ELLWANGER & GEIGER: THE STUTTGART OFFICE MARKET 2012/2013

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CONTENTS:
Stuttgart: A city of tradition and a great future
Europaviertel - under construction
Rental take-up rates at good level
Demand varies from sector to sector
Losses for large premises
Rental rates go up once again
Vacancy rate continues to fall
Nationwide office market stagnates
Stuttgart central business district/city centre:
Record levels of construction activity
Northern Stuttgart: Plans for enhancement
Eastern Stuttgart: Plenty of space for new projects
Southern Stuttgart: Supply of new space scarce

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ELLWANGER & GEIGER: THE STUTTGART OFFICE MARKET 2012/2013

  1. 1. Changing Stuttgart. THE STUTTGART OFFICE MARKET 2012/2013
  2. 2. * Data from a survey by BulwienGesa AG + Baasner, Möller & Langwald GmbH Source: Research Bankhaus Ellwanger & Geiger KG ©, as of 31 December 2012 Year Volume (sq. m) Representative prime rents Average central business district rents Vacancies (sq. m) Vacancies (%) Total space (mill. sq. m) Completion ­volume (sq. m) Pre-leased ­volume (sq. m) 2000 205,000 €16.87 €14.90 100,000 1.50 6.356 60,000 N/A 2001 160,000 €18.41 €15.34 137,000 2.00 6.516 160,000 130,000 2002 127,000 €17.89 €14.80 292,000 4.20 6.828 312,000 220,000 2003 149,000 €17.50 €14.50 379,000 5.30 6.973 145,000 80,000 2004 152,000 €17.00 €14.50 415,000 5.70 7.102 129,000 93,500 2005 145,000 €17.00 €13.50 402,000 5.60 7.170 68,500 51,400 2006 140,000 €17.50 €13.50 467,400 6.50 7.222* 52,500 20,500 2007 169,000 €17.50 €14.50 466,000 6.40 7.253 32,600 23,400 2008 180,000 €18.00 €14.50 460,000 6.20 7.367 117,000 116,000 2009 171,000 €18.00 €13.60 453,000 6.12 7.401 40,000 22,000 2010 194,000 €17.50 €14.30 480,000 6.46 7.425 42,400 22,400 2011 285,000 €18.80 €14.30 424,000 5.7 7.449 45,900 41,200 2012 191,500 €20.00 €14.60 399,000 5.4 7.416 37,000 36,300 Overview of the Stuttgart office market
  3. 3. Bülow Carré Lautenschlagerstr. 21 Office + retail To be completed 2nd quarter of 2013 Hospitalhof Hospitalplatz/Gymnasiumstr. Office To be completed 4th quarter of 2013 citygate Kriegsbergstr. 11 Büro + Einzelhandel Fertigstellung 3. Q 2014 citygate Kriegsbergstr. 11 Office + retail To be completed 3rd quarter of 2014
  4. 4. Pauline Paulinenstr. 21 Office + clinic To be completed 3rd quarter of 2013 Caleido Tübinger Str. 41– 43 Office + retail + residential To be completed 2nd quarter of 2013 Das Gerber Marien-/Tübinger-/Paulinenstr. Office + retail + residential To be completed 4th quarter of 2014 dorotheen quartier Dorotheenstr./Holzstr. Office + retail + residential To be completed 2nd quarter of 2017
  5. 5. pariser höfe Athener Str. 9 –11 Office + residential To be completed 2nd quarter of 2013
  6. 6. IHK Jägerstr. 30 Office To be completed 2nd quarter of 2014 milaneo Heilbronner Str./Wolframstr. Office + retail + residential + hotel To be completed 2nd quarter of 2015 Site section 7 Wolframstr. Hotel + residential To be completed 3rd quarter of 2015 citygate Kriegsbergstr. 11 Office + retail To be completed 3rd quarter of 2014 sparkassenakademie Moskauer/Lissabonner Str. Office + training To be completed 1st quarter of 2014 Europe plaza Stockholmer Platz 1 Office To be completed at unknown date Look 21 Türlenstr./Heilbronner Str. Office + residential To be completed at unknown date
  7. 7. CONTENTS. Foreword 8 Stuttgart: A city of tradition and a great future 10 Europaviertel – under construction 11 Rental take-up rates at good level 12 Demand varies from sector to sector 14 Losses for large premises 15 Rental rates go up once again 16 Vacancy rate continues to fall 18 Nationwide office market stagnates 20 Stuttgart central business district/city centre: Record levels of construction activity 22 Northern Stuttgart: Plans for enhancement 23 Eastern Stuttgart: Plenty of space for new projects 24 Southern Stuttgart: Supply of new space scarce 25 Overview of the Stuttgart office market 27 Prospects are good for 2013 28 Your contact partners 30 ELLWANGER & GEIGER Real Estate 31
