REAL ESTATE MARKET GERMANY 2017 | 2018 TIGHT SUPPLY DRIVES RENTS FOR OFFICES AND RESIDENTIAL REAL ESTATE – RETAIL RENTS STABLE, AT A HIGH LEVEL
A RESEARCH PUBLICATION BY DG HYP | OCTOBER 2017
Real Estate Market Germany 2017 | 2018
TABLE OF CONTENTS
Preface ______2
Summary ______3
Current economic situation in Germany ______6
Upturn on the German hotel market is continuing ______7
Some of the shine has come off the environment for investments in commercial real estate ______10
Retail properties ______12
Offi ce properties ______27
Residential properties ______40
Overview of forecasts ______45
Imprint ______46
Disclaimer ______46
DG HYP offi ces ______47
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PREFACE
Dear Readers,
As the commercial real estate bank within the Volksbanken Raiffeisenbanken coop- erative fi nancial network, we regularly analyse those markets we actively cover, in order to better assess opportunities and risks. The present report – now in its tenth year – continues our series of studies concerning the German real estate market. This research study, which is regularly published in October, looks at market developments for retail, offi ce and residential real estate in Germany’s seven largest metropolitan areas.
The German real estate market continues to benefi t from the positive macroeconomic development. The benign labour market situation in Germany has triggered marked growth in the number of offi ce workers, together with increased need for fl oorspace – which cannot be suffi ciently met. Hence, it is fair to expect rising offi ce rents during the current year and next. Likewise, demand for residential real estate remains strong. Completions in residential construction cannot keep up with the number of people moving into the economic centres, thus constantly increasing the demand gap. This development offers scope for further rent increases. Rents for retail properties are reaching their limits, given the high levels reached and growing online commerce.
The latest market report presents a special feature covering developments on, and prospects for the hotel market – a segment which increasingly attracts the attention of investors as well as project developers, given the continued professionalisation of the hotel real estate sector, a continuously increasing number of overnight stays, as well as attractive potential returns.
The German real estate market report is of course also available in German. All previously published DG HYP market reports can be downloaded from our website (on www.dghyp.de/en/unternehmen/market-research).
Yours sincerely,
DG HYP
October 2017
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SUMMARY
» The German real estate market is still running at top speed. There are many The present issue is the tenth reasons for this: the continued expansion in the German economy is a factor just edition of our market report on the as much as the employment market. With employment repeatedly reaching new commercial real estate market in highs, combating unemployment has taken a back seat. The focus is instead in- the seven top locations creasingly concentrated on the growing shortage of workers. The indicators for the position of companies and consumer confidence are correspondingly positive. The population is also expanding through immigration and rising birth rates once more. And given low capital market returns, many investor billions are still on the hunt for property investments offering higher returns. But these are now just as difficult to find as commercial space and residential properties.
» The fact that rents and purchase prices are continuing to rise in this environment is just unsurprising as the continued slump in initial rental returns. However, there are signs that saturation point is gradually being reached. Following an upward trend in rents dating back many years, this is particularly true for the retail sector, as sales in pedestrian precincts and shopping centres are only seeing modest growth despite good consumer conditions. High-street sales are being curbed by the burgeoning online-shopping market. In contrast, there is no sign of an end to the boom in residential and office property. As previously occurred on the housing market, the supply of office property is becoming ever scarcer.
» In the present tenth edition of our market report, as in previous years, we analyse developments in the retail, office and residential segments of the market in the seven top locations in Germany, namely Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. In addition, we look at the trend in yields in these segments in two short sections and subsequently examine the ongoing boom in the German hotel market.
» Conditions for retailers are still favourable even if they will not improve any further Retail sector: the upward trend is and there are signs of a slight slowdown. Although the trend in both employment over for the moment; however, there and incomes remains positive, the increase in consumer prices leaves scarcely are no signs of a market slump anything over from the nominal growth in real terms. However, the consumer climate is still good. Private households are still confident as far as their own economic future is concerned thanks to the positive employment situation.
TOP LOCATIONS: RENTS FOR OFFICES AND HOUSING ARE STILL RISING – HOWEVER, THEY ARE STAGNANT IN THE RETAIL SECTOR
top locations: rent yoy in % 15 12 9 6 3 0 -3 -6 -9 -12 -15 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018e retail prime rent office prime rent residential average rent first letting average
Source: BulwienGesa, DZ BANK Research forecast
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The retail sector is also benefiting from population growth in all top locations and flourishing tourism. In 2017, however, high-street sales will only receive half the increase in retail sales – estimated at plus 2 per cent by HDE. The rest will be absorbed by the rapidly expanding e-commerce sector.
» While retailers in areas close to city centres benefit from online shopping thanks to their hybrid sales concepts, demand for retail space is growing more slowly. Retailers also seem to be reaching the limits of their economic viability because of sharp rises in retail rents in the past. The perceptible slowdown in rent rises since 2015 certainly points to this. » Ultimately, demand is still strong for top quality retail space in shopping malls and city centre shopping centres, which have also expanded in recent years through new developments. Tenants are, however, no longer prepared to pay higher rents. This has brought the upward trend in a prime rent of just under EUR 300 per sqm to a halt. There is likely to be scarcely any change here over the period covered by the forecast up to 2018. We could even see rents fall slightly. Demand for space has also shifted slightly from traditional sales space towards restaurants and cafés. Ultimately, a city centre shopping trip is still an important part of people’s leisure time.
FORECAST FOR RETAIL SPACE
Prime rent Change in prime rents
in EUR/sqm yoy (%) 2016 2017e 2018e 2016 2017e 2018e Berlin 310 310 3103.3 0.0 0.0 Cologne 250 255 2550.0 2.0 0.0 Dusseldorf 275 280 2801.9 1.8 0.0 Frankfurt 300 300 3000.0 0.0 0.0 Hamburg 285 285 2850.0 0.0 0.0 Munich 345 345 3451.5 0.0 0.0 Stuttgart 250 250 2502.0 0.0 0.0 Top location average 297.5 298.4 298.5 1.8 0.3 0.0 Source: BulwienGesa, Feri, forecast DZ BANK Research The prime rent represents an average of the top 3 to 5 per cent of market lettings, meaning that the figure quoted does not equate to the absolute prime rent.
» The top locations have key functions in keeping the economic engine purring: Office: the top locations are outstanding connections at home and abroad plus their large employment and surfing the wave of success but the office markets make them attractive locations for companies, especially as office shortage of offices and housing rents are average by European standards despite the strength of the German could curb the upturn economy. Office space is therefore highly sought after. » The upturn from which cities have benefited for many years has, however, left its mark on the real estate market, which could put these locations at a disadvantage in the long run. In addition to housing, too little office space has been constructed. This scarcity is driving rents through the roof. Finding suitable office space is also more and more difficult. This is particularly true of Berlin, Munich and Stuttgart where vacancy rates are less than 3 per cent. Decision-makers in cities, who have been spoilt by the growth they have enjoyed in recent years, should be aware that urban space is needed for this growth to continue – both for housing and for commerce. » We expect demand for office space to remain buoyant in the period covered by the forecast up to 2018. As a result, there could be a further fall in the vacancy
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rate, which has halved since 2010, while prime rents – averaging a little more than EUR 28 per sqm in top locations – pick up again. Despite the lack of supply, increases are likely to remain moderate given the prudent approach adopted by those looking for office space.
FORECAST FOR OFFICE SPACE
Prime rent Change in prime rents
in EUR/sqm yoy (%) 2016 2017e 2018e 2016 2017e 2018e Berlin 28.0 29.4 30.516.7 5.0 3.7 Cologne 21.0 21.2 21.50.0 1.0 1.4 Dusseldorf 24.5 24.9 25.32.1 1.6 1.6 Frankfurt 35.5 36.0 37.00.0 1.4 2.8 Hamburg 26.0 26.4 27.04.0 1.5 2.3 Munich 34.7 35.8 36.81.8 3.2 2.8 Stuttgart 19.7 20.0 20.22.1 1.5 1.0 Top location average 28.0 28.7 29.5 4.9 2.6 2.6 Source: BulwienGesa, Feri, forecast DZ BANK Research The prime rent represents an average of the top 3 to 5 per cent of market lettings, meaning that the figure quoted does not equate to the absolute prime rent.
» Residential construction has lagged behind the sharp rise in the number of inhab- Residential: even the increase in itants for years. Because the reserves from vacancies have long been exhausted new build figures is not sufficient; and the perceptible increase in completion figures is not keeping pace with consequently, the market situation demand for housing, the demand gap on housing markets in top locations has at the top locations is still fraught increased rather than decreased from year to year. The ongoing problems with supply are likely to ensure that residential rents, which have already risen sharply, will continue their upward trend. » The current rent for newly-built flats averages between EUR 12 and 18 per sqm. EUR 16 to 24 is demanded in the prime segment. As always, Munich is by far the most expensive location. By contrast, Berlin and Cologne are the most reasonable top locations from a tenant’s perspective. On average, just over EUR 13 and EUR 19 respectively must be paid per sqm for residential space in the seven cities. This figure is likely to increase by 2-3 per cent per annum in the period covered by the forecast up to 2018. The fact that rents are already so high is, however, likely to have a dampening effect, because the number of households that can still pay the current rents or are prepared to do so is diminishing.
FORECAST FOR RESIDENTIAL REAL ESTATE
First occupancy average First occupancy average
rents in EUR/sqm rents vs previous year (%) 2016 2017e 2018e 2016 2017e 2018e Berlin 11.6 12.0 12.30.9 3.4 2.5 Cologne 12.0 12.2 12.54.3 1.7 2.5 Dusseldorf 12.6 12.9 13.21.6 2.4 2.3 Frankfurt 14.8 15.3 15.89.6 3.4 2.9 Hamburg 13.4 13.7 14.01.5 2.2 2.2 Munich 17.0 18.0 18.57.6 5.9 2.8 Stuttgart 13.0 13.5 14.08.3 3.8 3.7 Top location average 13.2 13.6 14.0 3.8 3.5 2.6
Source: BulwienGesa, Feri, DZ BANK Research forecast
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CURRENT ECONOMIC SITUATION IN GERMANY
Macroeconomic growth in Germany has so far provided a sound foundation for the Strong growth is likely to continue real estate market. This situation will remain unchanged for the moment, as the over the rest of the year German economy is still expanding: in the second quarter of 2017, gross domestic product – after adjustment for price, seasonal and calendar effects – was 0.6 per cent up on the previous quarter. GDP grew even more strongly, by 0.7 per cent, in the first quarter of 2017. Growth is still primarily driven by domestic demand. Consumer expenditure by private households increased significantly and even public-sector spending grew. Investment had already expanded quite strongly in the previous quarter: investment in equipment and buildings was 1.2 per cent and 0.9 per cent higher than in the first quarter of 2017. In contrast, the trade balance – i.e. the differ- ence from exports and imports – depressed economic growth by -0.3 percentage points approximately. In view of the very positive sentiment indicators, we assume that economic development in Germany will remain favourable. This is reflected in our growth forecast for the current year of 2.0 per cent. We expect growth in the coming year to be much the same. The unemployment rate is likely to average just under 6 per cent over the year in both 2017 and 2018.
The inflation rate in Germany – measured by the national consumer price index – stood Inflation rate is finally edging higher at 1.7 per cent in July 2017 (HCPI: +1.5 per cent) somewhat higher than in the two previous months (May +1.5 per cent, June +1.6 per cent). Food prices continued to increase disproportionately (July: +2.6 per cent year on year), as did residential rents (+1.8 per cent). For 2017 as a whole, we expect inflation to rise by 1.7 per cent. Consumer prices are likely to rise at a largely unchanged rate over the coming year.
ECONOMIC FORECAST GERMANY
% yoy 2015 2016 2017e 2018e GDP 1.7 1.9 2.0 1.8 Private consumption 1.7 2.1 1.8 1.6 Public consumption 3.0 3.9 1.4 1.6 Investment 1.8 3.1 3.5 3.2 Exports 5.2 2.6 3.7 4.3 Imports 5.6 3.9 4.3 5.2 Unemployment rate (%) 6.4 6.1 5.8 5.9 Inflation rate (HCPI) 0.1 0.4 1.7 1.6 Public budget balance (% of GDP) 0.7 0.8 0.4 0.2
MACROECONOMIC GROWTH AND UNEMPLOYMENT TREND IN CONSUMER PRICES (HCPI)
12 3,0 forecast 10 forecast 2,5 2,8 8 2,5 6 2,0 2,3 2,1 1,9 4 1,8 1,8 4,1 1,5 1,7 2 3,7 3,7 1,6 1,6 1,2 0,7 3,3 1,1 0,5 0,5 1,6 1,7 1,9 2,0 1,8 1,3 0 1,0 1,1 1,2 -2 0,0 -0,7 0,5 0,8 -4 -5,6 0,2 0,1 0,4 0,0 -6 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
GDP yoy in % unemployment rate in % inflation rate (HICP)
Source: DZ BANK Research HCPI = harmonised consumer price index
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UPTURN ON THE GERMAN HOTEL MARKET IS CONTINUING
Tourism in Germany has been buzzing for some time. This is true of the typical holiday Tourism in Germany is also destinations such as the islands in the North Sea and the Baltic or the Bavarian Forest. benefiting from increased interest However, visitor numbers are soaring in attractive large cities, in particular. Besides from abroad the general desire for travel, cities are also benefiting from the trend towards making several short trips instead of taking a longer holiday. Foreign interest in visiting Germany has also grown. Consequently, there has been an appreciable expansion in the proportion of foreigners staying overnight in German hotels. It amounted to less than a fifth before the millennium and is now a good quarter.
TOURISM IS ALSO BOOMING IN GERMANY THANKS TO SUBSTANTIAL MANY NEW HOTELS WILL BE BUILT AT THE TOP LOCATIONS OVER NUMBERS OF VISITORS FROM ABROAD THE NEXT FEW YEARS
200 27 50 180 26 45 160 25 40 140 24 35 120 23 30 100 22 25 80 21 20 60 20 15 40 19 10 20 18 0 17 5 0 Berlin Cologne Dussel- Frank- Ham- Munich Stutt- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 dorf furt burg gart hotels: overnight stays in million (lhs) share of foreigners in % (rhs) hotels planned hotels under construction
Source: Federal Statistical Office Source: BulwienGesa
Growth in the number of overnight stays at the top locations has been highly dispro- There has been a disproportionate portionate. The number of visitors staying in hotels overnight here has almost tripled increase in the number of overnight within twenty years, while growth in this period across Germany has been “only” stays at top locations 80 per cent or so. Strong growth in Berlin, where the number has more or less quad- rupled since the middle of the 1990s, has helped here to a particular degree. The German capital contributes more than a third of the total of approximately 45 million overnight stays in traditional hotels at the seven top locations – excluding bed and breakfast hotels.
