Market Survey Commercial | Office Letting

2020 / Q 1 – 4 Berlin

Hamburg | Sylt | Berlin Commercial | Office Letting Berlin 2020 / Q 1 – 4

Key Facts Office Letting

653,000 m² | - 28 % year-on-year change

39.50 €/m² | + 2.6 % year-on-year change

28.60 €/m² | + 3.6 % year-on-year change

2.1 % | + 0.9 % pp year-on-year change

20,147,100 m² | + 1.6 % year-on-year change

Stresemannstrasse / Potsdamer Platz Take-up of space Premium rent mth (net) Average rent mth (net) Vacancy rate Office stock

“The high proportion of off-plan agreements in develop- The biggest rental agreements / owner-occupier construc- ments projected for 2021/22 is stabilizing the market.” tion starts were signed by state pension provider Deutsche Holger Michaelis | Managing director Rentenversicherung for about 84,000 m² in the Blackstone property Cule (An den Treptowers 3 | Periphery South) and by the state railway Deutsche Bahn AG for 25,000 m² in the Take-up of space Gasometer in Schöneberg (Euref-Campus 29 | Schöneberg). Take-up of space appreciably lower Other large amounts of space were leased to the Berlin- er Sparkasse, a bank, in Square 1 (about 23,000 m² | Wag- Having set ever new records in recent years with take-up of ner-Régeny-Strasse 1 | Adlershof) and 8 further agreements office space reaching 910,000 m² in 2019, the Berlin market for more than 10,000 m² were concluded in various sub-mar- plummeted to 653,000 m² in 2020 as a direct result of the kets. The other 14 agreements for space in excess of 5,000 m² coronavirus crisis, thus dipping below the long-term average. were distributed throughout the entire market. Take-up fell by 28 % due to a combination of economic uncer- tainty and companies’ decisions to shelve expansion for the Take-up of space time being. Nevertheless, several agreements for very large 2016–2020 / Q 1–4 | in 000 m² | incl. owner-occupiers premises were noted; here the public sector was the most 10-years-average (2011 – 2020): prominent player. Owner-occupiers accounted for 6 % of the approx. 731.000 m² market, similar to the long-term average and slightly higher than the prior year.

In 2020 a total of 26 agreements were signed for premises larger than 5,000 m², sixteen fewer than in 2019. Total take-up of space in this size category fell from 511,300 m² to 376,700 m² but its percentage share of the total market re- mained unchanged at 58 %. Even though 12 agreements for more than 10,000 m² of space (including one lease for 84,300 m²) boosted the annual total by some 276,000 m², this 820 900 835 910 653 sector could not compensate for the overall decline in demand 2016 2017 2018 2019 2020 due to the pandemic. Source: Grossmann & Berger GmbH

www.grossmann-berger.de | page 2 Commercial | Office Letting Berlin 2020 / Q 1 – 4

1. DRV Bund | An den Treptowers 3 | 84.300 m²

2. Deutsche Bahn AG | Euref-Campus 29 | 25.000 m²

3. Berliner Sparkasse | Wagner-Régeny-Strasse 1 | 22.300 m²

4. DRV Bund | Heilbronner Strasse 26 | 15.600 m²

5. DRV | Siemensdamm 59–63 | 13.400 m²

6. Zalando SE | Edith-Kiss-Strasse 1 | 12.900 m²

7. ZUG gGmbH | Stresemannstrasse 69–71 | 12.000 m²

8. Bundesrat | Leipziger Strasse 2 | 9.000 m²

Take-up of space As a result of the big individual agreements already named, 2020 / Q 1 – 4 | in 000 m² | by size of lettings the greatest share of take-up in 2020 was posted in Pe- riphery South sub-market (130,000 m² or 19.9 %), followed by Friedrichshain with some 11.8 % (about 77,000 m²) and Mitte 1 a with 10.6 % (some 69,200 m²).

