to exceed the 10,000 m² mark was recorded during the fourth quarter (Philip Morris occupied 14,500 m² as owner-occupier in the Airport business park). 77% of all transactions in excess of 5,000 m² were realised during the second half of the year. However, the most indemand segment was small offices of less than 1,000 m², which accounted for 47% of the take-up volume during the past year. The location with the highest turnover in 2010 was the city centre with a share of 38%. The sectors “other services” (27%), consultancy (18%) as well as media and advertising (10%) were involved in over half of all take-up. Following the record completions during 2009 (260,000 m²), including the completion of the “Kranhäuser” (crane houses) on the Rheinauhafen, additions of new office space plummeted by three quarters to around 60,000 m² last year. As a result, the vacancy rate fell from 8.9% to 8.3% during the year. During 2010, only a small number of rental agreements were concluded at prices per month in excess of €20/m². However, in view of the favourable macroeconomic conditions for 2011, leading brokers expect to see stable or rising prime rents in the prime segment (currently €21.5/m² per month). Munich: available office stock in the city centre becoming increasingly scarce Although take-up in 2010 increased by nearly 10% to 592,000 m² compared to the previous year, it was significantly below the average value of the last ten years for Munich (628,500 m²). One cause of this was restrained demand in the large building segment above 5,000 m², which accounted for just 18% of take-up (12 contracts) during 2010. By contrast, the dominant transactions were for offices of up to 2,000 m², which accounted for two thirds of total annual take-up last year. The highest shares of take-up were realised by the consultancy sector (25%), the IT sector (21.5%) as well as the manufacturing industry (10.2%). In geographical terms, almost half of take-up was concentrated in Munich’s city centre and suburban locations, which experienced increased growth on the back of favourable rent conditions compared to previous years. The trend for central locations is reflected by a low vacancy rate of less than 4% in the city centre. Across the market as a whole, 9.8% of available office space was vacant at the end of 2010 as compared with 9.1% one year previously. This expansion in vacancies was due not least to the completion of numerous speculative office projects. Consequently, modern office stock accounts for as much as 41% of the overall vacancy. In this context, prime rents in Munich had in the interim fallen 5% relative to the end of 2009 before increasing by almost 2% towards the end of the year to €29/m² per month. This upward trend is set to continue. This is because new construction activity is set to fall significantly this year and next year. An average delivery of 396,000 m² over the last decade compares with a mere 190,000 m² this year, of which just 32% was speculative. Consequently, the conditions for bringing about a fall in vacancies and a shortage of high-quality floor space in 2011 can be regarded as good. in 1,000 m 2 in 1,000 m 2 Office market Cologne 700 600 500 400 300 200 100 0 Office market Munich 2000 1750 1500 1250 1000 750 500 250 0 '0 0 '02 '0 4 '06 '0 8 '10 '1 2e Take-up Source: BNP Paribas Real Estate Take-up Vacancy Rent '0 0 '02 '0 4 '06 '0 8 '10 '1 2e Vacancy Rent 24 23 22 21 20 19 33 32 31 30 29 28 27 Office market Cologne in €/m² monthly Source: BNP Paribas RE/JLL et. al., forecast by IVG Research 13
Page 1: Market report GerMany 2011
Page 4 and 5: 2 Dear Readers, In forming a valid
Page 6 and 7: 4 Implications of IVG Research for
Page 8 and 9: 6 Leading economic indicators such
Page 10 and 11: 8 Modern office buildings in short
Page 12 and 13: 10 Problem of structural vacancy no
Page 16 and 17: 14 Stuttgart: extremely stable tren
Page 18 and 19: 16 Constance Freiburg Augsburg Muni
Page 20 and 21: 18 … only if rents are less volat
Page 22 and 23: 20 Investment market for office bui
Page 24 and 25: 22 Office Market Scoring and prime
Page 26 and 27: 24 Notes: German office markets 201
Page 28 and 29: 26 Office market scoring methodolog
Page 30: 28 Imprint IVG Immobilien AG Zander

Market Report 2011 GerMany - Europe Real Estate

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