Germany Office and Investment Market Report 2011


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Germany Office and Investment Market Report 2011

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Germany Office and Investment Market Report 2011

  1. 1. Q1 2011 | OFFICE & INVESTMENTGERMANYMARKET REPORT German office and investment market carries momentum from 2010 ANDREAS TRUMPP Head of Research | Germany Above average first quarter on the office leasing market. The German markets for office space seem to have finally recovered from the deep downturn in 2009, carrying the momentum that be- came evident toward the end of 2010 into the new year. With only one exception, the office leasing markets analyzed by Colliers International in Germany – Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, and Stuttgart – closed the first quarter with year-on-year gains, some of them quite sub- stantial. Overall, we noted take-up of space totaling 602,200 m² in the six cities, equivalent to an increase of some 6% in comparison to the first quarter of 2010. This result is also nearly 3% aboveLEASING MARKET – TOP 6 the median for the past five years. After the first three months of 2011, the leading market in terms Q1 11* Q2 11* of take-up of space is Munich, at 154,200 m² and a gain of 12%. It is closely followed by Berlin, with TAKE-UP OF SPACE 153,100 m² and an increase of about 31%. The biggest percentage gains were realized in the Frankfurt office market, where take-up of space was up nearly 50%, to 76,400 m². Hamburg VACANCIES (103,000 m²) and Stuttgart (37,500 m²) also recorded rising figures. The only office space market COMPLETIONS that saw a decline in take-up of space was Düsseldorf, although this development is easily ex- plained. While the same quarter of 2010 was dominated by the Vodafone lease signing (90,000 m²), PRIME RENT no comparably large signings were registered this year. Since the end of the recession, many com- PROPERTY INDEX panies have returned to a significantly greater degree of certainty for planning purposes in terms of personnel development, which also gives them greater certainty with regard to leasing of new office *COMP. *FORECAST Q4 2010 space. In many cases, companies have also returned to requests that had been put on hold during the crisis and are now signing new leases based on those requests.INVESTMENT MARKET – TOP 6 Q1 11* Q2 11* 800 Take-up of office space and TRANSACTION average for the past five VOLUME 700 years in thousands of m² 600 PRIME YIELD OFFICE 500 PRIME YIELD 400 RETAIL 300 PRIME YIELD INDUSTRIAL/ 200 LOGISTICS 100 *COMP. *FORECAST Q4 2010 0 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1
  2. 2. MARKET REPORT | Q1 2011 | OFFICE LEASING AND INVESTMENT | GERMANY Comparison of prime rents (€/m²) Vacancy figures stagnate on a high level. €°37.50/m², although that figure is slightly The positive trends on the demand side in below the levels seen last year and in the last 40.00 connection with the declining volume of new quarter. In Munich the figure is currently 35.00 30.00 project completions this year and in the two € 28.50/m², down 50 cents from the previous 25.00 years to come are slowly but surely also be- year but up by the same amount from the last 20.00 coming noticeable on the supply side. A com- quarter. Düsseldorf and Hamburg are tied at 15.00 parison with the previous year’s figures shows a € 23.00/m². In Düsseldorf, the prime rent has Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 significant increase in vacancies, which have sagged 8% from last year, but it is stable when Berlin Düsseldorf Frankfurt Hamburg München Stuttgart risen 8%, to approximately 8.02 million m² – not compared with the previous quarter. No change a very positive development. Compared with at all was noted in Hamburg. In Stuttgart, the the preceding two quarters, however, we can prime rent is the same as 12 months ago, at see that at least stagnation, and possibly even € 18.00/m². Compared with the previous quar- Comparison of average rents (€/m²) a slight downward trend, has set in. While ter, these figures show a slight upward trend 25.00 Berlin was the only market to have less office (50 cents). The only market to show an in- 20.00 space available for leasing in the short term crease from both the previous year and the last 15.00 than the previous year, at nearly 1.47 million m² quarter is Berlin, at € 21.00/m² after € 20.00/m² 10.00 (vacancy rate: 8.2%), a comparison with the in 2010 and € 20.45/m² in the preceding quar- preceding quarter yields more promising results ter. Development of average rents has varied 5.00 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 at least for Düsseldorf, where 877,000 m² of widely and is still without any discernible trend. Berlin Düsseldorf Frankfurt office space was vacant (11.3%), and Ham- At € 19.00/m², Frankfurt is down € 2.00 from the Hamburg München Stuttgart burg, with some 1.22 million m² of vacant space previous year’s figure, but is still the clear lead- (9.4%). In