We Stand for Office

We stand for Office

Office Market Report Vienna |Spring 2018

We stand for real estate.

Preface

In 2018 the Vienna office market will see the strongest production of new office space in more than ten years. This development will bring new impulses for both the letting and investment markets and also create interesting perspectives. The completion of high-quality new construction projects will continue to stimulate the interest of potential tenants in new office locations and set the stage for further successful lettings. This favourable climate will also benefit the investment market, which remains very popular with international investors.

Michael Ehlmaier FRICS Our experienced EHL team is pleased to help you develop the best real estate Managing Partner strategy or identify the property that perfectly fits your needs!

Yours,

EHL — the office specialist The EHL Real Estate Group has been one of the leading providers of property services in Austria for many years. We offer a complete range of real estate services throughout the entire property life-cycle as well as a successful international network.

“We are seeing a greater focus on urbanity, flexibility and services in location decisions. Our office experts at EHL are pleased to provide you with comprehen- Stefan Wernhart MRICS sive and structured advice for the lease of the right office space!“ Head of Commercial Properties [email protected]

EHL Market Reports EHL market reports are updated regularly and provide a comprehensive evaluation and overview of the real estate market.

“Indicators for office space demand in 2018 point towards a further strong year- on-year increase in momentum. Details on the key indicators and developments on the office and investment markets can be found in our EHL Real Estate Market Reports.“ Thomas Schanda, MA Head of Market Research [email protected]

Overview Office Market Vienna

Executive Summary

Deliveries at record high Increase in take-up At 280,000 sqm, the production of new space will The substantial production of new space has been well reach the highest level in more than ten years. A received by the market and, from the current point of number of large-scale projects including, among others, view, take-up is expected to top the 2017 level. the Austria Campus, THE ICON VIENNA and ViE are scheduled for completion in 2018. The investment market becomes more international Higher average rents Office properties remain the most popular segment The economic recovery has driven companies to of the Vienna investment market. A growing number increasingly focus on quality instead of cost aspects in their of investors who were previously not represented in search for office space. Most of the lettings are located Austria are expected to enter the market in 2018. in prime new buildings, which has led to an increase in average rents from EUR 14.30/sqm to EUR 14.50/sqm.

demand* | supply 2018 rents I first occupancy**** (in EUR/sqm/m.) Deliveries 280,000 sqm Prime locations 16.0-25.5 Take-up 210,000 sqm Quality locations 13.5-16.5 Standard locations 11.0-13.5 Market indicators Prime rents 25.5 Deliveries strongly increasing Take-up increasing economic data austria 2018* Vacancy rate slightly increasing Unemployment rate Austria 5.5% Prime yields slightly decreasing (Eurostat) EU (28) 7.3% Eurozone (19) 8.5% rental rates Nom. GDP EUR bn. 387.9 Average rents slightly increasing Economic growth 3.00% Prime rents stable Inflation 2.00% State budget deficit -0.40% office marke Q1 2018 Total space** VRF*** * Forecast Office space in sqm 11,055,000 5,746,000 ** All figures in the report refer to total office space consisting of modern office properties and office space in older buildings. Vacancy rate 5.3% 5.4% *** according to Vienna Research Forum, www.viennaresearchforum.at **** EHL-average rent levels of 100 newly built or refurbished office buildings at various locations