TOP LOCATIONS: THE NUMBER OF HOTEL VISITORS HAS RISEN CON- TOP LOCATIONS: DESPITE A SHARP RISE IN THE NUMBER OF BEDS, TINUOUSLY HOTEL OCCUPANCY IS IMPROVING
50 240 58 45 220 56 40 200 54 35 180 52 30 160 50 25 140 48 20 120 46 15 100 44 10 80 42 5 60 40 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 hotels without B&B: arrivals in million hotel beds withoug B&B in '000, (lhs) hotels without B&B: overnight stays in million occupancy rate of hotel beds without B&B in % (rhs)
Source: BulwienGesa Source: BulwienGesa
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Hotel capacity has also been expanded in recent years in response to the sharp Occupancy has increased despite a increase in leisure and business travellers. Twenty years ago, there were some significant expansion in the number 100,000 hotel beds to be found in the top locations altogether; today, there are more of hotel beds than twice as many to be found, at approximately 220,000. However, there has been a perceptible improvement in occupancy despite the sharp growth in overnight accom- modation. Having averaged something over 40 per cent in the mid-1990s, hotel bed occupancy is gradually heading towards 60 per cent.
Measured against the range in the major segments of the real estate market – The indicators for regional hotel residential, office and retail – the market data for regional hotel markets at the seven markets are comparatively uniform top locations are far more uniform. Accordingly, the average room rate ranges from EUR 90 in Berlin to EUR 115 in Dusseldorf and Munich; it averages EUR 100 across the locations. The room occupancy rate ranges from just under 70 per cent in Dusseldorf and Frankfurt to something over 80 per cent in Hamburg, averaging a good 75 per cent. The reason for higher values for the occupancy rate compared to the lower occupancy of hotel beds is the single use of double rooms – single rooms has become a rarity. The combination of the occupancy rate and the average room rate results in revenue per available hotel room ranging from EUR 66 in Frankfurt to EUR 88 in Munich. On average across the locations, each hotel room generates revenue of EUR 75 per day.
REVENUE PER ROOM IS HIGHEST IN MUNICH AND LOWEST IN FRANKFURT
80,9 77,1 76,5 73,4 73,3 74,2 69,5 68,8
115 115 96 96 97 99 101 90
70 70 80 66 78 88 73 75
Berlin Cologne Dusseldorf Frankfurt Hamburg Munich Stuttgart average of top locations average room rate in Euro (ARR) revenue per available room in Euro (RevPAR) occupancy rate in % (OR)
Source: Colliers, data for 2016 ARR = average room rate, RevPAR = revenue per available room, OR = occupancy rate
It is impressive that the three indicators have gradually improved in recent years. This The fact that both room rates and implies that room occupancy has increased despite higher room rates, meaning that occupancy could be increased is average daily revenue per room has also increased. The significant interest in the impressive German hotel market as well as the substantial work done in expanding existing hotel capacity can be explained by burgeoning tourism and positive business development of hotels at the seven top locations. There are currently many hotel projects under construction in all top locations as well as in many other large cities; many more are in the planning phase. New hotel brands are also venturing onto the German market. The established international chains are also expanding the range of brands in their portfolios to cater for the requirements of Generation Y – those born after 1980 – and Generation Z – those born after around 1995. Examples of the new hotel brands in Germany include Jo&Joe, LOGINN, NinetyNine Hotels, NYX, Soulmade and Urban Loft.
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It remains to be seen whether the indicators will continue their previous upward trend High levels of construction given the expansion in capacity. However, the fundamental preconditions for tourism activity in the hotel sector are likely in Germany are favourable. In addition to the sustained positive economic situation in to increase competitive pressures Germany, the economy in the Eurozone is increasingly buoyant meaning that demand for holidays in Germany and hotel rooms is likely to pick up once more.
Investors have not been blind to the gratifying trend on the German hotel market in Investment has increased their search for attractive investment opportunities. This is evident not just from the perceptibly, not just in absolute sharp rise in annual investment volume but also in the significant expansion in the but also in relative terms percentage share of hotel investments in the market as a whole. While, at something over EUR 50bn, the total amount invested in German commercial real estate in the last two years roughly matches the boom year of 2007 just before the international financial market crisis, hotel investments in Germany have more than doubled. At over EUR 5bn in 2016, German hotel investments reached the previous record figure. The proportion of total investment in commercial real estate was around 4 per cent from 2005 to 2011. The figure has risen continuously since then to almost 10 per cent now. Hotels have therefore caught up with the previous climbers on the commercial real estate market – logistics companies.
HOTEL INVESTMENTS RECORD A SHARP INCREASE THE INITIAL YIELD FOR HOTEL INVESTMENTS IS STILL COMPARATIVELY HIGH
6 12
5 10 5,4 5,2 4 8 5,0 5,0 4,8 3 6 4,6 2 4 4,3 1 2
0 0 Berlin Cologne Dussel- Frank- Ham- Munich Stutt- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 dorf furt burg gart transaction volume for hotels in EUR bn (lhs) share of hotels in % of the total CRE transaction volume (rhs) initial gross yield for hotels in % (Q1/2017)
Source: Colliers, JLL, Ernst&Young Source: Colliers
Another aspect by which lively investor interest in hotels can be explained is the Hotel investments still allow comparatively high initial yield that can be obtained. To be sure, yields have also been relatively high initial yields falling in this category for years in response to strong buyer demand but they are still relatively high. The range starts at just over 4 per cent in Munich and extends to more than 5 per cent in Cologne. Compared with the yield prospects for office or retail properties, which are struggling to reach 3 per cent (see the following section), yields of 1 to 2 percentage points more can be achieved with hotels.
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SOME OF THE SHINE HAS COME OFF THE ENVIRONMENT FOR INVESTMENTS IN COMMERCIAL REAL ESTATE
The difficulty facing many security-focused investors in achieving adequate yields with Demand for commercial real estate bonds ensures that demand for commercial real estate and residential portfolios is still is consistently high vast. This is clear solely from the relatively substantial number of bids when sought- after properties come onto the market, which is, however, not an all-too frequent occurrence. On the one hand, the pressure to sell facing many owners is contained in a good economic environment where demand for commercial space is correspond- ingly strong. On the other hand, willingness to sell is diminished despite the substantial sales proceeds that may be obtained as a result, because the problem of how to invest the funds will be transferred when the property changes hands. In this respect, firstly a relatively substantial investment volume above the EUR 50bn marker is also likely to be achieved in 2017 – as in the two preceding years. And secondly, as in previous years, a more substantial volume would probably be achievable if the supply was more extensive. Because of strong demand, the initial yields that can be achieved are con- tinuing to decline. Consequently, a “four” before the yield decimal point has become a rarity for the office and retail sectors in top locations at the end of the first half of 2017.
DEMAND FOR COMMERCIAL REAL ESTATE AND RESIDENTIAL OFFICE PROPERTIES ARE STILL THE DOMINANT ASSET CATEGORY PORTFOLIOS REMAINS STRONG AMONG INVESTORS IN 2017 TOO IN COMMERCIAL REAL ESTATE
transaction volume in EUR bn 100% 4% 6% 3% 6% 5% 60 10% 90% 11% 11% 6% 8% 6% 8% 10% 7% 50 80% 8% 7% 7% 9% 70% 9% 40 22% 60% 27% 22% 31% 24% 30 50% 19% 40% 20 30% 46% 10 20% 44% 41% 45% 39% 0 10% 0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2013 2014 2015 2016 2017 H1 2017e commercial real estate residential portfolios other mixed use hotel logistics retail office
Source: Ernst & Young, DZ BANK Research forecast Source: JLL, Colliers (Hotels)
So, is everything as it was on the commercial real estate market? Yes and no: yes, Bond yields have recovered from because demand is likely to remain at a high level for the time being and is continuing their low point to exert pressure on yields given the shortage of properties. And no, because conditions on the commercial real estate market are pointing to a turning point. Accordingly, while yields on bonds are still very low, they have, however, improved slightly from the low reached a year ago. In summer 2016, the current yield on 9- to 10-year Bunds was still slightly in negative territory; at present, they are slightly posi- tive, at 0.35 per cent – as at August 2017. And the future should bring higher rather than lower interest rates based on the economic recovery in the Eurozone and inflation gradually picking up once more.
The trend in rents is another change affecting the market environment. While investors Investor interest has been have been able in recent years to rely on the fact that rents for good quality properties dampened by the hiatus in at least would rise in future, the headroom is shrinking, given that rents are already retail rent rises very high in some cases – particularly in the case of retail properties. However, the investment market already reflects this. Accordingly, investments in retail properties have lost market share in the first half of 2017 and have even been pushed from
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second to third place by the perceptible increase in the share of logistics properties. Furthermore, yields are no longer falling or only falling marginally.
Overall, the environment for commercial real estate is likely to remain benign. How- By and large, the environment for ever, the trends described above should heighten investors’ awareness of the risk of commercial real estate is still benign changes of value in commercial real estate, which may be triggered by rising interest – but risk is gradually returning rates or a more difficult letting environment. However, with the exception of retail, strong demand is likely to affect the initial yields on commercial real estate, meaning that the yield advantage compared with bonds will be squeezed from above and below.
RETAIL: TREND IN YIELDS MOVEMENT IN YIELDS AT THE INDIVIDUAL TOP LOCATIONS
initial yield for retail properties in central locations in % initial yield for retail properties in central locations in % 7,0 6,0 6,5 5,5 6,0 5,5 5,0 5,0 4,5 4,5 Berlin 4,0 4,0 Dusseldorf Frankfurt 3,5 Hamburg 3,5 Cologne 3,0 Munich Stuttgart 3,0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1997 2001 2005 2009 2013 2017 Top-7 Regional-12 -H1
OFFICE: TREND IN YIELDS MOVEMENT IN YIELDS AT THE INDIVIDUAL TOP LOCATIONS
initial yield für office properties in central locatioins in % initial yield for office properties in central locations in % 7,0 7,0 6,5 6,5 6,0 6,0 5,5 5,5 5,0 5,0 Berlin 4,5 4,5 Dusseldorf 4,0 4,0 Frankfurt Hamburg 3,5 3,5 Cologne 3,0 3,0 Munich Stuttgart 2,5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1997 2001 2005 2009 2013 2017 Top-7 Regional-12 -H1
RESIDENTIAL: MULTIPLIER FOR APARTMENT BLOCKS MULTIPLIER AT THE INDIVIDUAL TOP LOCATIONS
gross rent multiplier for multi-family properties gross rent multiplier for multi-family properties 28 24 Berlin 22 26 Dusseldorf Frankfurt 20 24 Hamburg 18 22 Cologne Munich 16 20 Stuttgart 14 18
12 16
10 14 12 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1997 2001 2005 2009 2013 2017 Top-7 Regional-12 -H1
Source: BulwienGesa Source: BulwienGesa
Explanation: the net initial yield office/retail is determined from the annual net rent and the total purchase price, taking ancillary costs into account. For the apartment block multiplier, the purchase price is divided by the basic rent in the first year and consequently equates to the reciprocal value of the gross initial yield.
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RETAIL PROPERTIES
Are things going rapidly downhill in the retail sector? The about 300,000 hits received "Retail Apocalypse" in the U.S. with the search term “Retail Apocalypse” do not bode well. The term refers to a current retail sector trend in the U.S. retail sector, where significant numbers of shops are closing in shopping malls. And the trend is continuing, as the major anchor tenants in many malls, such as Macy's, Sears or JC Penney, alone will each close more than 100 shops in the current year. This is surprising since sound macroeconomic growth and the rising number of people in employment in the United States might be expected to generate an upturn in consumer spending. Are we seeing the first signs of the decline of high-street shopping here? If the shopping-loving Americans are worried about their retail sector, the situation does seem to be rather grim.
However, there are negative reports from the German retail sector too, despite good The German retail sector also has to economic conditions. The Nuremberg-based fashion chain Wöhrl was forced to file for cope with setbacks insolvency a few months ago, for instance. And only a few weeks ago, the Cologne- based department store group Galeria Kaufhof surprised the financial world by announcing that the credit insurer Hermes had cut its credit limit because of a deterioration in its creditworthiness.
However, it is too early to bid the retail sector farewell. This is clear from the number The U.S. retail sector is suffering of people going shopping on Saturday. Instead of yawning emptiness, it is difficult to from having far too much retail find space to park or grab a cup of coffee. And, of course, there are malls with high space footfall in the United States too. The problems in the U.S. retail sector are largely attributable to the oversupply of retail space. For many years, retailers wanted to be close to their customers and, with this in mind, expanded their branch networks continuously. This is also why the retail space per inhabitant in U.S. shopping centres is roughly ten times what it is in Germany. The thinning out of branch networks is therefore likely to be what the market needs.
However, shopping malls are also exposed to increasing competition from successful Amazon is making online shopping online shopping. Here, the Americans are well ahead of the Germans both in terms of more appealing with new functions ordering behaviour and the products ordered. Amazon provides an example of how online shopping is becoming ever easier. The U.S. giant introduced both the “Dash Button” and the “Echo” in the United States to start with. Both are now available in Germany. After installing the Dash Button in the kitchen, bathroom or utility room, customers can reorder products used there by simply pressing the button. And the Echo, which answers to the name Alexa, has become established in a string of American households. It plays music on request, provides information about the news and the weather, controls smart home functions, such as lighting and heating, and, of course, takes orders for products.
The development of online shopping is also likely to make further progress in The development of online retail is Germany. The retail industry is already testing new sales channels. For instance, also making progress in Germany Rossmann in Berlin has entered into a cooperative venture with Amazon to test the delivery of health and beauty products: customers in the capital can have 5,000 prod- ucts from the Rossmann range delivered to their homes. Aldi is another example. The discount store is also exploring online business, although for the moment only customers in three conurbations in the United States can order groceries online. Should the test be successful, it is likely to be only a matter of time until the service is extended to German consumers. Ultimately, e-commerce is likely to benefit from an increase in providers, simplified order processes and reduced delivery times. However, as a result, customers are likely to be less willing to travel longer distances, depending on where they live, to a shopping centre or into town.
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Market development, trends and outlook What impact may this have on retailers in A1 locations? If the switch from high-street Groceries and luxury goods are shopping to ordering online and having goods delivered to one’s front door or a likely to suffer less from online pick-up point continues as expected in the next few years, it is likely to be accompanied competition by falling demand for retail space. However, the extent is likely to differ depending on the product category. Accordingly, groceries and luxury goods will certainly still be largely bought in shops. Firstly, because it is usually a short distance to the nearest groceries store or discount store in Germany. And secondly, because people also like to “experience” exclusive products when buying them. However, online competition is likely to intensify even more in the broad segment between. This would also include large parts of the “consumer-oriented” offer in A1 locations. Competition from factory outlet centres, abbreviated to “FOC”, could also intensify over the coming years. The However, factory outlets may also number of FOCs, which currently stands at 16, the majority of which were opened in take sales from city centres the last ten years, is likely to increase further; twelve more are under construction or planned, including “The Styles Outlet” in Duisburg, which could become the largest FOC in Germany.
