M A R K E T B E AT GERMANY TOP-5 Office Q2 2020 YoY 12-Mo. Chg Forecast ECONOMY: Signs of Recovery According to Oxford Economics’ estimates, Germany faced a fall in GDP of almost 11% in the second quarter due to the measures 3.9% imposed by the government to combat the spread of Covid-19. Unemployment increased by more than 500,000 persons in only Vacancy Rate three months, to 2.85 million by end of June. The number of employees on the government’s furlough scheme reached 6.83 million in April 2020. However, growth rates for both unemployment and short-time working decreased in May and June, indicating that the 489,100 worst of the crisis has been overcome. Sentiment among German companies, as measured by the ifo Business Climate Index, Take-Up sq.m brightened in May and particularly in June, with the strongest increase ever recorded. In Germany, never before have so many office employees worked remotely as in recent months and it appears common sense, that this experience will further boost digitalization in Germany and will have a lasting impact on the way work is distributed between office space and alternative spaces, EUR 37.77 including homes, cafés and local office hubs. Avg. Prime Rent, Sq.m/month DEMAND: Take-up Plunged Due to the lockdown, activity in the office letting market slowed at end of March and remained at a low level untill early June. Many searches for spaces were withdrawn or put on hold. However, space negotiations which were at an advanced stage were still pursued and finalized. In Q2, take-up volume in the five major office markets reached 489,100 sq.m, 18% less than ECONOMIC INDICATORS in Q1 and 47% below the level reached in the second quarter a year earlier. In no quarter since Q1 2013 (478,800 sq.m), has Q2 2020 take-up been so weak. Due to one extraordinarily large deal, Berlin was the only market where the Q2 figure surpassed the result of the first quarter, while Frankfurt (minus 55%) and Hamburg (minus 43%) faced the largest plunges. Vacant space YoY 12-Mo. Chg Forecast increased in Q2 by 8% to 2,974,700 sq.m, reflecting an overall vacancy rate of 3.9%. At the end of June, 4.36 million sq.m of office space was under construction, the second-highest level in 20 years, triggered by the high take-up figures of recent -10.9% years and the demand for modern spaces. Almost 60% of this volume is pre-let and of the space that will become ready for Germany occupancy in the second half of the current year, no more than 209,300 sq.m is still available on the market. GDP PRICING: Prime Rents Remain Stagnant 6.0% Prime rents remained stable and are expected to maintain their level in the next quarter as well due to the Germany the shortage of high-quality office space in prime locations. In terms of prime rent, Frankfurt, at €45/sq.m/month, is the most Unemployment Rate, Avg expensive market; measured by the achieved weighted average rent, Berlin leads the ranking at €27.50/sq.m/month. -3.0% TAKE-UP GERMAN TOP-5 MARKETS VACANCY / UNDER CONSTRUCTION / PRIME RENT TOP-5 Germany 1.500 4.000 7.000 40,00 800 $74 14% Service Sector Empl. Index 3.500 6.000 35,00 6.000 €/sqm/month 3.000 5.000 30,00 35,00 1.000 5.000 25,00 Source: Oxford Economics, Federal Employment Agency, ifo institute 2.500 4.000 35,00 4.000 20,00 2.000 3.000 200 $68 15,007% in in 1 000 sqm in in 1 000 sqm 3.000 30,00 in in 1 000 sqm 500 1.500 in 1 000 sqm 2.000 €/sqm/month 500 sqm Thousand 30,0010,00 1.000 1.0002.000 Thousand sqm Thousand 5,00 Thousands 0 500 1.0000 0,0025,00 0 0 -400 $62 0 25,000% Q2Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2Q2 Q2 Q2 Q2 Q2 Q2 Q2 20152014 20152016 20162017 2017 2018 2018 20192019 20202020 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q1 2014 Q22016 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 2017Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 2018Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 2019Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 YTDQ3 2019 Q4 2019 2020Q1 2020 Q2 2020 2015 2016 2017 2018 2019 2020 Quarter (LHS)Quarter (LHS)NetTake-up Absorption,Take-up (Quarter)12-Month-Rolling12-Month-Rolling SF (RHS) (RHS) VacancyVacancyVacancy UnderUnder