Office Market Vienna 2014—2018 320,000 280,000 300,000 sqm 8%

220,000 210,000* 225,000 sqm 7% 200,000 185,000

150,000 150,000 sqm 130,000 6% 120,000 Vacancy rate

75,000 sqm 60,000 5%

Co-Working spaces enliven the market

Co-working spaces are currently experiencing an un- co-working space provider, Talent Garden: in the first disputed boom on the Vienna office market, and the quarter of 2018, EHL brokered a property with 5,000 available office space is becoming significantly more sqm of usable space in Liechtensteinstraße in Vienna’s differentiated. In recent years, the market was char- ninth district to this innovative company for single- acterised primarily by numerous local initiatives which tenant use. successfully transformed smaller commercial properties into new space for creative freelancers from the Additional benefit in new office properties neighbourhood. Large, international providers with corresponding space requirements are now sounding Developers frequently reserve part of the usable out the Vienna market for the first time. One of the space in high-quality new construction projects for forerunners is the established serviced office provider co-working areas already during the planning phase. Regus, which leased several sites for the implemen- For example, the concept of the ORBI Tower included tation of its new co-working space concept in 2017. 4,000 sqm for co-working spaces. Lettings to co- This new type of use is creating exciting impulses for working providers are not the only option in Vienna, the Vienna office market. Co-working spaces are be- owner operations are also a viable alternative. The ing integrated in new office developments in estab- level of rents in lettings to co-working providers lished office clusters, but also offer interesting oppor- corresponds to the prices for conventional office tunities for older properties outside the conventional space. Developers can also generate added benefits office regions. for their standard tenants with options that facilitate the use of co-working space for short-term additional Urbane living- as well as established office locations requirements or the project-related letting of creative areas which are often missing in traditional office Established office regions are no longer the focal structures. point of location searches, even for large international providers. Properties in urbane and lively structures Key factors for the design of co-working spaces are, close to the living environment offer added value, above in any case, flexible structures with optimal open-plan all with a view towards the start-up scene. Single tenant concepts, creative rooms, generous communication usage is also an important factor for the maximum zones and open-space areas. These factors support flexibility of co-working space. This development is the network philosophy that plays such an important illustrated by the market entry of a further international role in co-working spaces.

4 Rent levels and vacancy rates

Development of rents 2011—2018

Prime rents

Prime locations

Quality locations

Standard locations

2018

Rental rates in Vienna office regions

30 EUR/sqm

25 EUR/sqm

20 EUR/sqm

15 EUR/sqm

10 EUR/sqm

5 EUR/sqm Inner city Hauptbahnhof Vienna DC Lassallestr. Southern Eastern Region Seestadt Northern Western Surroundings Quartier Surroundings Messe Region Erdberg Aspern Region Region Belvedere Prater Wienerberg

Prime rents (in EUR/sqm/m.) Vacancy rates (in %)

127.7 London (West End) 14.0 Warsaw 65.0 Paris 12.0 Milan 44.2 Milan 9.5 Madrid 40.0 Frankfurt 9.1 Bucharest 35.5 Munich 8.1 Frankfurt 33.3 Amsterdam 7.8 Prague 31.8 Berlin 7.6 Budapest 31.0 Madrid 7.4 Amsterdam 25.5 Vienna 6.5 Bratislava 23.0 Warsaw 5.3 Vienna 22.0 Budapest 3.6 London (West End) 19.5 Prague 3.3 Munich 18.5 Bucharest 2.8 Paris (CBD) Source: EHL Market 15.5 Bratislava 2.0 Berlin Research | Q1 2018

5 The Vienna office regions

The Vienna office market consists of several cluster regions where office production is concentrated. The following map provides an overview of the most important office axes as well as indicators for the supply, demand and development of rent levels.

u4 1. Inner city | Surroundings 2.

top properties 1010, Goldenes Quartier Office 1010, Fleischmarkt 1 u5 1010, Kohlmarkt 8 u3 1. 1010, Georg-Coch-Platz 2

2. Northern Region 4. u2 top properties 1190, Skyline 1190, Kay 29 1190, Square Plus A23 1190, space2move © SRE/FOTOSTUDIO MENZL Rents EUR 11.0 -18.5 1200, Rivergate u6 Rents tendency 1200, Millennium Tower Demand 1200, Optimum Supply 1210, Florido Tower A21

A2 3. Western Region 4. Southern Region | Wienerberg

top properties Top properties 1120, Forum Schönbrunn 1100, Business Park Vienna 1120, Arcade Meidling 1100, myhive Twin Towers © © IMMOFINANZ 1140, Bergmillergasse 5 1100, Office Provider © barus graphicdesign barus © 1140, Scheringgasse 2 1100, The Brick - Biotope Offices Rents EUR 10.0 -14.5 1150, BahnhofCity Wien West Rents EUR 11.5 -18.0 am Wienerberg* Rents tendency Rents tendency 1120, Euro Plaza Demand Demand 1120, INNO Plaza* Supply Supply 6 5. Vienna DC | Surroundings

top properties 1220, Ares Tower

expressiv.at expressiv.at 1220, DC Tower © 1220, Andromeda Tower A22 1220, Tech Gate Vienna u1 Rents EUR 12.5 -22.0 1220, IZD Tower Rents tendency Demand S2 u6 Supply