The next-ranked sub-market was Kreuzberg which took a share of 7.8 % of the market (about 51,000 m²), closely followed by Tiergarten with 7.7 % (about 50,300 m²). Looking at sub-markets below the 10 % mark, one finds Mitte with a share of 7.1 % of take-up (46,400 m²) and Charlottenburg with 6.8 % (44,400 m²). Schöneburg closed with 6.6 % of the market (43,100 m²), followed by Adlershof in ninth place with 5.5 % 53,400 50,700 71,800 68,200 386,700 (about 35,900 m²). All the other sub-markets contributed less up to up to up to up to up to than 5 % to the total volume of take-up. 500 1.000 2.000 5.000 5.000 Source: Grossmann & Berger GmbH For many years the greatest demand for Berlin offices has come from the information and communication technologies industry (ITC) including their associated internet service providers and start-ups, and from the public administration / as- Take-up of space sociations / churches sector. These two groups regularly alter- 2020 / Q1 – 4 | by industry nated between first and second place. In 2019 most demand was generated by the ITC segment (25 %), but in 2020 it was the public sector which dominated the market with a share of Public adminis- 41.5 % (about 271,000 m²), pulling far ahead of the ITC industry, tration, associa- tions, religious where 78,400 m² of take-up translated into 12.0 % of the total.

Other 23% The public sector was behind 11 of the 26 new leases or owner-occupier construction starts involving office suites of 42% 5,000 m² or more; the pension provider Deutsche Renten- Tourism/ versicherung played a significant role in the strong result, 5% transport signing three rental agreements for office space totalling 113,400 m². Third place went to the banking and finance in- Construction/ 8% property dustry with 10.9 % of take-up (71,200 m²). Other segments, for example construction and real estate, fell below the 10 % mark Banks/financial 11% services (7.9 % | 51,500 m²) whereby the providers of coworking space, 12% IT/tele- communication also included in this category, contributed a mere 18,700 m² to the result. Tourism and transport noted a share of 5.2 % (34,000 m²). All other sectors of industry accounted for less Source: Grossmann & Berger GmbH than 5 % each.

www.grossmann-berger.de | page 3 Commercial | Office Letting Berlin 2020 / Q 1 – 4

Premium and average rent Rents 2016–2020 / Q 1–4 | in €/m² / mth (net) Rent increases slow down

average rent Despite the lower turnover figures the shortage of space — es- 39.50 premium rent 38.50 pecially in central locations — pushed up rental rates, although these increases were very moderate compared with previous 33.50 years. 30.00 28.60 27.50 27.60 Whereas in 2017 rents over 30 €/m² were agreed for only 7.7 % of total take-up, in 2019 this figure was exceeded for 21.30 34.1 % of take-up. In 2020 the proportion of rents over € 30 19.50 rose to 42.2 %. The average rent, weighted by space taken, 16.10 climbed to a new record, rising year on year from 27.60 €/m² to 28.60 €/m²; this modest 3.6 % increase follows the 30 % rise seen in 2019. Premium rents also rose slightly by 2.6 %, moving 2016 2017 2018 2019 2020 up from 38.50 €/m²/month to 39.50 €/m²/month to hit the Source: Grossmann & Berger GmbH highest level in 27 years.

Available and vacant space Vacancies now trending upwards Vacant space | Vacancy rate At present some 420,000 m² of office space in Berlin is avail- 2016–2020 / Q 1–4 | in 000s m² able at short notice, or 75 % more than was on the market a year ago; after 11 years of falling vacancy rates this possibly represents a reversal of the downwards trend. With total office stock standing at 20.2 m m², this translates into a still low vacancy rate (including sublet space) of 2.1 % compared with 1.2 % in the preceding year. 3.7% Higher vacancy rates are the result of a combination of re- 2.2% 2.1% 1.8% duced demand, high volumes of building completions and the 1.2% increase in sub-letting or working from home. A variety of 710 430 350 240 420 tech companies, having rented off-plan in new developments 2016 2017 2018 2019 2020 in 2019 in order to secure space reserves for expansion, put Source: Grossmann & Berger GmbH some of this volume back on the market in 2020 by offering it to sub-tenants. In 2020 some 325,000 m² of office space was completed, 76 % of which had been let by the end of the year. If the pandemic had not postponed the completion of some large construction projects to 2021, the amount of new build space would have been even higher. Completions | Pre-let rate 2018 – 2022 | in 000 m² In the years 2021 / 2022 some 1.16 m m² of new office space will come onto the Berlin market, of which 741,000 m² is scheduled for 2021. Such high completion figures were last seen 22 years ago. 560,000 m² (48 %) of the space in the pipeline for 2021 / 22 has been let already. It is to be expected that the pre-let ratio will continue to rise over the coming months. 54% 38%

