GERMANY 21: REGIONALER OFFICE INDEX Asking Rents in German Key Regional Cities 12Th Edition – Focal City Karlsruhe Status: 3/2017 CORPUS SIREO
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GERMANY 21: REGIONALER OFFICE INDEX Asking Rents in German Key Regional Cities 12th Edition – Focal City Karlsruhe Status: 3/2017 CORPUS SIREO CONTENTS Market Overview and Key Ratios 3 Index Performance 10 – Benchmark Comparison – Age Categories – City Trends Focal city Karlsruhe 20 Interview with Michael Kaiser, Director of Economic Development in Karlsruhe 22 Methodology 26 About empirica and CORPUS SIREO 28 Contact 32 2 Overview SUSTAINED MOMENTUM ON THE GERMAN OFFICE MARKETS Dear Reader, The office rental and investment market was in extremely good shape in 2016. Driven by robust economic data, lettings on the main office markets increased by around 10% year- on-year. Vacancy rates continued to decline despite the moderate rise in construction activity, and there was growth in both prime rents and average rents. On the investment market, office properties worth almost €25 billion changed hands. Following a muted first half of the year, the market rallied towards the end of 2016 with turnover of almost €10 billion in the final quarter. This meant that the volume for the year as a whole was comparable with the previous year in spite of the shortage of supply, with investors proving relatively reluctant to sell in the current low-interest environment. Strong demand led to a further rise in the price level in the top seven cities and the regio- nal office markets, with initial yields declining significantly in some cases. The development of the rental markets, and especially asking rents in 14 selected regional centres, is illustrated in the regional office index, which CORPUS SIREO is publishing in conjunction with the research firm empirica for the twelfth time. The index shows a tangible increase in asking rents in the second half of 2016. The regional focal point of this edition lies on the office market of Karlsruhe, which is characterised by long-term positive rental development accompanied by pronounced stability. We hope you will enjoy reading this publication. Ralph Scherer and Ralf Bäuchle 3 CORPUS SIREO REGIONAL CENTRES SUPPLEMENT THE BIG OFFICE LOCATIONS Regional office markets enjoy solid In addition to these regional centress, economic foundations Germany has a number of other cities with positive growth trends whose rental de- The 14 cities examined by CORPUS velopment is not yet included in the office SIREO and empirica in “GERMANY 21: index on account of their comparatively Regional Office Index” are characterised small market size. by growing office employment and stable demand for office space. These regional centres were selected on the basis of the following criteria: – absolute size of the office market – importance of office employment for the regional macro-economy – excellent historical and promising future demand trends Change in office employment 2007–2025 in % below -15 % -15 % to -5 % Key regional centres Focal cities of -5 % to 5 % previous editions Examples of other attractive office markets 5 % to 15 % above 15 % Top 7 cities 4 Overview SELECTION OF THE REGIONAL CENTRES Growth in office employment 2007–2025 KIEL ROSTOCK HAMBURG BREMEN BERLIN HANNOVER POTSDAM MÜNSTER DORTMUND ESSEN LEIPZIG DUSSELDORF DRESDEN COLOGNE ERFURT AACHEN BONN WIESBADEN FRANKFURT/MAIN MAINZ MANNHEIM NUREMBERG KARLSRUHE STUTTGART AUGSBURG MUNICH FREIBURG Previous editions are available as free downloads at: www.corpussireo.com/downloads Source: empirica 5 CORPUS SIREO FALLING YIELDS IN THE REGIONAL CENTRES Affordable office market in Karlsruhe Aachen 1.8 Prime rent 14.50 Interpretation of the available key market data based on Return 5.0 the example of Karlsruhe: At 2.9 million square metres, Take-up 35 Karlruhe is one of the smaller regional office markets. Take-up in 2017 is expected to be lower than the figure of Vacancy 2.4 74,000 square metres recorded in the previous year. Prime rent in Karlsruhe at year-end 2016 was €13.30/sqm. The Bonn 4.0 vacancy rate of 3.6% is expected to decline further over Prime rent 19.00 the next year. Return 4.6 Take-up 90 Vacancy 2.6 (Focal city, 2nd edition) Bremen 3.2 Prime rent 12.80 Key figures for 2016 Return 5.3 Take-up 88 City Trend Office stock (YoY change) (GLA, in million sqm) Vacancy 4.5 Prime rent stable €/sqm/month (Focal city, 6th edition) Yield rising Net initial yield Dortmund 3.3 (prime properties, in %) Prime rent 13.50 Take-up declining Net absorption