This development already seems to be taking place at the leading city centre retail Prime rents are no longer increasing locations in Germany, which were previously so accustomed to success. Since 2015, even in the best shopping locations the rise in rents – albeit having trended upwards over many years – has initially slowed in Germany and has now come to a halt. This halt in rent rises has taken place in an extraordinarily favourable economic environment. To be sure, the retail sector posted a respectable increase in sales but this did not boost demand for sales space. This raises the question as to what the impact would be if there was a deterioration in the current favourable economic environment.
THE POSITIVE TREND IN THE GERMAN EMPLOYMENT MARKET THE CONSUMER CLIMATE IS STILL BENIGN CONTINUES
45 13 18 16 44 12 14 43 11 12 42 10 10 41 8 9 40 6 8 4 39 2 7 38 0 37 6 -2 -4 36 5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 labour force in million (lhs) unemployment rate in % (rhs) GfK consumer climate
Source: Federal Employment Agency, Bundesbank Source: GfK
However, there is no sign of this at present: the macroeconomic conditions for the The employment market is heading retail sector remain positive, although some relevant factors affecting it are weakening. towards full employment Positive retail demand is supported by the still robust employment market, in particular. The growth in employment that has been apparent since 2006 is continuing. The number of people in gainful employment has increased by 5 million since then to the current record figure of over 44 million. The number of unemployed has halved at the same time; the unemployment rate has fallen below 6 per cent. The unemployment rate harmonised by Eurostat has even fallen below 4 per cent. The impact of the fall is positive in two respects: firstly, strong demand for staff has a positive effect on private households’ incomes; secondly, confidence in their own economic future
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increases. This is reflected in the buoyant consumption climate, which reached the highest level since the end of 2001 in August.
TOURISM IN GERMANY IS GROWING YEAR BY YEAR THE PICKUP IN INFLATION IS CURBING GROWTH IN REAL DISPOSA- BLE INCOMES
180 500 3,0 170 475 2,5 160 450 2,0 150 425 1,5 140 400 130 375 1,0 120 350 0,5 110 325 0,0 100 300 -0,5 90 275 80 250 -1,0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017e visitor arrivals in million, annualised (lhs) real disposable income of private households yoy in % overnight stays in million, annualised (rhs) consumer price index yoy in %
Source: Federal Statistical Office Source: Federal Statistical Office, Oxford Economics
At the same time, other factors are also encouraging consumption. These include Flourishing tourism and population persistently low interest rates, which make loans cheap and saving unattractive, but growth are expanding the potential also flourishing tourism, which is also boosting purchasing power. The numbers of customer base visitors arriving and staying overnight have been growing for many years. Cities are also benefiting from the trend towards several shorter trips such as city breaks instead of a longer continuous holiday. Another positive aspect is the sharp increase in the number of inhabitants in the seven largest cities, who have correspondingly expanded The increase in the inflation rate is the potential customer base for these locations – see charts on page 15 and 40. increasingly eating into growth in in- However, things look less positive concerning the trend in disposable income adjusted comes for inflation. Due to the inflation rate increasing in 2017, private households receive less in real terms of the still very positive increases in nominal salaries and pensions than was the case from 2014 to 2016.
Ultimately, retail sales are likely to grow comparatively strongly in 2017. The retail as- HDE expects nominal growth in sociation HDE is assuming growth – excluding the vehicle trade, fuel and pharmacies sales of 2 per cent in 2017 and excluding value added tax – of 2 per cent to around EUR 492bn. Consequently, the anticipated growth is weaker than in 2015 and 2016, when it came in at 2.9 per cent and 2.3 per cent respectively. The gap is even larger in real terms, as the antici- pated limited nominal growth in 2017 will be reduced by an inflation rate which is more than one percentage point higher than expected, at 1.7 per cent. As a result, growth in retail sales adjusted for inflation would be only just above zero.
The growth in high-street shopping is also put into perspective by the continuing E-commerce and inflation eating into success of e-commerce, which will achieve a growth rate of just under double-digits. sales growth in high-street shopping With annual sales of close to EUR 50bn, this now accounts for some 10 per cent of total retail sales. However, it is not the share but strong growth in e-commerce that is curbing high-street trade. Should HDE’s forecasts for 2017 prove to be correct, sales in high-street shopping would only expand by just over 1 per cent in nominal terms in the current year. Given an inflation rate of just under 2 per cent now, this would imply a fall in sales in real terms. If growth in sales in high-street shopping cannot exceed the inflation rate despite the economy and employment market being in good shape, this makes the future look rather bleak. In the event of less positive economic data, this could rapidly lead to sales falling in nominal terms as well. Sluggish periods are
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not unknown in the German retail sector; nominal retail sales stagnated in the first decade after the millennium but e-commerce was virtually immaterial at the time.
The developments described above are affecting the whole retail sector. However, Online shopping is also making life individual retail segments are affected to a greater or lesser extent. Accordingly, (more) difficult for A1 locations A1 locations in city centres have performed better than most in recent years, as has been reflected by the sharp rise in prime rents. Retailers with a presence in city centres have also been successful in including e-commerce in their sales strategies with hybrid concepts.
STRONG GROWTH IN THE GERMAN RETAIL SEGMENT IS GRADUALLY E-COMMERCE CONTINUES TO GAIN GROUND: SALES ARE LIKELY TO WEAKENING ACCOUNT FOR A TENTH OF THE TOTAL MARKET IN 2017
retail sales excl. VAT, vehicle sales, service station sales, fuel 5 500 500 12 4 490 480 10 3 2,9 480 2 1,6 470 460 8 2,5 2,2 2,3 2,0 1 1,5 0,9 0,9 0,6 1,1 2,0 1,7 1,2 460 440 6 0 450 -1,4 -1,2 420 4 -1 -2,1 440 -2 -3,1 430 400 2 -3 420 380 0 -4 410 -5 400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 retail e-commerce sales in EUR bn (lhs) 2017p 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2017e retail sales excl. e-commerce sales in EUR bn (lhs) yoy in % (lhs) in EUR bn (rhs) retail e-commerce sales in % of total retail sales (rhs)
Source: HDE Source: HDE
Retail: comparison of top locations The top locations are not just benefiting from generally favourable economic conditions In addition to positive economic in Germany. They are also helped, in particular, by continuing strong population growth conditions, top locations are also and the sharp increase in visitor numbers. The increase in the number of inhabitants benefiting from rising resident and in cities since around the millennium has two causes above all. Firstly, the major cities visitor numbers act as supra-regional growth engines, which create large numbers of jobs. Secondly, more people are opting to live in cities despite higher living costs. Due to this influx, the population in the seven cities has grown by around 850,000 people within ten years up to 2016 – which equates to growth of almost 10 per cent.
WITHIN 20 YEARS, THE NUMBER OF PURCHASERS HAS ALSO RISEN THE TOP LOCATIONS ARE BENEFITING GREATLY FROM BOOMING SHARPLY IN LINE WITH POPULATION GROWTH CITY TOURISM
population 1992 = 100 overnight stays in million 120 32 320% 28 growth from 115 1996 to 2016 24 110 20 105 16 126% 215% 12 100 175% 8 118% 116% 130% 95 4 90 0 Berlin Dusseldorf Frank- Ham- Cologne Munich Stuttgart Berlin Dussel- Frank- Ham- Cologne Munich Stutt- furt burg dorf furt burg gart 1992 1996 2000 2004 2008 2012 2016 1996 2000 2004 2008 2012 2016
Source: Feri Source: BulwienGesa, statistical offices of the cities (2015, 2016)
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The increase has been particularly dramatic in the last five years. However, this growth is not only driving demand on the housing market sky-high. It is also boosting con- sumer numbers and retail sales. Since there is no sign of growth in the major cities weakening so far, the retail sector is also likely to continue benefiting from this.
Thanks to flourishing city tourism, the potential customer base is being expanded by Growth in tourism: the figures for rising numbers of visitors and overnight stays, which have risen especially sharply in overnight stays have increased the capital and in Hamburg. However, even in Dusseldorf, the city that has seen the sharply least growth, the number of overnight stays has more than doubled in 20 years. Major differences emerge in the number of overnight stays in relation to the number of inhabitants. Translated into thousand inhabitants, Cologne and Stuttgart have 6,000 or so overnight stays, while this is 7,500 in Dusseldorf and Hamburg, Berlin gets to just under 9,000, Munich is heading towards 10,000 and Frankfurt is well ahead with 12,000 overnight stays. This substantial figure is, however, also likely to be attributable to the large airport and the many travellers who are obliged to stay in Frankfurt overnight because night flights are prohibited.
Thanks to the growing potential customer base, retailers in the top locations are likely Only high-street shopping offers to take a more relaxed approach to the expansion in e-commerce than those in other the chance to try, feel and smell locations. What is more, shops in A1 locations also offer committed online shoppers products the opportunity to experience the brands and products – only high-street shopping provides the opportunity to try, feel and smell the merchandise. This is why even original online providers are opening shops. Ultimately, it is incidental where the pur- chase of a product actually takes place – in the retailer’s high-street store or online. These aspects are likely to help stabilise demand for retail space in the top locations.
RETAIL: PRIME RENTS IN THE TOP LOCATIONS HAVE ALMOST DOU- HOWEVER, THE UPWARD TREND IN PRIME RENTS HAS SLACKENED BLED WITHIN 20 YEARS
prime rent 1998 = 100 prime rent yoy in % 190 10 180 170 8 160 6 150 140 4 130 2 120 110 0 100 90 -2 80 -4 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2017e 2018e Top-7 Regional-12 Regional-12 Top-7
Source: BulwienGesa, DZ BANK Research forecast Source: BulwienGesa, DZ BANK Research forecast Top-7: Index of top locations Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich and Stuttgart Regional-12: Index of regional centres Augsburg, Bremen, Darmstadt, Dresden, Essen, Hanover, Karlsruhe, Leipzig, Mainz, Mannheim, Münster and Nuremberg
The continuing appeal of A1 sites in the top locations has driven prime rents to a high The average prime rent in top level. Accordingly, the average prime rent in top locations has risen from slightly more locations has risen to around than EUR 200 per sqm in 2006 to almost EUR 300 in 2016 – an increase of some EUR 300 per sqm 46 per cent. That is a far sharper increase than in the second-tier large cities, the B locations, which are also appealing to retailers. Here, the prime rent has only risen half as much with growth of just under 25 per cent. A trump card for the top locations are their catchment areas, which in some cases comprise several million people. In addition to market size, they also benefit – apart from Berlin – from inhabitants’ substantial purchasing power and visitors’ international character. This means that
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top locations provide an excellent launch pad for international retailers wishing to enter the German retail market and for experiments with new retail concepts.
There are discernible differences in the way rents in the seven top locations have There were marked differences in evolved over the past decade. In contrast to Cologne and Stuttgart, where growth of the rate of rental increases over the 30% was achieved in ten years, prime rents in Berlin grew almost twice as fast, at past decade almost 60%. In Munich, growth was also somewhat weaker, at 35 per cent, but this may be because the starting level was already very high. Average rent increases of 40% to 50% were observed in Dusseldorf, Frankfurt and Hamburg.
IS THE UPWARD TREND IN PRIME RENTS COMING TO AN END? IN BERLIN, PRIME RENTS HAVE RISEN TWICE AS FAST AS IN COLOGNE AND STUTTGART SINCE 2006
retail prime rent in Euro per sqm growth of the retail prime rent iin % from 2006 to 2016 360 Berlin 340 Dusseldorf 320 Frankfurt 59 Hamburg 300 Cologne 280 Munich 49 46 260 Stuttgart 43 43 240 Top-7 220 35 200 32 180 28 160 140 Cologne Stutt- Munich Ham- Frankfurt Top-7 Dussel- Berlin 120 gart burg dorf 1998 2002 2006 2010 2014 2018e
Source: BulwienGesa Source: BulwienGesa
The market is largely unchanged compared with 2015 due to the surge in rents largely However, rents in the top locations coming to a halt. As previously, a presence in A1 sites at a top location will cost have been largely unchanged since upwards of EUR 250 per sqm. First class retail space in Cologne or Stuttgart is avail- 2015 able at this price. It is some EUR 30 more expensive in Dusseldorf and Hamburg. Berlin and Frankfurt are around EUR 300. And, yet again, Munich is almost EUR 50 more expensive. But while the average prime rent increased by just under 2 per cent in 2016 – thanks to growth in Berlin, Dusseldorf and Cologne – it looks as though there will be no increase in 2017. Even small falls are conceivable.
It is intriguing that prime rents have risen over a long period although sales per sqm Retail space per inhabitant has stag- sales floor – sales floor productivity – have been falling or at best stable. Since the low nated since 2010 reached in 2008, the average sales floor productivity, not just in A1 locations but across all retail space, has risen again. This is caused by a slowdown in the expansion in total retail space, but especially in relation to the number of inhabitants. Accordingly, the average retail space per inhabitant at top locations has not grown since 2010. Previously, this had expanded from 1 sqm to 1.7 sqm per inhabitant from 1992 to 2010 but has been stable since then. The fact that the current increase in shop floor productivity is not leading to higher rents is likely to be linked to the fact that the previous rent increases have anticipated much of this development. Consequently, scope for further rent increases would first have to be created by future sales increases.
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RETAIL SPACE PER INHABITANT IS SCARCELY GROWING SALES FLOOR PRODUCTIVITY IS INCREASING AGAIN IN THE TOP LOCATIONS
retail space per capita in sqm 18.000 4.200 2,2 2,0 16.000 4.000 1,8 14.000 3.800 1,6 1,4 12.000 3.600 1,2 10.000 3.400 1,0 8.000 3.200 0,8 0,6 6.000 3.000 Berlin Dussel- Frank- Ham- Cologne Munich Stutt- Top-7 1992 1996 2000 2004 2008 2012 2016 dorf furt burg gart top locations: retail space in sqm '000 (lhs) 1992 1996 2000 2004 2008 2012 2016 top locations: average retail sales in Euro per sqm (rhs)
Source: Feri Source: Feri N.B.: Sales and retail space for top locations as a whole
The high rents in the best city centre positions in the top locations are also reflected in Shifts in space rental in the retail the letting statistics of the leading real estate firms. These indicate that the major cities’ sector share of total rented retail space is declining, while large cities below the top locations are attracting shares with their far lower prime rents. The increasing significance of online shopping is also apparent in a shift in demand for space. People still enjoy a stroll through the city centre but their focus is no longer concentrated so completely on shopping. The aspect of leisure time is gaining ground. The percentage of exclusively retail space is decreasing somewhat, while cafés and restaurants, in particular, are gaining ground.