constructionCompletions constructionAsking Rent,AverageAverageAverage $ PSF of of ofPrime Prime Prime Rents Rents Rents Top Top Top 5 5(weighted) 5(weighted) (weighted) M A R K E T B E AT GERMANY: TOP-5 Office Q2 2020 MARKET STATISTICS AVAILABILITY YTD OVERALL TAKE- PRIME RENT SUBMARKET INVENTORY (SQ.M) OVERALL VACANCY RATE CURRENT QTR TAKE-UP UNDER CNSTR (SQ.M) PRIME YIELD* (SQ.M) UP(SQ.M) (€) Berlin 18,844,000 374,600 2.0% 175,400 305,100 1,857,700 40.00 2.90% Dusseldorf 9,098,700 623,200 6.8% 52,000 167,000 298,500 28.00 3.10% Frankfurt 11,721,800 854,400 7.3% 48,600 109,500 577,900 45.00 2.75% Hamburg 14,940,895 535,000 3.6% 63,500 175,000 580,900 30.00 2.80% Munich 21,052,240 587,500 2.8% 149,600 327,200 1,048,900 39.50 2.60% TOTAL 75,657,635 2,974,700 3.9% 489,100 1,083,800 4,363,900 . *Rental /Yields rates reflect achievable values KEY LEASE TRANSACTIONS Q2 2020 MICRO- PROPERTY SUBMARKET TENANT SQ.M TYPE MARKET URSULA NEISSER Head of Research Germany An den Treptowers 3 Berlin Media-Spree Deutsche Rentenversicherung 84,314 Pre-Lease Tel: +49 69 50 60 73 140 Anni-Albers-Straße/Lyonel-Feininger- Munich City Centre Amazon EU S.à r.l. 36,330 Pre-Lease [email protected] Straße Gruber Straße Munich Periphery East KraussMaffei Technologies GmbH 32,031 Pre-Lease HELGE ZAHRNT Owner Head of Research & Insight Germany Wanheimer Straße Dusseldorf North AOK Rheinland 26,500 Occupation Tel: +49 40 300 88 11 50 [email protected] *Renewals not included in leasing statistics KEY SALES TRANSACTIONS Q2 2020 A CUSHMAN & WAKEFIELD PRICE RANGE/ € RESEARCH PUBLICATION PROPERTY SUBMARKET MICRO-MARKET SELLER / BUYER SQ.M MN Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real Campus Mizal Dusseldorf Media Harbour Codic Development / R+V Versicherung 36,800 250 - 300 estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately Optima-Aegidius Group JV Hammer / Ampega SouthHorizon Munich Obersendling 31,000 250 - 300 51,000 employees in 400 offices and 70 countries. In 2018, the obo HDI Deutschland firm had revenue of $8.2 billion across core services of Ericus-Contor Hamburg HafenCity Patrizia / Union Investment RE 19,000 150 - 200 property, facilities and project management, leasing, capital markets, valuation and other services. ©2020 Cushman & Wakefield. All rights reserved. The information KEY CONSTRUCTION COMPLETIONS YTD 2020 contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or PROPERTY SUBMARKET MICRO-MARKET MAJOR TENANT SQ.M OWNER / DEVELOPER omissions and is presented without any warranty or representations as to its accuracy. Mediencampus Axel Springer Berlin Central Locations East Axel Springer Verlag 52,000 Norges / Axel-Springer-Verlag Winx Frankfurt Banking District Union Investment AM 42,200 Susanne Klatten / DIC cushmanwakefield.com My.O Munich CBD West JetBrains 26,300 CA Immo Deutschland M A R K E T B E AT BERLIN Office Q2 2020 OVERVIEW YoY 3-Mo. With 3.67 million inhabitants and 1.56 million employees contributing to social insurance, Berlin is Germany’s capital and its largest Forecast Chg city. At €74,200, the GDP per employed person is still 2% below the national average and well below the figures for the other major German cities. For historical reasons, Berlin is in the process of catching up economically. Both the GDP and the number of 2.0% employees have been growing at an above-average rate for many years. Vacancy Rate 175K SUPPLY AND DEMAND Take-Up in sqm At 175,400 sqm, take-up in the first quarter was 4% lower than in the previous quarter and 5% lower than the five-year average of second quarters. However, this was much better than expected, considering the second quarter included the peak of uncertainty and economic impact of the COVID-19 pandemic. The public sector, continued to lease space on a large scale. Deutsche €40.00 Rentenversicherung alone signed a pre-lease over 84,300 sqm in the CULE development project. Overall, the public sector Prime Rent /sqm/month accounted for 68% of take-up. For the private sector, however, the first shock phase of the corona crisis caused a sharp drop in leasing activity in the second quarter. The twelve-month take-up decreased slightly to a still very high 940,900 sqm.