Frankfurt, Munich, and Stuttgart, by er among all of the cities, followed by Düssel- contrast, vacancy figures rose both year on dorf (€ 14.40/m²), the Munich metropolitan area Comparison of vacancy rates (%) year and from the previous quarter. Frankfurt (€ 13.32/m²), Hamburg (€ 13.30/m²), Stuttgart 20.0 has the most office space without tenants, with (€ 12.18/m²) and Berlin (€ 12.12/m²). almost 2.14 million m², or 17.9% of the total 15.0 existing space, currently vacant, followed by Commercial investment market activity 10.0 Munich, at 1.82 million m² (8.2%). focuses primarily on areas outside the ma- 5.0 jor real estate centers. The start of the year in 0.0 Prime rents on an upward trend, average the German commercial real estate market Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 rents varied widely. In terms of prime and picked up almost exactly where the dynamic Berlin Düsseldorf Frankfurt Hamburg München Stuttgart average rents as well, it is worthwhile to look at fourth quarter of last year left off. The first both the previous year’s figures and those for quarter of 2011 closed with only a slight de- the last quarter. While a comparison with last crease in transaction volume from the previous year shows a tendency toward declining prime quarter, at nearly € 5.7 billion registered in total Prime yields for office properties (%) rents or stagnation, trends in a shorter-term by the end of March. This figure represents a 6.5 comparison with the previous quarter predomi- dip of only approximately 7% from the previous 6.0 5.5 nantly show slight upward movement. The quarter, but an increase of some 23% year on 5.0 highest prime rent is still found in Frankfurt, at year. One noticeable difference becomes clear 4.5 4.0 3.5 35.00 Commercial transaction Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 volume in the top six mar- Berlin Düsseldorf Frankfurt 30.00 kets, in billions of euros Hamburg München Stuttgart 25.00 (gray: average value in- cluding 2006/2007 red: average value not 20.00 including 2006/2007) 15.00 10.00 5.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 2011P. 2 | COLLIERS INTERNATIONAL
  3. 3. MARKET REPORT | Q1 2011 | OFFICE LEASING AND INVESTMENT | GERMANY COMPARISON OF GERMAN OFFICE AND INVESTMENT CENTERS Q1 2011 BERLIN DÜSSELDORF FRANKFURT HAMBURG MUNICH STUTTGART Existing office space (millions of m²) 17.90 7.75 11.70 12.99 22.31 7.40 Take-up of office space, 2010, in m² 153,100 78,000 76,400 103,000 154,200 37,500 Take-up of office space, 2009, in m² 117,100 139,000 51,100 91,000 137,700 30,500 Percentage change +30.7 -43.9 +49.5 +13.2 +12.0 +19.7 Prime rent, 2010, in €/m² 21.00 23.00 37.50 23.00 28.50 18.00 Prime rent, 2009, in €/m² 20.00 25.00 38.00 23.00 29.00 18.00 Percentage change +5.0 -8.0 -1.3 0.0 -1.7 0.0 Average rent, 2010, in €/m² 12.12 14.40 19.00 13.30 13.72 12.18 Average rent, 2009, in €/m² 12.12 14.60 21.00 12.80 14.40 11.26 Percentage change 0.0 -1.4 -9.5 3.9 -4.7 8.2 Vacant office space, 2010, in m² 1,465,000 877,000 2,139,800 1,223,600 1,819,300 490,500 Vacant office space, 2009, in m² 1,500,000 786,000 1,994,200 1,080,600 1,615,600 469,000 Vacancy rate in % 8.2 11.3 18.3 9.4 8.2 6.6 PropertyIndex 3.4 3.4 4.7 2.6 3.5 2.9 Transaction volume in millions of 495 69 254 300 243 58 euros, 2010 Transaction volume in millions of 1,300 115 145 300 702 45 euros, 2009 Percentage change -61.9 -40.0 +75.2 0.0 -65.4 +28.9 Top yields, office, in % 5.00 5.25 5.30 4.80 4.50 5.40 Top yields, retail, in % 4.80 4.50 4.25 4.80 3.75 450 Top yields, industry/logistics, in % 7.40 7.50 6.75 7.20 7.00 7.40 Largest group of investors by per- Project Closed- Opportunity / Closed- Closed- Corporates / centage developers / ended real Private ended real ended real Owner- building estate funds Equity estate funds estate funds occupants contractors Funds 26 29 43 28 50 27 Largest group of sellers by percen- Project Project Project Corporates / Project Corporates / tage developers / developers / developers / Owner- developers / Owner- building building building occupants building occupants contractors contractors contractors contractors 90 30 49 43 28 63 Most important type of real estate Retail Office Office Office Office Sites by percentage 55 49 91 41 35 48Sources: Colliers Deutschland, Grossmann & Berger GmbH (Hamburg); Photo: Owner of metris P. 3 | COLLIERS INTERNATIONAL
