Market Report 2011 GerMany - Europe Real Estate

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