The purchasing power and centrality indicators show the usual picture. The top Top locations score well in terms of locations – except Berlin – are characterised by substantial purchasing power com- purchasing power pared with the rest of Germany. Yet again, Dusseldorf and Munich stand out in this respect. While purchasing power in the capital of North Rhine-Westphalia is almost 20 per cent above the German average, the Bavarian city enjoys 15 percentage points more purchasing power, which underlines Munich’s exceptional position in the German retail sector. In terms of centrality, the second key retail characteristic, the figures are far closer together and are not especially high either. This is because customers from the surrounding area come to the city centres of the top locations to browse the shops, while they buy the things they need on a daily basis locally.
APART FROM BERLIN, THE TOP LOCATIONS BENEFIT FROM HIGH IN TERMS OF CENTRALITY, THE DIFFERENCES BETWEEN THE SEVEN PURCHASING POWER TOP LOCATIONS ARE SMALL
140 140
130 130
120 120 110 110 100 100 90 90 80 80 Frank- Berlin Cologne Ham- Munich Dussel- Stutt- Berlin Cologne Ham- Stutt- Frank- Dussel- Munich furt burg dorf gart burg gart furt dorf centrality average for Germany purchasing power average for Germany
Source: BulwienGesa Source: BulwienGesa
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European retail sector Compared with other European cities, prime rents in Germany’s top locations are In terms of prime rents, round about the average level – despite the positive economic conditions in Germany Germany’s top locations are and the sharp rise in retail rents over many years. However, any comparison with other average by European standards European cities must take account of the fact that in many countries one city operates as the outstanding shopping location, such as Paris in France or Vienna in Austria. Consequently, retailer demand is concentrated on these locations. Ultimately, there is no alternative location that comes even close in terms of quality. The German retail sector is different because no city among the top locations occupies such a dominant position in the retail sector.
PRIME RETAIL RENTS IN EUROPE: FIGURES FOR GERMAN CITIES ARE AVERAGE
retail prime rent in Euro per sqm per month 2.500 2.250 2.000 1.750 1.500 1.250 1.000 750 500 250 0
Source: BNP Real Estate, DZ BANK As at: Q4 2016
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Berlin: Retail properties
PRIME RETAIL RENTS IN EURO PER M2 PER CAPITA RETAIL SPACE IN M2
320 2,4
280 2,2 240 2,0 200 1,8 160 1,6 120 1,4 80
40 1,2
0 1,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Berlin Top-7 Regional-12 Berlin Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Berlin has evolved into an outstanding shopping location. With a large catchment area Berlin is also a top retail location of 5 million people, Berlin has long scored highly with investors and retailers as a across Europe trendsetter and a magnet for visitors with over 30 million overnight stays per year but was adversely affected by persistent economic weakness. But Berlin’s economy is now clearly on the up, although the purchasing power indicator of below 100 is still far below the substantial figures enjoyed by the other top locations. The positive develop- ment overall is apparent from the sharp increase in prime rents, which have risen by almost 40 per cent to the current level of EUR 310 per sqm within five years. As with office space, this is by far the most dramatic increase in rents among the seven top locations. However, demand for retail space also benefits from having the right condi- tions for market-testing new retail concepts. Consequently, Berlin is predestined as the first location for market entry by foreign retailers on the German market. The retail sector is also distinguished by having different types of A1 locations in separate areas of the city. Examples of this include Ku’damm/Tauentzienstraße, Alexanderplatz, Friedrichstraße or even the up-and-coming Hackescher Markt. There are also many shopping centres, including the huge Mall of Berlin, which only opened in 2014. Having risen so rapidly, Berlin’s development as a retail location is now likely to be more A further increase in prime rents is measured, although the pipeline still contains some shopping centre developments. not likely to be achievable even in We expect prime rents to remain stable until 2018. Berlin at present
RETAIL SPACE IN BERLIN
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 1,585 1,609 1,631 1,631 Unemployment rate (BA) (%) 10.7 9.8 9.2 9.3 Retail sales EUR m / % yoy 15,959 / 3.9 16,422 / 2.9 16,824 / 2.4 17,266 / 2.6 Retail sales EUR/sqm 2,535 2,576 2,597 2,597 Supply Total retail space In million sqm 6,296 6,375 6,479 6,587 Total retail space % yoy 1.1 1.3 1.6 1.7 Retail rents Prime rents/location EUR/sqm 300 / 14.5 310 / 14.5 310 / 14.5 310 / 14.5 Prime rents/location % yoy 3.4 / 3.6 3.3 / 0.0 0.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
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Cologne: Retail properties
PRIME RETAIL RENTS IN EURO PER SQM PER CAPITA RETAIL SPACE IN SQM
320 2,4
280 2,1
240 1,8
200 1,5
160 1,2
120 0,9
80 0,6
40 0,3
0 0,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Cologne Top-7 Regional-12 Cologne Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Besides Dusseldorf, Cologne, with its population of one million, is the second top shop- Top “mainstream-consumer ping location in western Germany. However, its focus is concentrated more on the oriented” shopping location in mainstream consumer. This is particularly true of Schildergasse, where 90 per cent of the west the stores are chain stores, which attract substantial footfall. However, Cologne also has hip locations which stand out from the typical mix of retailers in A1 locations. A smaller luxury segment has established itself in the Domkloster/ Wallraffplatz area, which is likely to expand in future following the redevelopment of the former Dom-Hotel. Cologne remains highly attractive to retailers due in part to its three-million strong conurbation, many shoppers from the nearby Benelux countries and a large number of tourists and trade fair visitors, who make up for the fact that Cologne residents do not enjoy quite as much purchasing power as the other top locations. The city centre’s advantages include a shopping trail of more than three kilometres in A1 locations and the fact that it is an attractive place to stay. In contrast to many other large shopping locations, there have been few large city centre project developments – and there is no sign of any either. The sole more significant exception is the redevelopment of the DuMont Carré. The building of the Cologne-based fashion house Jacobi, which has filed for insolvency, on Hohe Straße is to be completely modernised before Saturn opens a flagship store there covering all five storeys. Contrary to the stagnant trend in retail rents in the first quarter, prime rents firmed slightly to EUR 255 Prime rents likely to stay stable per sqm. However, we do not expect a further increase in rents in the period covered until 2018 by the forecast up to 2018.
RETAIL SPACE IN COLOGNE
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 1,769 1,797 1,820 1,820 Unemployment rate (BA) (%) 9.4 8.7 8.6 8.7 Retail sales EUR m / % yoy 7,066 / 4.2 7,311 / 3.5 7,518 / 2.8 7,748 / 3.0 Retail sales EUR/sqm 5,012 5,174 5,296 5,296 Supply Total retail space In million sqm 1,410 1,413 1,420 1,424 Total retail space % yoy 0.8 0.2 0.4 0.3 Retail rents Prime rents/location EUR/sqm 250 / 15.0 250 / 15.0 255 / 15.0 255 / 15.0 Prime rents/location % yoy 4.2 / 11.1 0.0 / 0.0 2.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
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Dusseldorf: Retail properties
PRIME RETAIL RENTS IN EURO PER M2 PER CAPITA RETAIL SPACE IN M2
320 2,4
280 2,2 240 2,0 200 1,8 160 1,6 120 1,4 80
40 1,2
0 1,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Düsseldorf Top-7 Regional-12 Düsseldorf Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Dusseldorf ranks among the leading German shopping locations. Demand for space The comprehensive upgrading of from retailers is correspondingly strong. Its strengths as a location are based on the Dusseldorf’s urban fabric is large catchment area of two million people and substantial purchasing power, where continuing only Munich fares better among the top 7. And the “Kö” has an international reputation as a luxury shopping street. The city is also being significantly upgraded through a large number of urban development projects which are accompanied by the develop- ment of new retail properties or the renovation of existing ones, such as the Kö-Galerie, Sevens or Kö-Karree. Kaufhof in Dusseldorf is also the first in Germany to be redesigned by the new owner Hudson’s Bay Company. The group, which is appar- ently in financial difficulties, also opened the first German branch of the fashion outlet Saks Off 5th in the immediate vicinity in the Carsch-Haus in June. A new development is the Kö-Bogen designed by Daniel Libeskind, which opened at the end of 2013. The shopping offer is still to be extended by Kö-Bogen II. Work on the major project, which is not expected to be completed until 2020, restarted in the middle of 2017 after some delays. Progress is also being made in the transformation of the A1 location Schadowstraße into a pedestrianised area. After more than ten years of building work, traffic calming measures in the city would then be completed by the demolition of the elevated road and the construction of the Hofgarten-Tunnel and the U-Bahn connection to Schadowstraße. It remains to be seen whether upgrading the shopping location will result in higher prime rents. We do not expect any further increase in the level of EUR 280 per sqm reached in the middle of the year up to 2018.
RETAIL SPACE IN DUSSELDORF
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 2,063 2,100 2,131 2,131 Unemployment rate (BA) (%) 8.5 7.8 7.6 7.7 Retail sales EUR m / % yoy 4,473 / 4.3 4,633 / 3.6 4,767 / 2.9 4,921 / 3.2 Retail sales EUR/sqm 3,638 3,735 3,834 3,834 Supply Total retail space In million sqm 1,229 1,240 1,243 1,248 Total retail space % yoy -0.1 0.9 0.3 0.4 Retail rents Prime rents/location EUR/sqm 270 / 16.0 275 / 16.0 280 / 16.0 280 / 16.0 Prime rents/location % yoy 3.8 / 14.3 1.9 / 0.0 1.8 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
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Frankfurt: Retail properties
PRIME RETAIL RENTS IN EURO PER SQM PER CAPITA RETAIL SPACE IN SQM
320 2,4
280 2,1
240 1,8
200 1,5
160 1,2
120 0,9
80 0,6
40 0,3
0 0,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Frankfurt Top-7 Regional-12 Frankfurt Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Frankfurt is one of the strongest German shopping locations. The catchment area Frankfurt’s retail sector benefits comprising 2.3 million people living in the wealthy Rhine-Main area plays a significant from the large catchment area, role here. Another factor is the rising number of inhabitants, people in gainful employ- substantial purchasing power and ment and visitors. Interest in city centre retail space is correspondingly strong. New many visitors developments, such as the Skyline Plaza opened in 2013 close to the exhibition centre, have been easily absorbed by the market. Following a few initial difficulties, visitor numbers are now increasing despite the surrounding building sites. However, there is also a great deal of building in the Zeil shopping area to satisfy consumers’ Frankfurt's shopping centres increasing demands: The new “UpperZeil” will have been completed on the site of the are being upgraded through demolished Zeilgalerie by 2018, which will allow the neighbouring Kaufhof to increase construction measures its sales floor from the first storey upwards by almost 11,000 sqm. Construction project number two is the redevelopment of the MyZeil shopping centre, which was only opened in 2009 but is to be upgraded with a new restaurant area and an exclusive art house cinema. However, the planned addition of 14,000 sqm of retail space to the Hesse Centre could fail because of objections from the neighbouring towns of Bad Vilbel and Hanau. There are also signs of change in the Nordwestzentrum, which was extended a few years ago: one of the three Frankfurt branches of Kaufhof will be closed here in autumn 2019. The hiatus in the upward trend in retail rents has also Growth in prime rents is exhausted reached Frankfurt. Prime rents reached EUR 300 per sqm at the end of 2015 but are for the moment unchanged since then. We expect this to be the case until 2018.
RETAIL SPACE IN FRANKFURT
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 1,708 1,724 1,738 1,738 Unemployment rate (BA) (%) 6.8 6.3 6.0 6.1 Retail sales EUR m / % yoy 5,278 / 3.8 5,461 / 3.5 5,622 / 2.9 5,786 / 2.9 Retail sales EUR/sqm 3,513 3,595 3,677 3,677 Supply Total retail space In million sqm 1,503 1,519 1,529 1,538 Total retail space % yoy 0.3 1.1 0.6 0.6 Retail rents Prime rents/location EUR/sqm 300 / 18.0 300 / 18.0 300 / 18.0 300 / 18.0 Prime rents/location % yoy 3.4 / 0.0 0.0 / -2.8 0.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
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Hamburg: Retail properties
PRIME RETAIL RENTS IN EURO PER SQM PER CAPITA RETAIL SPACE IN SQM
320 2,4
280 2,1
240 1,8
200 1,5
160 1,2
120 0,9
80 0,6
40 0,3
0 0,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Hamburg Top-7 Regional-12 Hamburg Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Hamburg as the leading shopping location in the north is sustained by sound economic Top-class shopping location in the growth, population growth, substantial purchasing power and a large catchment area, north which is increasingly boosted which easily doubles the number of 1.8 million inhabitants in the city. Tourism is also by tourism growing strongly: the recently opened Elbphilharmonie concert hall gives Hamburg another magnet for tourists. In addition, the number of tourists whose cruise ships dock at the Hanseatic city’s three cruise terminals is also growing year by year. Another plus point is Hamburg’s broad retail offer, which ranges from classic shopping locations, such as Spitalerstraȕe, to the luxury end of the spectrum such as Neuer Wall. However, the sales space on offer in the city is tight; it makes up only a seventh of the entire retail space. It is, however, increasing through numerous project developments, with which the A1 locations on the borders will also be expanded. Construction measures in the shopping centres should also increase their appeal. The Alsterhaus is undergoing a comprehensive refurbishment, as is the former HSH Nordbankpas- sage, which is now known as Perle Hamburg. The Europa Passage is being upgraded with a food court. However, there will be no significant expansion in the space. In contrast, a major project is envisaged in the southern section of the Überseequartier in HafenCity. It comprises a shopping centre with 200 shops and 80,000 sqm of retail space and is to be completed by 2021. This may be too much of a good thing, as this island solution would then account for a quarter of the city centre retail space. Since There is no sign of further growth in the end of 2015, prime rents have stuck at EUR 285 per sqm, which, in view of the prime rents for the moment planned centre, is likely to represent the end of the road for the moment.