6. Lassallestraße | Messe | Prater 5. top properties u2 1020, Green Worx 6. 9. 1020, Austria Campus* 1020, messecarree Wien 1020, Denk Drei, Viertel Zwei

top properties

T own AG 1030, Marxbox 1030, Solaris A4

u1 WS T own 1030, ORBI Tower © I 1030, MGC Office Park Rents EUR 11.5 -19.5 1030, ViE* S1 Rents tendency 1110, OCG Office Campus Gasometer Demand Supply

9. Seestadt Aspern 8. Hauptbahnhof | Quartier Belvedere

top properties top properties

1220, Hoho Wien* © SIGNA 1100, QBC* 1220, Campus West 1100, THE ICON VIENNA*

ATP ARCHITEKTEN ARCHITEKTEN ATP 1220, Technologiezentrum Seestadt, 1100, Laxenburger Straße 36 © Bauteil 2* 1100, HBF 1*

INGENIEURE / TELEGRAM71 / INGENIEURE Rents EUR 11.5 -16.0 Rents EUR 15.0 -22.0 1100, Columbus Center Rents tendency Rents tendency Demand Demand

Supply Supply *Project 7 Completions | Largest Lettings

Record completions strengthen established office clusters

Deliveries will increase to 280,000 sqm in 2018, office space as defined by the Vienna Research Forum with the major volume located in the Lassallestraße/ (VRF), the vacancy rate currently equals 5.4 per cent. Messe/Prater region and areas surrounding Vienna’s The vacancy rate according to the VRF is lowest in the Hauptbahnhof. The overall vacancy rate will rise slightly inner city and directly adjacent locations at 2.3 per cent from 5.3 to 5.6 per cent towards year-end. For modern and highest in the northern region at 10.6 per cent.

Completions 2018 | 2019 Take-up by sectors* 1% 2% 3% PROPERTY SIZE LOCATION 4% 5% Austria Campus 160,000 sqm 1020, Walcherstraße 1 THE ICON VIENNA 74,200 sqm 1100, Wiedner Gürtel 11

2018 6% 31% ViE/Lände 3 13,800 sqm 1030, Erdberger Lände 26A 8% Inno Plaza 11,000 sqm 1120, Pottendorfer Straße 23-25 HoHo Wien 8,000 sqm 1220, Seestadt Aspern 20% 20% FUTUREbase 7,100 sqm 1210, Gieffinggasse 4 messecarree Wien 4,600 sqm 1020, Ausstellungsstraße 50 The Brick - Biotope Offices am Wienerberg 20,000 sqm 1100, Triester Straße 91 Public sector

2019 SILO PLUS 11,000 sqm 1230, Lemböckgasse 57-59 IT | High-Tech HBF 1 3,500 sqm 1100, G.-Fröhlich-Sandner-Straße Law firms and consultants Banks and insurance companies * fully let **owner-occupied Source: EHL Market Research | Q1 2018 Serviced Office | Co-Working The table only includes those properties for which construction has already begun. Numerous projects for Trade and services which construction will only commence when pre-let to a suitable degree are not included. Educational and training instituions Other Pharma and health Construction, real estate

Selected Lettings 2017 | Q1 2018 Take-up by regions*

4% TENANT SIZE LOCATION 4% SVA 11,600 sqm 1030, Hintere Zollamtsstraße 1 7% TPA Steuerberatung GmbH 8,600 sqm 1100, THE ICON VIENNA Talent Garden AT GmbH 4,900 sqm 1090, Liechtensteinstraße 111-115 33% 11% WienIT EDV Dienstleistungs GmbH 4,900 sqm 1030, ORBI Tower

Otto Bock Healthcare Products GmbH 4,600 sqm 1110, Brehmstraße 12 15% Spaces Österreich 4,000 sqm 1030, ORBI Tower 26% Nestlé Österreich GmbH 3,800 sqm 1100, THE ICON VIENNA thyssenkrupp Aufzüge GmbH 3,200 sqm 1230, Zetschegasse 11 Sonepar Österreich GmbH 3,200 sqm 1120, Gaudenzdorfer Gürtel 67 Inner city | Surroundings Hauptbahnhof | Quartier Belvedere