249 340 340 741 421 2018 2019 2020 2021 2022 Source: Grossmann & Berger GmbH

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Outlook Effects on the labour market

The rate at which infections have risen and the partial lockdown Take-up of space imposed in November compound the uncertainties for business Take-up of space in 2021 is forecast at 750,000 m² if the uncer- managers. The impact of the coronavirus pandemic on the tainties caused by the coronavirus crisis abate during the year economy has also been felt on the labour market in Berlin. The thanks to higher numbers of vaccinations and an economic jobless rate was 10.1 % in December 2020, but it had been 7.7 % recovery. the year before. Over the course of the year the number of jobless rose by 50,000 to 202,388. Nationwide, Germany’s unem- Rents ployment rate was 5.9 % in December. The ifo Institute detects Based on the current reticence of business managers to rent a tiny downturn in the German labour market. In December the new premises, rents will most probably stagnate, although the employment barometer sank to 95.5 points, down from 96.7 in shortage of space in the CBD should be a stabilizing factor. November. However, huge differences exist from sector to sector. Whereas construction firms and service providers, above Available space all IT companies, plan to hire more staff, managers in the travel In view of a pre-let ratio of 54 % for new office space due for and hospitality industries still plan to cut payrolls. By contrast completion in 2021, it is assumed that the vacancy rate will rise the ifo index of business confidence rose from 90.7 points in to around 3.0 %. However, there is every reason to believe that November to 92.1 in December. The partial lockdown in place top-quality new-build space in readily accessible locations — es- since November has stalled the moderate V-shaped recovery pecially in the central city — will remain easy to let whereas anticipated by the World Economy Institute (HWWI). Despite there is unlikely to be much demand for locations outside the this development the Institute still expects 2020 to close with S-Bahn rail ring line that are not served by public transport. The economic contraction of 5.0 %. However, they have revised the probable exceptions are properties that are oriented towards growth forecast for 2021 downward. Assuming that the num- the new BER airport. ber of new Covid cases falls significantly and vaccinations be- come more widely available, growth should be 4.0 %. In 2022 growth of 2.5 % is forecast and a return to growth rates seen prior to the crisis.

Office building close to federal highway B 1. Grossmann & Berger‘s Promise.

Frankfurter Allee 206 | Lichtenberg | approx. 20.000 m²

030 - 202 953 20 grossmann-berger.de 96

273

109

10 11 2

273

10 111

96a

109

2 96

158

96a

111 11

109

273 114

96a

158 2

Havel Commercial | Office Letting Berlin 2020 / Q 1 – 4 158

5 96a Reinickendorf 114 10 Overview of office sub-markets Berlin 158 2 273 10 5 2020 / Q 1 – 4

Tegeler 111 109 See 158 96 96a 12 16

96a 158 TXL 96 Pankow

Spandau 109

Havel 2

111 96 100 Marzahn-Hellersdorf

5 5

96a 158 5 Spree 9 2 13

10 1 7 5 4 2 1 5 Lichtenberg 2 2 5 158 100 2 1 5 5 Mitte 10 2 96 3 96a Tiergarten 1 Charlottenburg- 5 5 2 1 5

Wilmersdorf 5 1 1 1 6 15 Kreuzberg- 96a 10 Spree 2 Friedrichshain 96

1 115 100

96a

96a 10

Grunewald 8 100 Neukölln Treptow-Köpenick Tempelhofer Tempelhof- Feld 2 14 273 103 Schöneberg 96 100 96a

10 Havel 2 Steglitz- 113 Zehlendorf Spree 1

115 96 11

101 96a Großer 1 Adlershof Dahme Müggelsee Großer WiSta 273 Wannsee Adlershof

1 Take-up of space Rents paid Average rent Completions Sub-markets in m² incl. longer-term in €/m²/mth 96a2021/2022 101 96