  8. 8. Foreword. Stuttgart needs ecological modernisation. Stuttgart is a cosmopolitan, tolerant and international city which is home to over 170 successfully co-existing nationalities. The quality of life in Stuttgart is consistently high and the city has a vibrant culture. These are some of the factors which enable businesses to attract the top professionals which the city so urgently needs. Stuttgart is the economic engine for all of Baden-Württemberg. The city is the world’s top location for engineering and the home of key, groundbreaking ­environmental technology. The city’s economic strength is founded on a diverse range of industries, a significant service sector, excellently networked businesses and, above all, its outstanding ­capacity for innovation. It is essential that the city and region maintain these advantages. At the same time, they must also promote the development of industries which manufacture the ­products for which, in the future, there will be substantially growing demand on global markets. The conditions for such a scenario are favourable. The guiding vision for Stuttgart’s continuing economic development is one of ecological ­modernisation. We have the scientific and technical capacity to gain a leading position in energy technology, mobility, production engineering and environmental engineering. The enterprises based in Stuttgart are already heading in this direction. Stuttgart must now shape up to become the world’s leading location for green technologies. We must also manage a process of transformation in which the city develops, applies and accelerates the practice of new forms of sustainable mobility. In 15 years Stuttgart must export not only automobiles, but also tried-and-tested models for the transportation systems of the future. This will involve the integrated, step-by-step realisation of the energy transition, green urbanism and sustainable building. We need strong businesses which engage in ecological modernisation to create new jobs which uphold the vision of social justice and improve the quality of life for all of us. Fritz Kuhn Mayor of Stuttgart Ines Aufrecht Director of Business Development, Stuttgart
  9. 9. 8 9 Focusing on sustainability. Never before has there been so much construction activity in Stuttgart’s city centre as there was in 2012. Investors and tenants are increasingly attracted to the city centre and demand for modern office space continues to grow unabated. This explains why construction work gets underway on some new projects even before advance rental agreements are in place – ultimately the chances of finding tenants are excellent. It is gratifying to see the focus of project planning move increasingly towards the issue of ­sustainability, especially bearing in mind that many large companies now insist that the premises they occupy have a sustainability certificate. Baden-Württemberg’s capital city is the perfect setting for this development. A recent study undertaken by the business news magazine Wirtschaftswoche ranks Stuttgart as the most sustainable city in the whole of Germany. In the integrated scientific study, the first of its kind, the Swabian capital scored well above average in all six of the sustainability categories: economic strength, environment, human capital, social conditions, energy and transport, as well as transparency and social commitment. Over the next few years the focus of work will almost certainly shift to more peripheral parts of Stuttgart, where the aim will be to set in motion positive developments similar to those which ­have transformed the centre of Stuttgart. Facts, figures and everything else worth knowing about Stuttgart’s office market in 2012 can be found on the following pages. We hope you find the report informative and will be glad to ­respond to any questions or suggestions you may have. Mario Caroli Björn Holzwarth