RETAIL SPACE IN HAMBURG
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 2,006 2,030 2,051 2,051 Unemployment rate (BA) (%) 7.4 7.1 7.0 7.1 Retail sales EUR m / % yoy 14,705 / 4.0 15,295 / 4.0 15,841 / 3.6 16,412 / 3.6 Retail sales EUR/sqm 4,944 5,120 5,267 5,267 Supply Total retail space In million sqm 2,974 2,987 3,008 3,025 Total retail space % yoy 0.4 0.4 0.7 0.6 Retail rents Prime rents/location EUR/sqm 285 / 40.0 285 / 40.0 285 / 40.0 285 / 40.0 Prime rents/location % yoy 3.6 / 0.0 0.0 / 0.0 0.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
24 Real Estate Market Germany 2017 | 2018
Munich: Retail properties
PRIME RETAIL RENTS IN EURO PER SQM PER CAPITA RETAIL SPACE IN SQM
360 2,4
320 2,1 280 1,8 240 1,5 200 1,2 160 0,9 120 80 0,6 40 0,3 0 0,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Munich Top-7 Regional-12 Munich Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
With its strengths as a location, Munich takes the leading position among the top Munich is Germany’s leading German shopping locations. Kaufingerstraße regularly ranks as No.1 for footfall. It also shopping destination wins in terms of sales floor productivity and purchasing power. With a purchasing power indicator of over 130, Munich has left the other top locations far behind. In addition to the 1.4 million people living in Munich, the catchment area includes a further 1.6 million living in the prosperous surrounding area. The number of buyers is also increasing year by year through rapid population growth. With over 14 million overnight stays by business travellers and city tourists, Munich ranks second after Berlin. However, as a shopping location, Munich is helped by the fact that it offers high quality accommodation and a very diverse range of goods. In addition to the usual retailers to be found in A1 locations, many local businesses are also based in the city. Accordingly, the percentage of chain stores in city centre locations is comparatively low, at between 50 per cent and 80 per cent. The sum of these factors justifies the highest, by some way, prime rent in the German retail sector of EUR 345 per sqm. This figure was reached at the end of 2016 and is unchanged since then. As a result, The scope for higher prime rents is despite its strengths as a location, at this level, rents may have stopped rising even in arguably exhausted Munich. However, the project pipeline is well-stocked in view of persistently strong demand for space. Examples include the old Hettlage/Alte Akademie or the redevelopment of Sattlerplatz following the demolition of the Hirmer multi-storey car park. The largest project of relevance to the retail sector is the construction of the new central railway station, which will not be completed for some time.
RETAIL SPACE IN MUNICH
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 2,163 2,186 2,206 2,206 Unemployment rate (BA) (%) 4.9 4.6 4.3 4.4 Retail sales EUR m / % yoy 8,968 / 3.5 9,319 / 3.9 9,644 / 3.5 9,980 / 3.5 Retail sales EUR/sqm 4,334 4,458 4,555 4,555 Supply Total retail space In million sqm 2,069 2,090 2,117 2,145 Total retail space % yoy 0.9 1.0 1.3 1.3 Retail rents Prime rents/location EUR/sqm 340 / 37.0 345 / 37.0 345 / 37.0 345 / 37.0 Prime rents/location % yoy 4.6 / 0.0 1.5 / 5.4 0.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
25 Real Estate Market Germany 2017 | 2018
Stuttgart: Retail properties
PRIME RETAIL RENTS IN EURO PER SQM PER CAPITA RETAIL SPACE IN SQM
320 2,4
280 2,1
240 1,8
200 1,5
160 1,2
120 0,9
80 0,6
40 0,3
0 0,0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Stuttgart Top-7 Regional-12 Stuttgart Top-7 Regional-12
Source: BulwienGesa, Feri, DZ BANK Research forecast Source: Feri
Retail activity in Stuttgart, Germany’s sixth largest city, benefits from a population of Attractive shopping location in 2.7 million and an economically strong hinterland, which ensures it scores well in economically strong region purchasing power and centrality. Demand is also driven by visitors, as is clear from the 3.5 million overnight stays per year. Another advantage, like Munich and Cologne, is the presence of local specialist shops. Its strengths as a location have also kick-started the development of several large city centre retail projects, which has led to an increase in retail space of a good 20 per cent in one fell swoop: in autumn 2014, the two city centre shopping centres MILANEO and GERBER comprising a total of around 60,000 sqm of retail space opened almost simultaneously. Nevertheless, prime rents still increased somewhat from EUR 235 per sqm in the third quarter of 2014 to EUR 250 by mid-2016. They have remained stable since then. The Dorotheen Quartier providing another 10,000 sqm of shopping space opened in spring 2017. However, it could be that the concentrated centre developments have slightly overburdened the location despite its strengths. Accordingly, more people are arguing that the city centre has been weakened by the closure of individual shops and falling footfall in Königstraße. The recent opening of a Saks Off 5th fashion outlet and a large Primark branch in the former Karstadt building may boost customer numbers in Stuttgart’s Continued growth in space is A1 location. In this environment, any further increase in prime rents is unlikely in the limiting further rent rises period covered by the forecast until 2018.
RETAIL SPACE IN STUTTGART
2015 2016 2017e 2018e Demand Per capita disp. income EUR per month 1,956 1,977 1,997 1,997 Unemployment rate (BA) (%) 5.5 5.3 4.9 5.0 Retail sales EUR m / % yoy 3,531 / 3.5 3,643 / 3.2 3,737 / 2.6 3,840 / 2.7 Retail sales EUR/sqm 3,330 3,372 3,368 3,368 Supply Total retail space In million sqm 1,060 1,081 1,109 1,128 Total retail space % yoy 6.7 1.9 2.7 1.7 Retail rents Prime rents/location EUR/sqm 245 / 14.5 250 / 14.5 250 / 14.5 250 / 14.5 Prime rents/location % yoy 2.1 / 3.6 2.0 / 3.4 0.0 / 0.0 0.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
26 Real Estate Market Germany 2017 | 2018
OFFICE PROPERTIES
Just over ten years ago, the top locations were characterised by surplus office space. The shift from surplus office space Vacancy rates were generally around 10 per cent. In Frankfurt, there was almost twice to a shortage of office space is as much vacant office space. Only Stuttgart fared much better. But this picture has based on... changed fundamentally. Today, the difficulty is less in letting office space but far more in the problem of even finding suitable premises for the rising number of office workers. But why has the situation on the key German office markets changed so fundamentally since then? In essence, three factors are behind it.
Firstly, demand for office space has grown thanks to the positive economic situation …strong demand for space, and the increase in employment associated therewith. The expected macroeconomic limited construction of new offices slowdown caused by the lack of growth among key European trading partners, Brexit and the conversion of vacant office or the large number of international crises has, however, largely failed to materialise. properties Secondly, construction of new offices is modest compared with demand. To be sure, there is far more construction in the large cities but it is often housing or hotels. Frequently, developers are building exclusive housing blocks rather than offices in city centres. The third reason is also linked to the types of use mentioned. In recent years, many vacant and scarcely lettable office properties have been converted into residen- tial properties or hotels. The withdrawal of this space has reduced the vacancy rate but also decreased the amount of space actually available to rent. Finally, the unused office buildings no longer met the expectations of potential tenants.
Market development, trends and outlook But what is in store for the office market? Demand for space could weaken in the In the long-term, demand for office longer term. Possibly because of demographic change, which could result in a fall in space may suffer from demographic the professionally active population over the years to come caused by the retirement change and digitisation – but that is of the baby boomer generation when birth rates were higher. Another reason could be not definite the increasing digitisation of the world of work with people focusing more on working from home. But that is just as uncertain as demographic change, which can again and again throw up surprises such as waves of immigration or people taking retirement later. There are well-known examples of companies such as Yahoo a few years ago, or IBM this spring who initially set home working as standard practice for their employees but subsequently ordered them back into their offices. This makes clear the difficulties in forecasting demand for office space in the longer term. This might be a reason why construction of new offices is not more dynamic.
THE BUSINESS CLIMATE DETERMINED BY THE IFO INSTITUTE HAS IM- ECONOMIC EXPECTATIONS REMAIN AT A HIGH LEVEL PROVED PERCEPTIBLY COMPARED WITH 2016
indices 2005 = 100, seasonally adjusted 100 130 125 80 120 60 115 40 110 20 105 100 0 95 -20 90 -40 85 -60 80 75 -80 70 -100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 expectations ifo business climate business conditions economic sentiment economic situation
Source: ifo Institute Source: ZEW
27 Real Estate Market Germany 2017 | 2018
In the short term, demand for space is, however, likely to increase. The economic There are no obstacles to growth in outlook for Germany is, as our forecast on page 6 shows, still positive with growth the period covered by the forecast rates of 2 per cent or just below until 2018. Surveys of companies (ifo) and economic up to 2018 experts (Centre for European Economic Research [ZEW]) reflect the good prospects for corporate business development and the economy. The increase in employment and consequently demand for office space is therefore likely to continue. Deserted desks in large cities are more likely to be attributable to a lack of staff than surplus office space.
TOP LOCATIONS: THE NUMBER OF OFFICE WORKERS IS INCREASING THERE HAS BEEN A SIGNIFICANT DECLINE IN THE SUPPLY OF MORE RAPIDLY OFFICE SPACE OFFICE SPACE, WHICH WAS ABUNDANT A FEW YEARS AGO
2,4 85 41 2,3 82 40 2,2 79 39 2,1 76 2,0 73 38 1,9 70 37 1,8 67 36 1,7 64 35 1,6 61 34 1,5 58 1,4 55 33 32 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
office workers in million (lhs) office space in milion sqm (rhs) 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 office space per office worker in sqm
Source: BulwienGesa, Feri Source: BulwienGesa, Feri
As the number of office workers has grown faster than office space in recent years, There is not likely to much change the ratio of the two variables has shrunk appreciably. Ten years ago, there was roughly to the scarcity of office space in the 40 sqm for each employee on average in the top locations, today this figure has de- near future. creased to only 35 sqm. The slowdown in the expansion in office space is very clear from the figures for new office space coming onto the market each year. In the ten years from 1997 to 2006, the cumulative annual space was around 1.4 million sqm. By contrast, it was only 0.8 million per year in the following decade up to 2016. In view of the increase in office space from 64 (1997) to 79 million sqm last year, the average amount of new space coming onto the market has halved from 2 to 1 per cent com- pared with the previous two decades. Based on the office space currently under construction, the growth this year and next will not be very different. As a result, space will remain scarce for the moment.
TOP LOCATIONS: NEW OFFICE SPACE COMING ONTO THE MARKET TOP LOCATIONS: SCARCE SUPPLY IS PREVENTING ANY INCREASE REMAINS COMPARATIVELY LIMITED IN TAKE-UP OF OFFICE SPACE
office space in thousand sqm office space in thousand sqm 2.500 4.000 forecast 3.500 2.000 3.000 1.500 2.500 forecast 2.000 1.000 1.500
500 1.000 500 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2017e 2018e new office space 1997-2006 2007-2016 office space take-up 1997-2006 2007-2016
Source: BulwienGesa Source: BulwienGesa, DZ BANK Research forecast
28 Real Estate Market Germany 2017 | 2018
The fact that office space is virtually unobtainable might also be reflected in falling Despite strong demand, take-up of take-up despite persistent demand for space. The less obtainable space is available, office space might fall because of the more difficult it will be to find large connected office space. Nevertheless, take-up the lack of supply up to 2018, at an estimated 3.4 to 3.5 million sqm, is likely to achieve a visibly higher level than the previous decade.
The reduction in vacancies described above has caused a sharp fall in the vacancy Rent rises remain moderate rate. It has halved from around 10 per cent in 2010 to the current figure of less than despite the increasing shortage 5 per cent. It is not surprising that strong demand for space and an increasing shortage of office space thereof is leading to higher rents. However, it is surprising that the trend in rents is more stable than in previous market phases and that rent rises are relatively moderate. Prime rents rose by 3 per cent on average per year from 2011 to 2016. There have been none of the excesses seen in the dot-com boom. Companies are evidently exercising a degree of caution on the market despite positive economic prospects: tenancy agreements are not concluded at any old price. Potential tenants’ conduct is consistent with the picture of a sound but not effervescent upturn in Germany.
TOP LOCATIONS: RISING EMPLOYMENT IS RESULTING IN A TOP LOCATIONS: PRIME RENTS ARE RISING AT A MODERATE PACE SUSTAINED FALL IN THE VACANCY RATE
16 32 12 2.450 12 30 10 2.300 8 28 8 2.150 4 26 0 24 6 2.000 -4 22 4 1.850 -8 20 2 1.700 -12 18 -16 16 0 1.550 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e office prime rent yoy in % (lhs) vacancy rate in % (lhs) office workers in thousand (rhs) office prime rent in Euro per sqm (rhs)
Source: BulwienGesa, DZ BANK Research forecast Source: BulwienGesa, DZ BANK Research forecast
Office: comparison of top locations The seven largest German cities are attractive for companies. While other large cities The top 7 cities are attractive certainly fare well in terms of the relevant location factors, the sum of the characteris- locations for companies tics elevates the top 7-cities. They gain plus points through first-class connections by road, rail and air. Thanks to international flight connections foreign destinations can also be reached reasonably rapidly. Cities also offer good access to specialist staff, both in the large employment market in the conurbations and from the ongoing influx. The large office markets, which mean that larger premises can be rented without companies having to develop these themselves previously, represent another advantage. The final aspect has, however, been diminished by the reduction in the vacancy rate. This is particularly true of Berlin, Munich and Stuttgart. With vacancy rates of 2 to 3 per cent, there is scarcely any office space still freely available.
29 Real Estate Market Germany 2017 | 2018
OFFICE EMPLOYMENT IS INCREASING FAR MORE RAPIDLY THAN VACANT OFFICE SPACE IS DISAPPEARING RAPIDLY OFFICE SPACE
growth from 2006 to 2016 in % vacancy rate in % (2006, 2008, 2010, 2012, 2014, 2016 and 2018e) 28 20 18 24 16 2006 20 14 2018e 16 12 10 12 8 8 6 4 4 2 0 Berlin Dussel- Frank- Ham- Cologne Munich Stutt- Top-7 0 dorf furt burg gart Berlin Dussel- Frank- Ham- Cologne Munich Stutt- Top-7 office space office workers dorf furt burg gart
Source: BulwienGesa, Feri Source: BulwienGesa, DZ BANK Research forecast
This basic appeal of the top locations holds true without exception. Accordingly, all The economic performance of the locations are united by a marked increase in employment in the last ten years. The top locations is heartening fact that job engines, such as Munich or Stuttgart, fare less well in terms of percentage growth in the number of office employees is likely to be primarily due to the high starting level in these locations. The pleasing economic development is also apparent from rising economic output per inhabitant and the dramatic fall in unemployment ratios in all seven locations. However, there are considerable differences in the individual cities’ economic data. Accordingly, Berlin’s pro capita economic output is far lower than in the other six cities. The figure is more than twice as large in Frankfurt and Stuttgart.
POSITIVE TREND: GROSS DOMESTIC PRODUCT PER INHABITANT ... … IS INCREASING, WHILE UNEMPLOYMENT IS FALLING
gross domestic product per capita in thousand Euro unemployment rate in % 100 20 Berlin Berlin 90 Dusseldorf 18 Dusseldorf 80 Frankfurt 16 Frankfurt
70 Hamburg 14 Hamburg Cologne Cologne 60 12 Munich Munich 50 Stuttgart 10 Stuttgart 40 8
30 6
20 4 1996 2000 2004 2008 2012 2016 1996 2000 2004 2008 2012 2016
Source: Feri Source: BulwienGesa
However, this is not to diminish the economic success which the capital has achieved There has been a perceptible fall in in recent years. Berlin can boast considerable progress in reducing unemployment: unemployment in all locations the unemployment rate here has more than halved to below 9 per cent in July 2017 within ten years – and has consequently visibly reduced the gap between it and the other cities. The lowest figures are reported by Stuttgart with less than 5 per cent (July 2017) and Munich at just over 4 per cent. The low figure underlines the economic strength of the Bavarian capital, where employment continues to fall despite very high immigration – the number of inhabitants regularly grows by more than 1 per cent per year.