  4. 4. MARKET REPORT | Q1 2011 | OFFICE LEASING AND INVESTMENT | GERMANY when comparing current developments with those from last year. While activity on the commercial real estate market is generally concentrated in the country’s few prime locations – Berlin, Düsseldorf, Frank- 480 offices in furt, Hamburg, Munich, and Stuttgart, along with Cologne – which is reflected in the fact that these cities 61 countries on account for more than 50% of the transaction volume, the share attributed to the first six without Cologne was just 25% in the first quarter of 2011, or some € 1.4 billion. The reasons lie primarily in the type of 6 continents products that are currently in demand, along with the large-volume sales that have taken place recently USA: 135 outside of the major centers. First and foremost in this group are the purchase of the 45-property Metro Canada: 39 portfolio for about € 700 million by an affiliate of financial investment firm Cerberus and the purchase of a Latin America: 17 50% share in the CentrO shopping center in Oberhausen, also for a price of about € 700 million. Asia / Pacific: 194 EMEA: 95 Retail properties – the main product category sold. The percentage of overall investment volume • $1.9 billion in annual revenue attributed to portfolio transactions was similar this year to the figure for the first quarter of 2010. In all, • 2.4 billion square feet under management nearly € 2 billion, or 35% of the transaction volume, changed hands as part of package sales. Alongside • Over 15,000 professionals the abovementioned sale of the Metro C&C stores to Cerberus, retail properties were the main category sold in these package transactions. For example, the ECE European Prime Shopping Center Fund in- vested in two shopping centers, one located in Berlin and the other in Potsdam. The Galeria Kaskada, in COLLIERS DEUTSCHLAND Szczecin, Poland, was also part of the transaction. A portfolio consisting of two properties with Galeria HOLDING GMBH Kaufhof as the primary tenant went to DIC Asset AG for approx. € 108 million. As a result, retail properties made up by far the largest percentage of the transaction volume. With in- Dachauer Straße 65 vestment volume at nearly € 3.6 billion, this group is clearly the leader, ahead of office properties, which D-80335 Munich accounted for some € 1 billion. Industrial and logistics properties contributed approximately € 386 million TEL +49 89 540411-050 to the transaction volume. FAX +49 89 540411-199 Over 31%, ( € 1.7 billion), of the investment volume was placed by open-ended and closed-ended real estate funds and special real estate funds. Opportunistically minded investors accounted for market share of about 21% (€ 1.2 billion). International investors, who have returned in greater numbers to the German real estate market, accounted for 45% of the volume in this segment at the end of the first quarter. Major real estate centers weaker than in 2010 - Prime yields almost unchanged. While an increase in transaction volume on the overall market is evident compared to last year, volume fell by nearly 46% in the cities we analyzed. Especially striking declines were registered in Berlin (-62%) and Munich (-65%). In both of these centers of real estate activity, the market was influenced by large-volume individual or port- folio sales last year, but comparable transactions have been lacking so far this year. Within the Düsseldorf urban area, transaction volume also fell by a significant measure, dropping 40%, although the expanded market segment included the sale of the Rheinpark Center, in Neuss, for over € 200 million, one of the biggest individual transactions of the year to date. Despite a significant decline in volume, Berlin had the FOR FURTHER INFORMATION top figure among these markets at the end of the first quarter, with approximately € 495 million in transac- Andreas Trumpp tion volume, ahead of Hamburg (€ 300 million) and Frankfurt (€ 254 million), followed by Munich (€ 243 Head of Research | Germany million), Düsseldorf (€ 69 million), and Stuttgart (€ 58 million). With the exception of Berlin, where the prime yield for an ideal office property slid 25 base points from the TEL +49 89 540411-040 E-MAIL previous quarter, to 5.00%, values held steady in all of the cities. Munich remains the most expensive location, at 4.50%, followed by Hamburg, with a prime yield of 4.80%. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot Forecast. The financing environment for real estate investors continues to be favorable, with almost no guarantee it. No responsibility is assumed for any change having been registered this quarter despite the growing likelihood that the European Central Bank inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material will raise the prime rate. Banks are much more willing to enter into discussions regarding smaller to mid- contained in this report. © 2010 Colliers Deutschland Holding GmbH range investment volumes than it was the case 12 to 18 months ago. Large-volume sales are also once again on the rise, with borrowing often spread across several banks. The continued upturn in the overall economy should also benefit the real estate markets, with employment on the rise and unemployment figures falling, greater consumer confidence in the retail sector, high order volumes in the manufacturing industry, and positive figures for take-up of space in the office leasing markets. All of this adds up to a good environment in which to make riskier investments than before and buy real estate with promising potential. Some uncertainty does remain, however, in connection with the debt crises in Europe and Accelerating success. elsewhere.P. 4 | COLLIERS INTERNATIONAL