Wiener Sozialdienste 3,100 sqm 1020, E-Zone Eastern Region | Erdberg SAE Institute GmbH 2,800 sqm 1010, Hohenstauffengasse 6 Lassallestraße | Messe | Prater Southern Region| Wienerberg City of Vienna - MA 67 2,700 sqm 1100, Laxenburger Straße 36 Vienna DC | Surroundings Aon Jauch & Hübener GmbH 2,700 sqm 1010, Schwarzenbergplatz 3 Western Region

EHL Real Estate Group provides consulting *lettings of more than 1,000 sqm services to tenants and/or lessors. Source: EHL Market Research | Q1 2018 Source: EHL Market Research | Q1 2018

8 Investment market

Prime office yields across Europe (in %) 7.50 7.25 6.50 5.75 5.00 4.85 3.75 3.75 3.70 3.50 3.25 3.25 3.00 3.00 2.90 Athens Bucharest Bratislava Warsaw Prague Amsterdam Vienna Frankfurt Milan Madrid London (West End) Berlin Paris Munich Budapest

Source: EHL Market Research | Q1 2018

Investment market

The real estate investment market in Austria broke all cent can be expected during 2018. This situation is records in 2017. The exceptionally high transaction increasing the interest of many investors in secondary volume of EUR 4.7 billion resulted, above all, from ten quality segments that promise slightly higher yields. spectacular large-scale transactions – each of which clearly exceeded EUR 100 million. Office properties The supply of available prime properties is very limit- were again the strongest segment by far with a 65 per ed, especially in the office segment, because many of cent share of the total volume. the projects scheduled for completion this year were already sold through forward deals in 2017. Market The year’s largest transaction was the sale of the Aus- activity in the residential segment, above all in special tria Campus by SIGNA to a special fund managed by forms like housing for students or senior citizens, can PGIM Real Estate for German and Swiss institutional in- be expected to increase during 2018. This segment vestors. With a volume of more than half a billion euros, saw extensive interest on the part of German investors this was also the largest single transaction ever realised during the past year, a trend which will also continue on the Vienna market. EHL supported numerous large in 2018. The demand for logistics properties is also in- transactions in the office segment, including the sale creasing, in particular for properties for the so-called of THE ICON VIENNA at the Hauptbahnhof by SIGNA “last mile“, which will become more attractive over the to Allianz, the purchase of the DC Tower by the Ger- medium-term due to the growth in online retail reve- man Deka Immobilien and the sale of the ORBI Tower in nues. TownTown to Bank Austria Real Invest. International investors on the move

Prime yields continue to decline The strong momentum on the Austrian real estate investment market has been supported by rising interest Demand is expected to remain strong in 2018, but the on the part of financially strong international investors previous year’s record will be difficult to match because who were hardly active in Austria to date. Asian inves- of the limited supply of large-volume, prime properties. tors, in particular, are appearing in growing numbers. This demand overhang is driving prices, and the prime In addition to the German investors who have clearly yields for office properties are therefore trending down- dominated the market in the past, they will play an in- ward. Prime yields equalled roughly 3.75 per cent at creasingly important role in the future. year-end 2017 and a further decline towards 3.5 per

