Market Report 2011 GerMany - Europe Real Estate

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… only if rents are less volatile and vacancies are low
Frankfurt achieves “only” 4th position in the scoring. This is largely because the success
of an investment in Frankfurt is exposed to relatively high market risks due to
high rent volatility and the recent high level of structural vacancy. It is also dependent
to a significant degree on the entry point during the real estate cycle. The growth
prospects for Frankfurt are rated as not quite as dynamic as in many smaller cities
such as Ingolstadt, Erlangen and Freiburg. Nevertheless, Frankfurt claims 4th position
with regard to market size and is within the top third of the office market scoring in
terms of market risk (24th place) and future prospects (19th place). Frankfurt is therefore
one of the most attractive markets for office building investments in Germany.
New Federal States: innovation and high-tech are trumps
Positive messages are also emanating from the east of the Federal Republic. Dresden
(11th place) and Potsdam (19th place) are two cities from the new Federal States
that find themselves in the upper third of the overall scoring. Dresden scored highly
particularly with regard to its future prospects (4th place). Previous decisions to locate
here such as the VW plant in Dresden are indicators of the city’s positive image. Of
much greater significance is the fact that the city with its microelectronics, information
and communication fields of expertise offers excellent future prospects and that it
supports these core competencies with relevant courses of study.
The same applies to Potsdam, which is continuously expanding its position as a centre
of science and which also profits from the influx of wealthy Berliners. With the
Alfred Wegener Institute, the Institute for Climate Impact Research, the Fraunhofer
Institute for Biomedical Engineering (IBMT), the Max Planck Institute of Molecular
Plant Physiology as well as the Fraunhofer Institute for Applied Polymer Research IAP,
Potsdam holds a leading position in Germany regarding the future industries of geo-
and environ mental sciences, life science as well as physics and therefore moves up to
5th place in the future prospects category.
By contrast, the Zeiss city of Jena lies far behind in 58th place. This is despite aboveaverage
economic growth, low rent volatility and extremely promising future prospects
as reported by Prognos. The primary factors influencing this score include the small
market size (ranked 66th), a very high vacancy rate of 19.2% and the low level of
transparency in the office market to date.
Leipzig, which ranked 28th, is in the middle group of the locations under review – the
primary reason why the trade fair city did not score even higher despite excellent
future prospects is its relatively high vacancy rate of 17%.
Transparency is a prerequisite for good market positioning
The future also appears rosy for Bavaria’s Audi and Siemens locations of Ingolstadt
and Erlangen. They are characterised not only by above-average economic growth,
but in particular by a high capacity for innovation, which earn them 1st and 8th place
respectively for future prospects. Only their small market size and insufficient transparency
concerning the office building market prevent the two cities from ranking
higher in the overall scoring.
The lower third of the office market scoring is made up
mainly of small markets, and among them, the university
towns and tourist attractions of Trier (ranked 59th) and
Wurzburg (ranked 62nd). Despite average future prospects,
their score is surprisingly weak and this is primarily due to
a lack of transparency and high vacancies.
And finally: industrial cities, locations
in rural areas
The bottom of the office market scoring is made up of cities
in the economically underdeveloped parts of eastern and
western Germany and cities with a greater emphasis on the
commercial and industrial sector such as Krefeld, Siegen,
Solingen and Salzgitter with poorly developed service sectors.
These generally have only very small, non-transparent
office markets that are dominated by owner-occupiers.
Some of these cities are also in the midst of structural
change and have yet to develop a functioning office market.
New Federal States: Scoring results
Berlin (6)
Dresden (11)
Potsdam (19)
Leipzig (28)
Jena (58)
Rostock (64)
Erfurt (65)
Magdeburg (67)
Weimar (68)
Schwerin (69)
Chemnitz (71)
Cottbus (73)
Gera (74)
Halle (75)
Score
Rank in brackets
Source: IVG Research
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