  10. 10. STUTTGART: A CITY OF TRADITION WITH A GREAT FUTURE. Although Stuttgart may have a smaller office market than any of Germany’s other seven most important property markets, over the years it has demonstrated that it has a great deal to offer. As well as a ­traditionally strong economy and a highly qualified workforce, other factors such as electromobility and sustainable building are becoming increasingly important. Stuttgart’s property market has also benefited from extensive property measures taken by automotive companies in 2012 which underlined their ­continuing commitment to their business locations in Stuttgart. SHOWCASE FOR ELECTROMOBILITY The region has been chosen by the government in Berlin as one of Germany’s four “showcases for e-mobility”. With so many people commuting into Stuttgart every day work began several years ago on devising mobility ­concepts, some of which have now been implemented in the new “moovel” mobility platform which was ­launched in mid-2012. The system shows its users the best possible way to get from A to B and bundles the ­offers of diverse mobility providers. Another idea behind the showcase for electromobility is to foster continuing development of know-how by the global firms based in the region. ­Experiments have been underway for many years on ­hybrid buses, for example. Trials are also being conducted on large fleets of vehicles working with new drive concepts, such as the 300 Car2Go Smart electric drive cars which recently hit the road. The service is ­supported by 300 charging stations set up by local ­suppliers right across the city. SUSTAINABLE BUILDING In just four years, the certification system established in Stuttgart by the German Sustainable Building Council (DGNB) has become a badge of quality which now has an indispensable function in the country’s property sector. The system is now firmly established as the essential basis for the leasing of modernised and new buildings or the sale of properties. In addition, the Triple Zero® building standard developed by Werner Sobek Engineering and Klaus Sedelbauer will be implemented for the first time in Stuttgart’s Neckarpark. This standard defines the demands that a building must meet in order to qualify as a ­sustainable structure. The lion’s share of the district’s energy requirements will be met from renewable sources of energy, such as heat recovered with heat exchangers from waste water. At the same time, the initiators are building a first model residential house to Triple Zero® standards in Stuttgart. The plan is for the building to produce more energy than it actually needs itself. Data source: GfK GeoMarketing, figures as of December 2012 28,247 24,374 24,310 23,568 22,813 22,769 18,565 Munich Düsseldorf Frankfurt Stuttgart Cologne Hamburg Berlin Per capita purchasing power in 2012, in €: Cities with 500,000 or more residents
  11. 11. 10 11 Europaviertel – under construction. Fast and furious building in the Europaviertel. The 7,500 square metres of office space and 240 apart- ments which make up the “Pariser Höfe” are almost fully let and the first tenants have already moved into their new homes. The biggest office user in this new urban ­development is a subsidiary of EnBW, which has rented some 6,000 square metres of space. The new Sparkassenakademie building, which is going up next to the City Library, is also beginning to take ­shape: preliminary work on the almost 12,600 square metres of new training and administrative space and 160 planned apartments has almost been finished. ­Building work is scheduled for final completion in the spring of 2014. The foundation stone for the large-scale “Milaneo” project has already been laid. The project will provide around 43,000 square metres of retail space, 7,400 square metres of office space, 450 apartments and a hotel. Marketing activities for retail space are in full swing. Plans for a hotel and residential tower on the directly adjacent site section 7 are now also entering the final phase. The neighbouring “Europe Plaza” project now has the green light and ­construction work will begin as soon as the first advance rental agreements are in place. The road layout, with centrally located squares and a new station to link the site to the urban railway, will also enhance the quality of this urban development. Pariser Höfe Office + residential To be completed 2nd quarter of 2013 Sparkassen akademie Training + residential To be completed 1st quarter of 2014 Europe plaza Office To be completed at unknown date City Library milaneo Office + retail + residential To be completed 2nd quarter of 2015 Site section 7 Hotel + residential To be completed 3rd quarter of 2015 Site section 5 Site section 15 Site section 12 Site section 4 Development model Under construction Available space Completed Wolframstrasse Wolframstrasse