Market activity

Selected investment transactions 2017 | Q1 2018

PROPERTY LOCATION TYPE OF USE SIZE BUYER SELLER ECO Portfolio Austria Office I Retail 104,000 sqm Hanse Merkur Grundvermögen conwert Austria Campus Vienna Office 100,000 sqm PGIM Real Estate Signa THE ICON VIENNA Vienna Office 81,500 sqm Allianz Signa DC Tower 1 Vienna Office 74,500 sqm Deka BAI OMV-HQ (Hoch Zwei I Plus Zwei) Vienna Office 43,000 sqm Deka S Immo AG Obere Donaustraße 23-27&29 Vienna Office 40,000 sqm Reitenburg GmbH Deka Millennium Tower Vienna Office 38,000 sqm Art-Invest Real Estate Morgan Stanley UBM-Portfolio Austria Office | Hotel 37,300 sqm Private investor UBM Development AG ORBI Tower Vienna Office 23,500 sqm Bank Austria Real Invest IWS TownTown AG qbik Vienna Office 17,790 sqm Bank Austria Real Invest Savills Investment Management Marximum Building 2+4 Vienna Office 15,980 sqm Swiss Life Hochtief Skyline Vienna Office 15,770 sqm KGAL Savills Investment Management Seeparkcampus West Vienna Office 15,500 sqm Erste Immobilien KAG Kerbler Group IKANO Office Park Wr. Neudorf Office 11,690 sqm Private investor Private investor Lindenpark Linz Linz Office 4,000 sqm German private trust RHW Immobilien Wagramer Straße Vienna Office 3,770 sqm Pine Asia Asset Management Construct Retail portfolio Austria Retail 70,000 sqm BVK ADIA ZIB Salzburg Salzburg Retail 16,650 sqm Private investor Immofinanz AG ELI - Shopping Center Liezen Retail 15,000 sqm KGAL Rutter Hornbach Stadlau Vienna Retail 13,000 sqm Leasinvest Private investors Retail park Stadlau Vienna Retail 11,000 sqm Leasinvest Private investors EKZ Hietzing Vienna Retail 9,420 sqm INVESTER United Benefits Private investors Leiner Flagshipstore Mariahilfer Str. Vienna Retail 7,370 sqm Laura Privatstiftung Steinhoff Westbahnhof A3 Vienna Retail | Hotel | Office 25,000 sqm Real I.S. AG Acron TrIIIple Turm 3 Vienna Student housing 670 rooms Corestate Capital ARE Development | Soravia The Fizz Student Hotel Vienna Student housing 633 rooms International Campus Stonehill Developments und Pegasus Milestone Graz Graz Student housing 386 rooms Union Investment ARE Development

Source: EHL Market Research | Q1 2018

10 EHL References

Reference projects

Investment

the icon vienna orbi tower EHL advised Allianz on the purcha- EHL brokered the sale of the 102 © SIGNA se of THE ICON VIENNA through a metre ORBI Tower in TownTown, forward deal and was responsible Wien-Erdberg, to Bank Austria Real for the commercial due diligence Invest. The transaction took place © IWS TOWNTOWN AG audit. through a structured sale process in the form of a forward deal. GLA 81,500 sqm GLA 23,760 sqm Client Allianz Real Client IWS TownTown Estate AG

dc tower 1 ubm-Portfolio

EHL advised DEKA Immobilien on © UBM EHL brokered a portfolio of seve- the purchase of the DC Tower 1 ral office properties in Graz and from Bank Austria. This tower, with Vienna plus a hotel to a group of 74,500 sqm of rentable space, is Austrian private investors. nearly fully let to well-known com- © DC TOWERS | Michael Nagl panies from the service sector and GLA 74,500 sqm GLA over 37,000 sqm IT branch. Client DEKA Immobilien Client UBM

Leasing

Dentsu aegis pioneer investments The communication agency Dentus austria Aegis leased 2,600 sqm of modern EHL brokered 2,700 sqm of office office space in the Denk Drei /Vi- space on the Schwarzenbergplatz Office LeNomade Office © IC Development |

ertel Zwei. EHL supported Dentsu to Pioneer Investments Austria, a from the market evaluation up to member company of the Amundi the signing of the lease. Group. GLA 2,600 sqm GLA 2,700 sqm Client Dentsu Aegis Client Pioneer Invest- Network ments Austria Austria GmbH GmbH

thyssenkrupp City of Vienna — Ma 67 thyssenkrupp leased a prime The city of Vienna leased approx.

refurbished, single-tenant- Fotostudio 2,700 sqm of office space in Laxenburger Straße. EHL advises

building in Vienna-Liesing as © PETER STROBL © 2017 MAKAPLAN 2017 © its new Austrian headquarter. the owner on the marketing of the EHL provided thyssenkrupp with property and supported the con- tract negotiations. GLA 3,200 sqm comprehensive advice from the GLA 2,700 sqm market evaluation to conclusion of Client thyssenkrupp Client MA 67 Aufzüge GmbH the lease.

11 This report is a translation. In the event of doubt the German-language report is to be used.

The information and forecasts in this report are made without guarantee, warranty or liability.

Cover: © SIGNA

The digital version of the report can be downloaded under www.ehl.at/en/marktberichte

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