30 Real Estate Market Germany 2017 | 2018
The development of new office space has lagged behind the rapid growth in office Too low a vacancy rate can prove to employment for years; accordingly, the percentage of vacant office space in all be a disadvantage for a location locations has fallen significantly. Halfway through 2017, Frankfurt had by far the highest figure with a vacancy rate just below double figures. Dusseldorf is already well below this at just under 8 per cent. The figures for Hamburg and Cologne are even more favourable at around 5 per cent. And the office markets in Berlin, Munich and Stuttgart are largely exhausted with vacancy rates of less than 3 per cent. These low figures could even prove to be locational disadvantage if potential tenants seeking larger connected space, in particular, cannot be offered suitable properties. In Munich, the situation is exacerbated by frighteningly high residential rents.
ALL IN ALL, OFFICE RENTS ARE ONLY RISING MODESTLY BERLIN ACHIEVES THE LARGEST INCREASE IN PRIME RENTS
office prime rent in Euro per sqm growth of the office prime rents in % from 2006 to 2016 50
45 37 40 Berlin 35 Dusseldorf 24 23 23 24 30 Frankfurt 20 25 Hamburg Cologne 11 20 Munich 11 15 Stuttgart Top-7 10 Cologne Frank- Dussel- Top-7 Stutt- Ham- Munich Berlin 1998 2002 2006 2010 2014 2018e furt dorf gart burg
Source: BulwienGesa, DZ BANK Research forecast Source: BulwienGesa, DZ BANK Research forecast
Unlike the residential market, the ever-diminishing supply on the office market has, as Office rents fail to rise by even a explained above, not triggered any significant rent rises. The prime office rent rose by quarter within ten years 20 to 24 per cent within ten years at four of the seven locations. In Frankfurt and Cologne, the increase in rent was only half as much. Only Berlin can demonstrate appreciably more dynamism with an increase of almost 40 per cent. Having been rel- atively cheap a few years ago, Berlin will rank alongside Frankfurt and Munich among the three most expensive German cities with this trend in rents, which – assuming it continues – is likely to achieve a prime rent of EUR 30 per sqm in the near future.
Because rents in Munich have risen far more rapidly than those in Frankfurt in recent Munich's prime rent reaches years, the city has caught up with the rent level in the international financial centre. In Frankfurt’s level mid-2017, they were level pegging with a prime rent of EUR 35.50. Overall, however, prime rents in the top locations over the year to date are largely unchanged compared with the end of 2016: only Berlin and Munich achieved a visible increase of around 1 EUR each in the first half of the year.
31 Real Estate Market Germany 2017 | 2018
Top locations in a European context
Just like retail rents, office rents in the top locations do not head the rankings compared Prime German office rents are with the rest of Europe. Given its economic strength, increasing employment and the average by European standards scarcity of office space available, prime German office rents must be seen as relatively modest. As in the retail sector, this is also likely to be linked to the fact that Germany has a whole series of prosperous office locations. There is no concentration on a small number of cities, in some cases even on only one single dominant economic centre. Consequently, no German location achieves an exposed market position of the kind that would allow far higher rents than the Frankfurt or Munich level.
PRIME OFFICE RENTS IN EUROPE IN EUR PER SQM – TOP GERMAN LOCATIONS ARE AVERAGE
office prime rent in Euro per sqm per month 140 120 100 80 60 40 20 0
Source: BNP Real Estate, DZ BANK Research As at: Q4 2016
32 Real Estate Market Germany 2017 | 2018
Berlin: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
32 12
28 10 24 8 20
16 6
12 4 8 2 4
0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Berlin Top-7 Regional-12 Berlin Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
Having previously been viewed as a “problem child”, there has been a sustained im- Berlin’s economy continues its provement in Berlin’s economic situation. This is clear from the continuous fall in the successful path unemployment rate, which has fallen from almost 20 per cent in mid-2005 to 8.8 per cent in July of the current year, despite the rising number of inhabitants. Today, the capital is a sought-after location for e-commerce providers and fintechs but also for established companies. Berlin’s appeal as a place to live helps, making it easier to obtain specialist staff. The sustained upturn is, however, reflected just as much in the figures for office market. The prime rent, which was still at a reasonable level of around EUR 20 per sqm in 2010, rose to EUR 29 by mid-2017 and could exceed the EUR 30 Prime rent likely to rise to mark in the coming year. However, the reason for the highest rise in rents among the EUR 30 per sqm by 2018 top locations is not just strong demand but, in particular, the shortage of space. There has been a noticeable increase in the construction of new office space. However, new construction is not sufficient to overcome the shortage. This is why the vacancy rate is likely to fall further towards 2 per cent in the period covered by the forecast up to 2018. As a result, the Berlin office market has lost the previous locational advantage of having a good supply of reasonable office space without letting activity being harmed. On the contrary: despite the limited supply, the letting volume has reached a Despite a limited supply, take-up is new record, at 415,000 sqm, in the first half of the year. However, given the lack of substantial space, it is doubtful whether the previous peak of 875,000 sqm for 2016 as a whole will be exceeded in the current year.
OFFICE SPACE IN BERLIN
2015 2016 2017e 2018e Demand GDP % yoy 5.4 3.4 2.8 3.0 Per capita GDP EUR 35,602 36,507 37,323 38,265 Per capita GDP % yoy 516.4 523.9 531.1 531.1 No. of office workers % yoy 1.4 1.5 1.4 1.4 Supply Total office space In thousand sqm 18,929 18,932 19,050 19,230 Total office space % yoy 1.0 0.0 0.6 0.9 Vacancy rate (%) 3.8 3.0 2.4 2.1 Office rents Prime rent/secondary locations EUR/sqm 24.0 / 9.5 28.0 / 11.0 29.4 / 11.0 30.5 / 11.0 Prime rent/secondary locations % yoy 4.3 / 11.8 16.7 / 15.8 5.0 / 0.0 3.7 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
33 Real Estate Market Germany 2017 | 2018
Cologne: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
32 12
28 10 24 8 20
16 6
12 4 8 2 4
0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Cologne Top-7 Regional-12 Cologne Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
With take-up of 375,000 sqm in 2016, the Cologne office market not only exceeded Following a record year last year, the previous year’s reasonably good result but also the previous high of 300,000 sqm the Cologne office market has also from 2006. Several major deals, which accounted for almost 40 per cent of the 2016 made a good start in 2017 take-up, contributed to the record result. The list is headed by the new headquarters of Zurich Versicherung in MesseCity comprising almost 60,000 sqm. The other five major deals are all attributable to public administration, namely the University, the City of Cologne and the Bundesagentur für Arbeit (Federal Employment Agency) respectively. The current year has started well with take-up of 150,000 sqm halfway through the year but is likely to fall well short of the exceptional result achieved in 2016. Of the two major deals in the first half, the larger deal also involves the public administration. The smaller deal involves the construction of new headquarters for the road building group Strabag. The relocation of Lufthansa, which is leaving its previous headquarters in Cologne-Deutz, has set the office market in motion. The prime rent was determined at EUR 21 per sqm in the first half. This level is regarded as largely consistent since 2012, which is likely to be attributable to the major significance of the public administration for the Cologne office market. The vacancy rate has fallen to The scarcity of freely available office exactly 5 per cent halfway through the year. The decline is likely to continue because space could help the prime rent rise the amount of new space coming onto the market remains modest. The ongoing lack slightly of space could at least pave the way for a slight increase in the prime rent.
OFFICE SPACE IN COLOGNE
2015 2016 2017e 2018e Demand GDP % yoy 2.3 3.0 2.9 3.0 Per capita GDP EUR 53,634 54,942 56,223 57,646 Per capita GDP % yoy 234.9 238.7 241.5 241.5 No. of office workers % yoy 2.1 1.6 1.2 1.2 Supply Total office space In thousand sqm 7,527 7,599 7,630 7,650 Total office space % yoy 0.6 1.0 0.4 0.3 Vacancy rate (%) 6.0 5.5 4.8 4.5 Office rents Prime rent/secondary locations EUR/sqm 21.0 / 8.0 21.0 / 8.3 21.2 / 8.3 21.5 / 8.3 Prime rent/secondary locations % yoy 0.0 / -1.2 0.0 / 3.8 1.0 / 0.0 1.4 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
34 Real Estate Market Germany 2017 | 2018
Dusseldorf: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
32 12
28 10 24 8 20
16 6
12 4 8 2 4
0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Düsseldorf Top-7 Regional-12 Düsseldorf Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
Although the Dusseldorf office market did not produce a bad result in terms of take-up Following a relatively poor previous in 2016, the market cannot match the predominantly excellent figures achieved by the year, it looks as though things are other top locations. Compared with the figure from 2015, which was admittedly very picking up on the office market in high, take-up fell by around 0.25 per cent to 308,000 sqm and was therefore within the Dusseldorf this year ten-year average. This is because no major tenancy agreements, of which there were still a fair number in 2015, were concluded. In contrast, the first half of 2017 has been promising with the highest take-up since 2010. This includes two major deals covering more than 10,000 sqm; the tenants are the Trinkaus & Burkhard and Lampe banks. Despite strong demand for the relatively limited supply of office space in new building projects, prime rents in Dusseldorf have ranged between EUR 24 to 25 per sqm since 2012. This may also be attributable to the still relatively high percentage of vacant office space, which fell below 8 per cent in the first half of 2017. Apart from demand for office space, conversion into housing and hotels has played a role here. The declining vacancy rate in conjunction with the reduction in vacancies is likely to ensure a modest increase in prime rents, which could, as a result, return to close to the previous maximum of EUR 25.50 per sqm over the coming year. However, a more marked rent rise is unlikely because companies moving to new buildings will free up corresponding amounts of space in existing buildings.
OFFICE SPACE IN DUSSELDORF
2015 2016 2017e 2018e Demand GDP % yoy 2.5 3.2 3.0 3.2 Per capita GDP EUR 73,587 75,476 77,441 79,659 Per capita GDP % yoy 202.6 205.6 208.0 208.0 No. of office workers % yoy 3.7 1.5 1.2 1.3 Supply Total office space In thousand sqm 7,549 7,554 7,580 7,680 Total office space % yoy 0.0 0.1 0.3 1.3 Vacancy rate (%) 8.8 8.3 7.6 7.4 Office rents Prime rent/secondary locations EUR/sqm 24.0 / 10.0 24.5 / 10.3 24.9 / 10.3 25.3 / 10.3 Prime rent/secondary locations % yoy 0.0 / 5.3 2.1 / 3.0 1.6 / 0.0 1.6 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
35 Real Estate Market Germany 2017 | 2018
Frankfurt: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
45 20 40 18 35 16 14 30 12 25 10 20 8 15 6 10 4 5 2 0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Frankfurt Top-7 Regional-12 Frankfurt Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
After two relatively weak years, the hitherto most expensive German office market Despite weakened banking sector, Frankfurt has gained momentum again. At 460,000 sqm, office take-up again reached office market is on the up an above-average level in 2016. There was also a promising start to 2017; office take-up in the first half of 2017, at just over 200,000 sqm, was exactly equal to the good level of the previous year. A major deal for 12,000 sqm by the law firm Clifford Chance contributed to this. It is apparent from the second largest tenancy agreement, covering 8,000 sqm, agreed with Morgan Stanley, that Frankfurt, as the location of the ECB, is, as expected, benefiting from Brexit. The high albeit declining vacancy rate of just below 10 per cent means that office space is available although a large proportion of this is unlikely to be suitable because of its location or the condition of the property. Besides Brexit, two trends are shaping the Frankfurt office market: the positive economic environment with rising employment is faced with problems in the financial sector – regulation, low interest rates and digitisation. In this environment, prime rents have been largely stable since 2013. Halfway through the year, it stood at EUR 35.50 per sqm. The sound economic situation and the demand for office space triggered by Brexit could push prime rents to EUR 36 per sqm in 2017 and EUR 37 in 2018. Brexit as an opportunity: British Assuming growth in space is manageable, the reduction in vacancies should continue. bankers could push prime rents The Bundesbank is also generating demand on the office market, as it will need higher alternative premises for over 2,000 employees from 2019 until the end of the next decade while its building is being completely refurbished.
OFFICE SPACE IN FRANKFURT
2015 2016 2017e 2018e Demand GDP % yoy 4.5 3.2 3.0 3.2 Per capita GDP EUR 92,239 93,766 95,411 97,517 Per capita GDP % yoy 284.1 287.9 291.0 291.0 No. of office workers % yoy 2.5 1.3 1.1 1.1 Supply Total office space In thousand sqm 10,295 10,250 10,280 10,330 Total office space % yoy -0.5 -0.4 0.3 0.5 Vacancy rate (%) 11.3 10.7 10.0 9.3 Office rents Prime rent/secondary locations EUR/sqm 35.5 / 9.5 35.5 / 9.5 36.0 / 9.5 37.0 / 9.5 Prime rent/secondary locations % yoy 1.4 / 1.1 0.0 / 0.0 1.4 / 0.0 2.8 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
36 Real Estate Market Germany 2017 | 2018
Hamburg: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
32 12
28 10 24 8 20
16 6
12 4 8 2 4
0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Hamburg Top-7 Regional-12 Hamburg Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
The upward trend on the Hamburg office market is continuing. Since 2014, annual Even after three strong years, office take-up has consistently exceeded 500,000 m2 – and this figure is trending the Hamburg office market is not upwards. Accordingly, the 550,000 sqm achieved last year is likely to be exceeded in easing off 2017, as deals concluded in the first half contributed almost 300,000 sqm and consequently matched the previous record years of 2007 and 2008. However, major deals helped the good result: Olympus is adding the Olympus Campus to its European headquarters in Hamburg and has rented almost 35,000 sqm for this purpose. Ham- burg’s university is the tenant in the second major deal, which comprises 20,000 sqm. Despite these positive figures, prime rents did not increase in the first half and remain at EUR 26 per sqm for the moment. In return, the reduction in vacancies is continuing. The rate is likely to fall below 5 per cent over the year and consequently halve com- pared with the high of a good 10 per cent in 2010. The level of vacancies is likely to decline further because of strong demand for space from the broadly-based Hamburg economy. However, the decline is likely to slow somewhat because development of new office space has also picked up. Admittedly, only around three quarters of the ten-year average space, at 260,000 sqm, is likely to be added in 2017 and 2018 together. In this respect, the supply of attractive office space will still be too small rather than too large. Prime rents could therefore rise further. We are confident that they will rise to EUR 27 per sqm by 2018.
