Market Report 2011 GerMany - Europe Real Estate

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14 Stuttgart: extremely stable trend Following initial difficulties at the beginning of the year, the Stuttgart office market gathered increasing momentum during the course of 2010. A dynamic second halfyear performance yielded the third highest take-up in the Stuttgart office market’s history (194,000 m²). Contributory factors included three major lettings in the fourth quarter (Bosch 22,000 m², Staples 7,100 m², IST Care 5,300 m²). Almost half the lettings concluded during the last year were located in the city centre including the City district, with a further 30% in the submarkets of Vaihingen and Zuffenhausen. Active tenants in 2010 were companies from the IT and telecommunication sectors (18% share of take-up), consultancy (13%) and financial services (8.4%). Despite higher demand for office space during the second half-year of 2010, take-up for the current year – except in the case of additional exceptional transactions – is likely to be more moderate than in 2010. The vacancy rate during the first three quarters rose from 6.1% to 6.9% before falling to 6.5% under the influence of the major lettings. As a result, Stuttgart has the lowest vacancy rate of the seven real estate strongholds under review. Particularly in good and prime locations, there is a scarcity of modern large office buildings. The majority of vacant properties is concentrated on the periphery. Older properties that are no longer in line with market requirements are becoming particularly problematic. A trend towards structural vacancy is gradually emerging among the stock of old buildings and this trend is likely to increase further in the absence of renovation or targeted marketing measures. 80% of the completions expected for <strong>2011</strong> are located in Stuttgart’s city centre. Based on the high level of pre-letting of current construction projects and the economic upturn, we expect to see a sustained reduction in vacancies during <strong>2011</strong>. Prime rents for high-quality office buildings, which fell 2.8% to €17.5/m² per month during the first six months of 2010, are therefore likely to rise again during the current year. in 1,000 m 2 Office market Stuttgart 500 400 300 200 100 0 '0 0 '02 '0 4 '06 '0 8 '10 '1 2e Take-up Source: Colliers/DIP et. al. Vacancy Rent 19 18 17 16 in €/m² monthly
Regional markets: robust development In addition to the preceding analyses, it is worth examining the most recent trends across Germany’s regional centres. The following argument relates to a representative selection of 15 cities in the west and 5 markets in the east of the Federal Republic for which longer time series for evaluating market trends are available (for the city selection, see the *-marking on pages 24/25). The 20 selected regional markets, which recorded the second highest take-up result of the decade in 2009 of 1.25 million m² thanks to a range of major transactions (e.g. the City of Leipzig 42,000 m²), reported a reduction in take-up of 11.3% to 1.1 million m² in 2010 – in contrast to the seven office strongholds. The east of the country recorded an even steeper fall in take-up of 14.3%. However, when interpreting these figures, it is important to bear in mind that letting activities in the regional centres are frequently “supply-driven”. Since new construction projects in the regional centres are generally only undertaken subject to high levels of pre-letting (greater than 50%), in other words, rarely on a speculative basis, high take-up is often generated during the years immediately prior to or coinciding with the completion of new office buildings. For this reason, the majority of regional markets frequently develop at a certain time lag compared with the seven major office strongholds – especially if market activity in the major locations is already overheated. From a geographical perspective, there were significant differences regarding sales trends – while Ratingen, Mannheim, Mönchengladbach and Potsdam recorded growth in take-up during 2010 of 14% to 78% over the previous year, lettings in Leipzig and Mainz collapsed by 37% and 76% respectively – not least because the previous year’s results in these markets had been distorted upwards by major transactions. Although letting activities in the regional centres appear at first glance to have fallen compared with the previous year, aggregated vacancy levels fell slightly from 3.0 to 2.9 million m². In this respect, differences between east and west were evident. While the regional markets reviewed in the old Federal States recorded an increase in vacancy levels overall of 2.3% to 1.92 million m², vacancy levels in the five eastern German cities declined. By the turn of the year, there was just 1.15 million m² of vacant space there, a reduction of one tenth on the figure for the previous year. In Dresden, Leipzig and Rostock, the vacancy rate declined by 11.6% to 14.3% (vacancy rates range from 11.8% in Dresden to 23% in Schwerin). Nevertheless, the adjusted vacancy rate in the regional centres in the western half of the country of 5.5% is significantly below the average level in the east (12.6%) and in the seven main office strongholds (10.1%). Since the take-up in the regional markets was also largely derived from relocation activities rather than from office expansions, in particular older office buildings or those no longer in line with market requirements were vacated in preference for higher quality offices, frequently in better locations. Consequently, vacancy levels in modern buildings fell significantly in 2010 while the share of structural vacancy increased. Against this background, prime rents remained generally stable or even increased during the second half of the year. Year-on-year, however, only the prime rents in the western German regional centres increased, while the downward corrections of the first half-year in the east were not yet fully recompensated. in million m 2 Office market 20 regional centres 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Take-up Vacancy Source: IVG Research in 1,000 m 2 '0 0 '02 '0 4 '06 '0 8 '10 Ø-Take-up Regional Centres 80 60 40 20 0 Ø-Take-up West Ø-Take-up East Source: IVG Research Vacancy rates 16 % 12 % 8% 4% 0% Source: IVG Research 106 104 102 100 98 96 94 Rental index east Rental index west '0 0 '02 '0 4 '06 '0 8 '10 '0 0 '02 '0 4 '06 '0 8 '10 Regional Centres West Regional Centres East TOP 7 cities Index of prime rents (2000 = 100) 15
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 14 and 15: 12 Frankfurt: steady increase in va
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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