1 Berlin-Brandenburg owner-occupier in €/m²/mth (net) (net) in m² 113 Müggelberge

2 1 Berlin-Brandenburg

10 115 1 KU’DAMM + SEITENSTRASSEN 20,896 20.10 – 55.00 32.75 25,400 179 10 Dahme 273 2 MITTE 1 A 69,218 16.00 – 42.80 37.00179 121,800 1 96 Teltow 101 96a 3 POTSDAMER-/ LEIPZIGER PLATZ 7,836 24.00 – 38.30 32.10 126,700 117 1

1 2 4 CHARLOTTENBURG 44,404 14.00 – 37.00 96a 24.40 27,500

179 Seddinsee 5 FRIEDRICHSHAIN 77,054 11.00 – 38.00 30.70 120,400

117

1 10 6 KREUZBERG 50,934 14.90 – 39.00 BER29.70 161,500 1

96a MITTE 101 2 7 46,363 14.00 – 42.10 32.40 75,700

8 SCHÖNEBERG 43,098 96 17.00 – 33.00 29.60 137,800 115

9 TIERGARTEN 50,281 20.00 – 35.00 30.30 113 68,200 10

10 WILMERSDORF 8,489 14.00 – 35.00 28.60 96,800 Schwielowsee 11 ADLERSHOF 35,915 12.00 – 21.30 19.80 20,000 2 101 12 PERIPHERIE-NORD 30,691 11.00 – 30.00 22.60 6,500

96 13 PERIPHERIE-OST 29,385 11.00 – 28.50 22.60 34,000 2

14 PERIPHERIE-SÜD 129,947 12.00 – 31.00 28.70 9,000 10 10 12 15 PERIPHERIE-WEST 653 26.00 – 26.00 26.00 140,900 10 10

10 16 REINICKENDORF10 7,836 13.00 – 20.00 19.40 10,200

10 179 10 13 TOTAL 653,000 11.00 – 42.80 28.60 1,182,400 101

179 9 www.grossmann-berger.de | page 6 Commercial | Office Letting Berlin 2020 / Q 1 – 4

Skilled consultancy Services and contacts

What can we do for you? Ulrich Denk An analysis of the property markets is an important part Diplom-Geographer | Investment Consultant / Research of the wide-ranging consultancy services offered by Gross- phone: + 49 (0)30 / 202 953 21 mann & Berger. We would be pleased to be of assistance in Mail: u.denk @ grossmann-berger.de your decision-making process and can draft an offer that is tailored to your specific requirements.

Glossar Definitions, office market

Take-up of space: Take-up of space is the total of all space newly let plus that sold to Photo credits: or built by an owner-occupier during the period under review. The operative date for Cover: Two Towers at Spittelmarkt; page 3: ParkSide Office Gallery; page 5: Frank- inclusion in the statistics is the date on which the lease or purchase agreement was furter Allee 206; © Johs. Reese Immobilien Consulting; signed. Lease renewals are not counted as take-up. Areas are stated on the basis of page 2: Stresemannstrasse, © Grossmann & Berger GmbH Berlin; the guide for calculating the rental area in commercial leases (MF/G). all charts: Grossmann & Berger Berlin Premium rent: The premium rent is that paid for the most expensive 3 % of the market for new lets (not counting owner-occupiers) during the 12 months just ended and We draw your attention to the fact that all statements made here are non-binding. is stated as the average of such rents. Most of the information is based on third-party reports. The sole intention of this Average rent: The average rent paid is calculated by taking the individual rents market survey is to provide general infomation for our clients. agreed in all leases signed over the past 12 months, weighting them by the amount of space rented and computing the mean value. Figures refer to nominal net rents Grossmann & Berger GmbH • Potsdamer Platz 9 • D - 10117 Berlin ex services. phone: +49 (0) 30 / 202 953 - 20 • Fax: +49 (0) 30 / 202 953 - 25 Vacancies: Vacancies include all office space that is available to new tenants within berlin @ grossmann-berger.de • www.grossmann-berger.de three months. Sub-let space is counted as vacancy. Managing directors: Sandra Ludwig, Andreas Rehberg, Holger Michaelis, Lars Seidel Chairman of the supervisory board: Frank Brockmann Sitz Hamburg Registered office Hamburg• Registered at Hamburg no. B 25866