OFFICE SPACE IN HAMBURG
2015 2016 2017e 2018e Demand GDP % yoy 3.8 4.1 3.1 3.3 Per capita GDP EUR 61,685 63,728 65,308 67,113 Per capita GDP % yoy 407.8 413.3 418.7 418.7 No. of office workers % yoy 1.2 1.3 1.3 1.3 Supply Total office space In thousand sqm 13,575 13,718 13,800 13,900 Total office space % yoy 0.2 1.1 0.6 0.7 Vacancy rate (%) 5.5 5.3 4.9 4.7 Office rents Prime rent/secondary locations EUR/sqm 25.0 / 10.5 26.0 / 10.8 26.4 / 10.8 27.0 / 10.8 Prime rent/secondary locations % yoy 2.0 / 8.2 4.0 / 2.9 1.5 / 0.0 2.3 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
37 Real Estate Market Germany 2017 | 2018
Munich: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
40 11 10 35 9 30 8 25 7 6 20 5 15 4 10 3 2 5 1 0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Munich Top-7 Regional-12 Munich Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
It is astonishing that office space take-up in Munich year, at 580,000 sqm, exceeded Increasing scarcity of office space, the 10-year average by 10 per cent although there is scarcely any freely available housing and specialist staff is space on offer. But, at almost 290,000 sqm, a good result was also achieved in the shaping Munich as a dynamic first half of 2017. The problem of there being scarcely any office space available is business location clear from the major deals of over 10,000 sqm, which - with one exception - have only materialised in newly constructed properties in both this year and last. With a vacancy rate that has fallen to just over 2 per cent halfway through the year, large connected office space, in particular, is virtually unobtainable. In this respect, a perceptible increase in letting figures would be conceivable in view of Munich’s dynamic economy. Because completion figures are only expected to be moderate in 2017 and 2018, the bottleneck will only get worse. In the long run, the lack of office space and housing combined with the highest residential rents in Germany is likely to have an adverse impact on the location’s development, which is already struggling to find specialist staff with an unemployment rate of 4 per cent. Halfway through the year, prime rents, at EUR 35.50 per sqm, caught up with Frankfurt - previously, Germany’s most expensive office location. Without the additional demand triggered by Brexit, Munich would be At EUR 35.50 per m2, the prime rent well placed to overtake Frankfurt in terms of prime rents by 2018. Both markets are has reached Frankfurt’s level likely to be level-pegging for the moment.
OFFICE SPACE IN MUNICH
2015 2016 2017e 2018e Demand GDP % yoy 4.1 3.4 3.3 3.5 Per capita GDP EUR 70,680 72,181 73,794 75,675 Per capita GDP % yoy 376.2 379.9 383.5 383.5 No. of office workers % yoy 0.8 1.0 0.9 0.9 Supply Total office space In thousand sqm 13,704 13,728 13,790 13,870 Total office space % yoy 0.4 0.2 0.4 0.6 Vacancy rate (%) 3.8 2.7 1.9 1.5 Office rents Prime rent/secondary locations EUR/sqm 34.1 / 12.5 34.7 / 13.0 35.8 / 13.4 36.8 / 13.7 Prime rent/secondary locations % yoy 1.8 / 0.0 1.8 / 4.0 3.2 / 3.1 2.8 / 2.2
Source: Feri, BulwienGesa, DZ BANK Research forecast
38 Real Estate Market Germany 2017 | 2018
Stuttgart: Office properties
PRIME RENTS IN % COMPARED WITH PREVIOUS YEAR VACANCY RATE (IN %)
32 12
28 10 24 8 20
16 6
12 4 8 2 4
0 0 2002 2004 2006 2008 2010 2012 2014 2016 2018e 2002 2004 2006 2008 2010 2012 2014 2016 2018e Stuttgart Top-7 Regional-12 Stuttgart Top-7 Regional-12
Source: BulwienGesa, DZ BANK Research forecast Source: Feri, DZ BANK Research forecast
As in Berlin and Munich, there has been an ongoing fall in the amount of freely Sound demand for space combined available office space in Stuttgart. Accordingly, in mid-2017, the vacancy rate fell to with an ever-diminishing supply has less than 3 per cent. And as in the Bavarian capital, the major deals in the last year pushed Stuttgart's prime office rent involve new office properties, as it is very difficult to find larger connected space in the to EUR 20 per sqm existing office stock. The market also achieved the record result of 2016 through a few major deals to an even greater extent than Cologne. The new Daimler Campus accounted for 77,000 sqm. Together with deals for more than 50,000 sqm for Bosch, they drove office space take-up to 400,000 sqm; almost twice the ten-year average. However, unlike Cologne, the six major deals did not involve public administration but the manufacturing industry. While the economies of the other top locations are domi- nated by services, the capital of Baden-Württemberg still has a substantial amount of industry. The office market made an average start to the current year, which is attributable to the absence so far of major deals in excess of 10,000 sqm. Thanks to strong demand for space combined with a lack of supply, the prime rent rose to EUR 20 per sqm for the first time up to June. However, the likelihood of more marked rent rises driven by the lack of space is reduced by the relatively substantial number of new properties coming onto the market this year and next.
OFFICE SPACE IN STUTTGART
2015 2016 2017e 2018e Demand GDP % yoy 4.9 3.1 2.9 3.1 Per capita GDP EUR 79,445 81,184 83,036 85,198 Per capita GDP % yoy 194.0 196.7 198.8 198.8 No. of office workers % yoy 2.6 1.4 1.1 1.1 Supply Total office space In thousand sqm 7,603 7,682 7,780 7,840 Total office space % yoy 0.8 1.0 1.3 0.8 Vacancy rate (%) 3.7 2.9 2.8 2.7 Office rents Prime rent/secondary locations EUR/sqm 19.3 / 8.7 19.7 / 8.8 20.0 / 8.8 20.2 / 8.8 Prime rent/secondary locations % yoy 1.6 / 0.0 2.1 / 1.1 1.5 / 0.0 1.0 / 0.0
Source: Feri, BulwienGesa, DZ BANK Research forecast
39 Real Estate Market Germany 2017 | 2018
RESIDENTIAL PROPERTIES
The top locations continue to attract large numbers of newcomers. Over the past five The move into top locations has years, the cumulative number of inhabitants in the seven cities has increased by “emptied” the housing markets 114 thousand people on average per year – this equates to annual growth of 1.2 per cent. Even the perceptible increase in purchase prices and rents for apartments and houses has not been sufficient to have any noticeable impact on the rate of influx. As a rough estimate, some 60,000 apartments are needed per year simply to satisfy the demand for housing resulting from the influx. However, the annual number of comple- tions falls far short of this. Even the relatively substantial, compared with previous years, number of 40,000 new apartments (2016) is far too low, especially as the number between 2007 and 2010 was only half this figure.
This results in an ever-increasing demand gap on the housing market. The influx has Taken together, there is a shortfall of boosted the number of inhabitants in the top locations by a good million in ten years several 100,000 apartments in the to almost 10 million people today. Over 500,000 apartments would have to be built top locations simply to cope with this. However, this figure is matched by a cumulative figure of only 260,000 completions since 2006. The gap is exacerbated by the fact that demand for housing is also increasing because of the trend towards fewer people per household. Through this reduction in household size, the number of private households increases, making it a key demand determinant even when the population is stagnant. Apartments are also being lost from the housing stock.
THE INFLUX INTO THE TOP LOCATIONS HAS GATHERED MOMENTUM THE NUMBER OF NEW HOUSEHOLDS HAS EXCEEDED RESIDENTIAL IN THE RECENT PAST IN PARTICULAR CONSTRUCTION IN THE TOP LOCATIONS TWO TO THREE-FOLD SINCE 2006
9,0 200.000 ratio of new individual 175.000 7,3 households to completed 150.000 2,8 dwellings 6,2 5,6 125.000 2,0 4,4 4,2 100.000 2,3 3,9 216 75.000 2,0 1,7 50.000 2,3 2,2 107 25.000 75 24 46 35 66 0 Berlin Dussel- Frank- Ham- Cologne Munich Stutt- Dussel- Ham- Cologne Stuttgart Berlin Munich Frank- dorf furt burg gart dorf burg furt growth of individual households (2006-2016) population growth from 2011 to 2016 in thousand poeple in % cumulative dwelling completions (2006-2016)
Source: Feri Source: Feri
Even under optimistic assumptions, the demand gap in the housing market cannot be Obstacle No. 1: a lack of land closed in the short term. To achieve this, figures for new construction would have to for construction limits residential reach an entirely unrealistic level. But even growth beyond the current perceptible construction in major cities increase in the level of housing construction is a challenge for the seven large cities even though the figure of construction permits reached 60,000 units in 2016. However, it is doubtful whether this volume will be maintained over the coming years, as space for construction in the densely populated large cities is declining. And zoning new areas for construction and increasing the density of use in existing residential areas is a contentious project, which is often met with considerable resistance from residents and environmentalists. Their concerns relate to the character of the area in which they live, the frequent scarcity of school and day nursery places, heavily congested roads and, not least, the preservation of green spaces and areas of fresh air. But even if new space for construction in the amount required can be pushed through against all the resistance, this will take a great deal of time.
40 Real Estate Market Germany 2017 | 2018
CONSTRUCTION PERMITS AT A 20-YEAR HIGH CAPACITY IN THE BUILDING TRADES IS UNDER CONSIDERABLE STRAIN
70.000 80 3.500 60.000 75 3.250 50.000 70 3.000 40.000 65 2.750 30.000
20.000 60 2.500
10.000 55 2.250 0 50 2.000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 dwelling completions building permits 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 construction sector capacity utilisation in %, 4Q average (lhs) construction sector employees in 000s, 4Q average (rhs)
Source: Feri Source: ifo, Federal Statistical Office
And, however heartening the increase in the number of construction permits may be, Obstacle No. 2: capacity bottlenecks only completed homes will ease the pressures on the housing market. But this is in the construction industry are precisely what is lacking, as is apparent from the increasing gap between permits and limiting completions completions. Over 240,000 homes were approved in the top locations between 2011 and 2016 but only around 166,000 were actually built. One reason for this is that capacity in the construction industry is already virtually fully utilised, especially in conurbations such as the top locations. Today, utilisation is even markedly greater than in the post-reunification boom. While high unemployment at the time meant that the number of construction workers could increase rapidly to deal with the flood in orders, it is far more difficult to employee new staff now because the pleasing upturn on the employment market offers job-seekers far better prospects today. Other factors behind the lagging completion figures may include rising construction costs, which may play havoc with the original budget for the construction project or deliberate delays in construction to take advantage of rising prices.
CONSTRUCTION ACTIVITIES HAVE STEPPED UP MOST NOTICEABLY ...THE GREATEST NUMBER OF HOMES PER CAPITA HAS BEEN IN BERLIN AND HAMBURG, WHILE... COMPLETED IN FRANKFURT AND MUNICH
residential building permits dwelling completions per 000 inhabitants 28.000 7
24.000 6
20.000 5
16.000 4
12.000 3
8.000 2
4.000 1
0 0 Berlin Dussel- Frank- Ham- Cologne Munich Stutt- Berlin Dussel- Frank- Ham- Cologne Munich Stutt- dorf furt burg gart dorf furt burg gart 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: Feri Source: Feri
There are relatively substantial differences in construction activity between the individ- The greatest number of homes ual locations. Accordingly, the most housing is being built in relation to the number of is being built in Frankfurt and inhabitants in Frankfurt and Munich with six and five homes per thousand inhabitants Munich ...
41 Real Estate Market Germany 2017 | 2018
respectively. Above-average amounts of housing had, however, previously been built in these two cities, which are also experiencing the most rapid growth in population. While three to four homes per 1,000 inhabitants were being built here in 2010/2011, the figure in Berlin, Dusseldorf and Hamburg was only one to two residential units.
However, the gap has shrunk considerably in the meantime. In Berlin especially and, ... while construction activities have to a lesser extent, in Hamburg, there has been a marked expansion in both increased most in Berlin and construction permits and completions. By contrast, residential construction activities in Hamburg Cologne, Munich and Stuttgart have remained relatively stable over the years. And in Frankfurt, there has been a perceptible increase in the number of completions while construction permits have risen more slowly.
Ultimately, there is no sign of any general easing on housing markets in the top The fraught housing market situa- locations. Rather, given the conditions described above – a sustained influx, a tion in top locations could intensify significant existing demand gap and insufficient construction – the situation on the still further housing market is most likely to deteriorate further. This is why the pressure towards higher rents will also persist. However, the degree to which housing markets are under strain differs considerably. High levels of immigration in Frankfurt and Munich are putting the market under a great deal of pressure. The fact that rents are already so high is most likely to have a dampening effect here because the number of households that can still pay the current rents or are prepared to do so is diminishing. The chart below right shows that residential rents are rising in all top locations but at different rates. While rents in Berlin, Dusseldorf, Hamburg and Cologne are rising at a somewhat more moderate rate, they are rising more rapidly in Frankfurt and Munich despite already being higher. Residential rents are also rising relatively sharply in Stuttgart.
TOP LOCATIONS: RENTS FOR NEW HOMES HAVE RISEN NEW HOMES IN MUNICH ARE 50% MORE EXPENSIVE THAN IN BERLIN CONTINUOUSLY SINCE 2006 AND COLOGNE
8 15 average rent first letting in Euro per sqm 19 6 14 18 4 13 17 16 2 12 15 Berlin 0 11 14 Dusseldorf 13 -2 10 Frankfurt 12 Hamburg -4 9 11 10 Cologne -6 8 9 Munich -8 7 8 Stuttgart 1998 2002 2006 2010 2014 2018e 7 Top-7 average rent first letting yoy in % (lhs) 6 average rent first letting in Euro per sqm (rhs) 1998 2002 2006 2010 2014 2018e
Source: BulwienGesa, DZ BANK Research forecast Source: BulwienGesa, DZ BANK Research forecast
The differences in the rate at which rents are rising mean that the range in residential The average first occupancy rent rents between the seven locations has expanded in recent years. While the average ranges from EUR 12 to 18 per sqm first occupancy rent ranged from EUR 9 to 13 per sqm in 2011, the range has currently increased to EUR 12 to 18 per sqm. However, the relative gap between the cheapest and the most expensive location is astonishingly stable over time. Apart from smaller deviations, the average first occupancy rent at the most expensive top location – that is consistently Munich – is 50 per cent higher than initially in Stuttgart and subsequently in Berlin as the least expensive top location today.