Return 5.0 (in thousand sqm) Take-up 100 Vacancy Vacancy rate (in %) Vacancy 5.4 (Focal city, 5th edition) 6 Überblick Dresden 3.3 Leipzig 3.4 Nuremberg 4.5 Prime rent 12.60 Prime rent 13.00 Prime rent 13.80 Return 5.0 Return 5.0 Return 4.8 Take-up 80 Take-up 97 Take-up 70 Vacancy 8.4 Vacancy 11.4 Vacancy 6.1 (Focal city, 8th edition) (Focal city, 4th edition) (Focal city, 1st edition) Essen 3.7 Mainz 2.0 Wiesbaden 2.8 Prime rent 14.00 Prime rent 12.70 Prime rent 14.30 Return 5.0 Return 5.3 Return 5.1 Take-up 85 Take-up 21 Take-up 58 Vacancy 5.4 Vacancy 5.5 Vacancy 5.7 (Focal city, 10th edition) (Focal city, 7th edition) Hanover 6.1 Mannheim 2.6 Prime rent 14.80 Prime rent 15.20 Return 4.7 Return 5.0 Take-up 110 Take-up 91 Vacancy 5.5 Vacancy 4.9 (Focal city, 3rd edition) (Focal city, 9th edition) Karlsruhe 2.9 Münster 2.8 Prime rent 13.30 Prime rent 14.40 Return 5.0 Return 5.0 Take-up 74 Take-up 60 Vacancy 3.6 Vacancy 3.0 Source: empirica, BulwienGesa, (Focal city, 12th edition) (Focal city, 11th edition) Wirtschaftsförderung der Städte 2017 7 CORPUS SIREO BERLIN STAYS AHEAD IN TERMS OF TAKE-UP Vacancy rate in Munich continues to fall Interpretation of the available key market data based on the example of Munich: Prime rent in the Bavarian capital amounted to €34.70/sqm at year-end 2016, placing it only just behind Frankfurt; further growth is anticipated. The vacancy rate in Munich has reached a low level of 2.7%, and this figure is expected to decline further. Key figures for 2016 City Trend Office stock (YoY change) (GLA, in million sqm) Prime rent stable €/sqm/month Yield rising Net initial yield (prime properties, in %) Take-up declining Net absorption (in thousand sqm) Vacancy Vacancy rate (in %) 8 Overview Berlin 23.6 Düsseldorf 9.1 Prime rent 28.00 Prime rent 24.50 Return 3.3 Return 4.1 Take-up 875 Take-up 308 Vacancy 3.0 Vacancy 8.3 Frankfurt 12.4 Hamburg 17.2 Prime rent 35.50 Prime rent 26.00 Return 4.1 Return 3.6 Take-up 463 Take-up 550 Vacancy 10.7 Vacancy 5.3 Cologne 9.4 Munich 17.1 Prime rent 21.00 Prime rent 34.70 Return 4.1 Return 3.2 Take-up 375 Take-up 581 Vacancy 5.6 Vacancy 2.7 Stuttgart 9.3 Prime rent 19.70 Return 3.9 Take-up 400 Vacancy 2.9 Source: empirica, BulwienGesa 9 CORPUS SIREO NEW UPTURN IN ASKING RENTS IN THE REGIONAL CENTRES Regional markets outperform the top 7 in of 2.9% in the first half of the year was terms of rental development followed by a modest rise of just 0.2% in the second half, suggesting a shortage of Average asking rents for office space in high-quality space in particular. the 14 regional markets increased by an average of 1.8% in the period from July Asking rents in the top seven cities ave- to December 2016. Development saw the raged €13.66/sqm in the fourth quarter same pattern as in 2015, with stability in of 2016, with rents excluding the most the first half of the year followed by sub- expensive 10% of the market ranging from stantial growth in the second half. €7.50 to €21.00/sqm. Only the mid-price segment saw rental growth, whereas rents In the regional centres, the asking rent in the upper and lower market segments for office space amounted to €8.42/sqm remained unchanged compared with the on average in the fourth quarter of 2016. halfway point of the year. Rents mainly came in at between €5.00 and €12.00/sqm, with prime rents amounting to around €17.00/sqm. Interpretation of the Regional Office Index In terms of rent categories, the trends re- The Regional Office Index shows the ave- corded in the early part of the year continu- rage asking rents in the 14 regional centres ed, with asking rents in the high-end seg- since the first quarter of 2008 (index = ment again enjoying above-average growth 100). The development of the correspon- in the second half of the year while rents in ding rents in the top 7 locations is shown the other segments saw little movement. for comparison. Asking rents saw more muted developed in the top seven locations. The increase 10 Index Performance REGIONAL OFFICE INDEX Development of asking rents in the regional centres compared to the top 7 120 115 110 105 100 95 90 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Asking rent indices 14 Key Regional Cities Regional Office Index Top 7 Cities Asking rents in the top 7 cities Source: empirica Preisdatenbank 2017 (IDN Immodaten GmbH, empirica systeme GmbH) 11 CORPUS SIREO RENTAL GROWTH BENEFITS ALL AGE CATEGORIES Very low supply of new construction space New builds in the regional centres increased by 0.4% to an average of €11.90/sqm in the second half of the year.