42 Real Estate Market Germany 2017 | 2018
THE RELATIVE GAP BETWEEN THE LEAST EXPENSIVE AND MOST RESIDENTIAL RENTS HAVE INCREASED VISIBLY LESS RAPIDLY IN EXPENSIVE TOP LOCATIONS IS LARGELY STABLE COLOGNE AND STUTTGART
1,8 18 residential: growth of the average rent first letting from 2006 to 2016 in % 1,6 16 1,4 14 57 1,2 12 52 52 1,0 10 48 48 0,8 8 44 0,6 6 0,4 4 0,2 2 33 0,0 0 29 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ratio most expensive to most affordable city (lhs) average rent first letting in Euro per sqm - most expensive city (rhs) Cologne Stutt- Hamburg Top-7 Dussel- Munich Frank- Berlin average rent first letting in Euro per sqm - most affordable city (rhs) gart dorf furt
Source: BulwienGesa, DZ BANK Research Source: BulwienGesa
The ratio of 1.5 is equally true of the prime segment of the housing market. Here, the In the upper market segment, it first occupancy rent ranges from just over EUR 16 per sqm in Cologne to EUR 24 in costs between EUR 16 and 24 Munich. It is just over EUR 20 in Frankfurt and Hamburg. Berlin, Dusseldorf and per sqm to rent a newly constructed Stuttgart are, in contrast, a good EUR 2 to 3 less expensive. apartment
FORECAST "HOUSING" UP TO 2018
Dus s e l- Fr ank - Ham - Stutt- Year Berlin Cologne dorf furt burg Munich gart Top-7 De m and Population in thoausand 2016 3.513 1.053 610 736 1.784 1.457 621 9.775 5-year change in % 2011-2016 6,6 4,6 4,1 9,9 4,4 7,9 5,9 6,2 Private households in thousand 2016 2.057 578 330 408 1.031 842 336 5.582 Unemployment rate in % 2016 9,8 8,7 7,8 6,3 7,1 4,6 5,3 7,8 Disposable income per capita in Euro 2016 17.025 22.295 25.965 21.898 21.645 25.189 24.756 21.069 Supply 0 Dwelling units in thousand 2016 1.940 542 334 381 927 784 307 5.216 Annual completions 2005-2015 1,6 2,9 1,8 4,3 2,6 4,8 2,6 2,7 per 1000 inhabitants 2016 3,9 3,5 2,8 5,8 4,3 5,1 3,4 4,1 Residential rent 0 First letting, average rent 2016 11,6 12,0 12,6 14,8 13,4 17,0 13,0 13,2 in Euro/sqm 2017e 12,0 12,2 12,9 15,3 13,7 18,0 13,5 13,6 2018e 12,3 12,5 13,2 15,8 14,0 18,5 14,0 14,0 2016 0,9 4,3 1,6 9,6 1,5 7,6 8,3 3,8 YOY change in % 2017e 3,4 1,7 2,4 3,4 2,2 5,9 3,8 3,5 2018e 2,5 2,5 2,3 2,9 2,2 2,8 3,7 2,6 5-year change in % 2011-2016 27,5 14,3 16,7 28,7 7,2 27,8 34,0 21,7 First letting, maximum rent 2016 17,0 16,0 16,5 21,0 20,2 24,0 17,5 18,8 in Euro/sqm 2017e 17,5 16,2 16,9 21,0 20,5 24,0 17,7 19,1 2018e 17,9 16,5 17,3 21,5 20,8 24,5 18,0 19,5 2016 6,3 3,2 3,1 5,0 3,6 6,7 6,1 5,3 YOY change in % 2017e 2,9 1,3 2,4 0,0 1,5 0,0 1,1 1,6 2018e 2,3 1,9 2,4 2,4 1,5 2,1 1,7 2,0 5-year change in % 2011-2016 18,9 14,3 13,8 23,5 12,2 29,7 33,6 19,9
Source: Source: BA, BulwienGesa, Feri, DZ BANK Research forecast
43 Real Estate Market Germany 2017 | 2018
Despite the differences between the rental levels of the individual housing markets, First occupancy rents in the top the percentage rent increase has been relatively similar in most locations. First occu- locations have risen by around pancy rents in Dusseldorf, Frankfurt, Hamburg and Munich have risen by around 50 per cent within ten years 50 per cent within ten years. They have risen by a few percentage points more in Berlin because of the low starting level, among other factors. Residential rents in Cologne and Stuttgart have, in contrast, risen appreciably less quickly. Here, the increase over ten years is around 30 per cent.
The complaints frequently expressed recently that rents are prohibitive in Germany is Rental housing is often far more put into perspective when rents are considered in a European context. Despite the expensive in other European sharp rent rises in recent years, even Munich as the most expensive place to live in countries Germany is not expensive compared with other large European cities.
DESPITE THE HIGH RENT INCREASES, IT IS POSSIBLE TO LIVE COMPARATIVELY CHEAPLY IN BIG GERMAN CITIES COMPARED WITH THE REST OF EUROPE
monthly rent for a 3 bedroom apartment in the city centre in Euro 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0
Source: www.numbeo.com
44 Real Estate Market Germany 2017 | 2018
OVERVIEW OF FORECASTS
Population in Population GDP P.c. GDP Annual p.c. disposable Unemployment rate Structural data (as at 2016) thousands 2006-2016 (%) in EUR m in EUR income in EUR (%) Berlin 3,513 9.0128 36,507 17,025 9.8 Cologne 1,053 7.258 54,942 22,295 8.7 Dusseldorf 610 6.646 75,476 25,965 7.8 Frankfurt 736 16.069 93,766 21,898 6.3 Hamburg 1,784 7.0114 63,728 21,645 7.1 Munich 1,457 14.9105 72,181 25,189 4.6 Stuttgart 621 8.850 81,184 24,756 5.3 Top locations 9,775 9.6 570 58,361 21,069 7.8
Retail space Change in prime rent Retail sales vs previ- Retail properties as at 2016 Prime rent in EUR/sqm vs previous year (%) ous year (%) in 2006- Per inha- 1,000 2016 bitant 2016 2017e 2018e 2016 2017e 2018e 2016 2017e 2018e sqm (%) in sqm Berlin 6,339 55.0 1.8 310310 310 3.3 0.0 0.0 2.92.4 2.6 Cologne 1,413 8.9 1.3 250255 255 0.0 2.0 0.0 3.52.8 3.0 Dusseldorf 1,240 52.6 2.0 275280 280 1.9 1.8 0.0 3.62.9 3.2 Frankfurt 1,536 53.0 2.1 300300 300 0.0 0.0 0.0 3.52.9 2.9 Hamburg 2,985 42.5 1.7 285285 285 0.0 0.0 0.0 4.03.6 3.6 Munich 2,084 39.9 1.4 345345 345 1.5 0.0 0.0 3.93.5 3.5 Stuttgart 1,064 52.8 1.7 250250 250 2.0 0.0 0.0 3.22.6 2.7 Top locations 16,661 45.1 1.7 297 298 298 1.8 0.3 0.0 3.5 3.0 3.1
Office space Change in prime rent Vacancy rate Office properties Prime rent in EUR/m2 in 2016 vs previous year (%) (%) in Per in- Per office 1,000 habitant worker in 2016 2017e 2018e 2016 2017e 2018e 2016 2017e 2018e sqm in sqm sqm Berlin 18,932 5.4 33.3 28.029.4 30.5 16.7 5.0 3.7 3.02.4 2.1 Cologne 7,599 7.2 31.5 21.021.2 21.5 0.0 1.0 1.4 5.54.8 4.5 Dusseldorf 7,554 12.4 36.5 24.524.9 25.3 2.1 1.6 1.6 8.37.6 7.4 Frankfurt 10,250 13.9 35.5 35.536.0 37.0 0.0 1.4 2.8 10.710.0 9.3 Hamburg 13,718 7.7 32.2 26.026.4 27.0 4.0 1.5 2.3 5.34.9 4.7 Munich 13,728 9.4 32.8 34.735.8 36.8 1.8 3.2 2.8 2.71.9 1.5 Stuttgart 7,682 12.4 39.2 19.720.0 20.2 2.1 1.5 1.0 2.92.8 2.7 Top locations 79,463 8.1 33.9 28.0 28.7 29.5 4.9 2.6 2.6 5.1 4.5 4.2
First occupancy aver- First occupancy rents Development from First occupancy aver- Residential properties age rents vs previous in prime locations 2011 to 2016 (%) age rents in EUR/sqm year (%) EUR/sqm Inhabi- House- Housing 2016 2017e 2018e 2016 2017e 2018e 2016 2017e 2018e tants holds stock Berlin 6.6 6.5 2.1 11.612.0 12.3 0.9 3.4 2.5 17.017.5 17.9 Cologne 4.6 5.6 2.6 12.012.2 12.5 4.3 1.7 2.5 16.016.2 16.5 Dusseldorf 4.1 4.0 2.2 12.612.9 13.2 1.6 2.4 2.3 16.516.9 17.3 Frankfurt 9.9 10.1 4.8 14.815.3 15.8 9.6 3.4 2.9 21.021.0 21.5 Hamburg 4.4 5.9 3.5 13.413.7 14.0 1.5 2.2 2.2 20.220.5 20.8 Munich 7.9 9.1 3.9 17.018.0 18.5 7.6 5.9 2.8 24.024.0 24.5 Stuttgart 5.9 6.4 2.6 13.013.5 14.0 8.3 3.8 3.7 17.517.7 18.0 Top locations 6.2 6.8 2.9 13.2 13.6 14.0 3.8 3.5 2.6 18.8 19.1 19.5
Source: Feri, BulwienGesa, DZ BANK Research forecast
Note on the prime rents used for retail and office properties: the values taken from BulwienGesa represent an average of the top 3%–5% of the market lettings, meaning that the figure quoted does not equate to the absolute highest rent. Higher specified rents for individual locations which are sometimes stated in alternative market reports are therefore not contradictory.
45 Real Estate Market Germany 2017 | 2018
IMPRINT Published by: DG HYP – Deutsche Genossenschafts-Hypothekenbank AG, Rosenstrasse 2, 20095 Hamburg Management Board: Dr. Georg Reutter (Chairman of the Management Board), Manfred Salber
Authors: Responsible: Stefan Bielmeier, Head of Research and Volkswirtschaft Author: Thorsten Lange, CIIA/CEFA, Analyst
All DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main 2017
Reprinting and reproduction requires the approval of DG HYP
DISCLAIMER This document has been published by DG HYP – Deutsche Genossenschafts-Hypothekenbank AG, Hamburg. This document has been prepared by DZ BANK AG Deutsche Zentral-Genossenschaftsbank („DZ BANK“) and is intended for distribution within the Federal Republic of Germany. This document is not intended for persons having their domicile and/or registered offi ce and/or branches outside Germany, particularly in the United States of America, Canada, the United Kingdom or Japan. This brochure may only be distributed outside Germany in compliance with the laws and regulationsapplicable in the relevant country. Anyone gaining possession of this information or material must inform themselves of theapplicable laws and regulations and observe said laws and regulations. Nothing contained herein constitutes a public offer to buy securities or fi nancial instruments. This document constitutes an independent assessment of the relevant issuer and/or securities by DZ BANK. All assessments, expressions of opinion and statements contained herein are those of the writer and are not necessarily shared by the issuer or third parties. DZ BANK has obtained the information on which this document is based from sources that are considered reliable, but has not, however, verifi ed all of these documents. Accordingly, no representation or warranty as to the accuracy or completeness of the information or expressions of opinion contained herein is made by DZ BANK. DZ BANK shall not be liable for losses caused by the distribution and/or use of this document or any losses in connection with the distribution and/or use of this document. Investors are urged not to base their investment decision regarding securities or other fi nancial instruments on this document, but rather on personal discussions with an adviser and the relevant sales prospectus or information memorandum. Depending on the specifi c investment objectives, investment horizon, and fi nancial situation, any such recommendations may not suitable, in whole or in part, for individual investors. As trading recommendations are largely based on short-term market conditions, they may also confl ict with other recommendations made by DZ BANK. The recommendations and expressions of opinion contained herein are as at the date of this document. They may becomeobsolete as a result of future developments, without this document being amended accordingly.
Competent supervisory authority Bundesanstalt für Finanzdienstleistungsaufsicht (German Federal Financial Supervisory Authority), Lurgiallee 12, 60439 Frankfurt am Main, Germany
46 Real Estate Market Germany 2017 | 2018
DG HYP OFFICES
Deutsche Genossenschafts-Hypothekenbank AG
20095 Hamburg, Germany Rosenstrasse 2 PO Box 10 14 46 20009 Hamburg Phone +49 40 33 34-0 Fax +49 40 33 34-11 11 www.dghyp.de
Real Estate Centres
DG HYP DG HYP DG HYP Real Estate Centre Berlin Real Estate Centre Dusseldorf Real Estate Centre Frankfurt Pariser Platz 3 Steinstrasse 13 CITY-HAUS I, Platz der Republik 6 10117 Berlin, Germany 40212 Dusseldorf, Germany 60325 Frankfurt/Main, Germany Phone +49 30 31993-5101 Phone +49 211 220499-10 Phone +49 69 750676-21 Fax +49 30 31993-5036 Fax +49 211 220499-40 Fax +49 69 750676-99
DG HYP DG HYP DG HYP Real Estate Centre Hamburg Real Estate Centre Munich Real Estate Centre Stuttgart Rosenstrasse 2 Türkenstrasse 16 Heilbronner Strasse 41 20095 Hamburg, Germany 80333 Munich, Germany 70191 Stuttgart, Germany Phone +49 40 3334-3778 Phone +49 89 512676-10 Phone +49 711 120938-0 Fax +49 40 3334-1102 Fax +49 89 512676-30 Fax +49 711 120938-30
Regional Offices
DG HYP DG HYP DG HYP Regional Office Hanover Regional Office Kassel Regional Office Leipzig Berliner Allee 5 Rudolf-Schwander-Strasse 1 Schillerstrasse 3 30175 Hanover, Germany 34117 Kassel, Germany 04109 Leipzig, Germany Phone +49 511 86643808 Phone +49 561 602935-23 Phone +49 341 962822-92 Fax +49 40 3334-782-3775 Fax +49 561 602935-24 Fax +49 341 962822-93
DG HYP DG HYP Regional Office Mannheim Regional Office Nuremberg Augustaanlage 61 Am Tullnaupark 4 68165 Mannheim, Germany 90402 Nuremberg, Germany Phone +49 621 728727-20 Phone +49 911 94009816 Fax +49 621 728727-21 Fax +49 40 3334782-4711
Institutional Clients
Hamburg Rosenstrasse 2 20095 Hamburg, Germany Phone +49 40 3334-2159 Fax +49 40 3334-1260
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DG HYP Deutsche Genossenschafts-Hypothekenbank AG Rosenstrasse 2 | 20095 Hamburg | Germany Phone: +49 40 33 34-0 | Fax: +49 40 33 34-11 11
www.dghyp.de As at = October 2017