  12. 12. RENTAL TAKE-UP RATES AT GOOD LEVEL. After record letting rates in 2011, take-up of space on Stuttgart’s office market fell in 2012. With around 191,500 square metres of office space, of which 8,700 square metres is being used by owners, rental take-up was well below last year’s 285,000 square metres. Nonetheless, rental take-up remained at a comparatively high level in 2012 compared with the average take-up of space over the last ten years of around 171,000 square metres. RENTAL VOLUME IN STUTTGART’S CENTRAL ­BUSINESS DISTRICT STILL AT RECORD LEVELS The amount of additional space rented out in Stuttgart’s central business district rose impressively again by some 61,500 square metres, just below the previous year’s ­record of 63,000 square metres. This outstanding annual performance was largely due to lettings of new building projects which are currently under construction. The biggest transaction in Stuttgart’s central business district involved the letting of around 12,000 square metres in Bülow Carré to a law firm. Much less space was let in Stuttgart’s city centre than in 2011. However, last year’s figures were also influenced by the activities of a handful of proprietors who occupy their own property (such as new buildings belonging to AOK or Sparkassenakademie). The number of new leases was in fact identical. FALL IN RENTAL TAKE-UP IN VAIHINGEN AND MÖHRINGEN Rental take-up in the southern markets in Vaihingen and Möhringen fell starkly in 2012, not only compared with the exceptional letting rates of the year before. This was most probably due to the lack of new space, particularly for small premises. Thanks to its proximity to the motor- way and airport, this area remains one of the most highly desired locations. The largest area, of around 2,700 square metres, of new space leased was in the OFFICIVM build­ ing complex. There were again no major transactions in Leinfelden-Echterdingen this year. Northern submarkets The northern submarkets encompassing Feuerbach/­ Zuffenhausen again benefited from the strategic land ­development activities of Porsche AG and Robert Bosch GmbH. In fact, Bosch signed the largest contract of all for around 5,000 square metres at the Feuerbach location.
  13. 13. 12 13 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Central business district 19,000 4,600 55,100 33,300 43,000 61,500 44,400 38,200 32,800 63,000 61,500 City centre 45,000 28,400 21,700 43,200 31,300 46,600 41,700 83,800 66,600 97,500 58,400 Vaihingen/Möhringen 6,300 14,450 30,800 10,400 32,600 13,700 18,500 20,200 26,200 56,300 18,200 Fasanenhof 11,000 72,500 4,000 3,700 3,500 2,300 10,600 2,700 5,300 12,500 7,400 Feuerbach/Zuffenhausen 6,000 8,400 20,600 9,800 2,000 6,800 12,300 3,300 28,500 24,800 18,700 Degerloch 2,700 3,000 6,000 3,400 4,500 7,200 9,200 4,900 2,100 4,000 4,800 Weilimdorf 16,000 750 3,000 6,600 6,000 5,100 12,800 5,900 11,400 5,500 5,300 Bad Cannstatt/Wangen 18,000 14,000 7,700 24,600 13,500 15,400 12,500 8,100 8,300 13,400 12,000 Leinfelden-Echterdingen 3,000 2,900 3,100 10,000 3,600 10,400 18,000 3,900 12,800 8,000 5,200 Total 127,000 149,000 152,000 145,000 140,000 169,000 180,000 171,000 194,000 285,000 191,500 205,000 159,000 127,000 149,000 152,000 145,000 140,000 169,000 180,000 171,000 194,000 191,500 285,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Rental take-up in Stuttgart and submarkets in sq. m Rental take-up of office space in Stuttgart 2000 – 2012 in sq. m Source: Research Bankhaus Ellwanger & Geiger, figures as of 31 December 2012 Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012
  14. 14. DEMAND VARIES FROM SECTOR TO SECTOR. In 2012, just under 35 percent of total lets were taken up by the largest category of “other office users” – a category which includes retail companies, various service providers and self-employed professionals – compared to around 40 percent in 2011. This is equal to total space of around 67,000 square metres. The “consultants” category also played a significant role in the office market in 2012. This category accounted for around 32,000 square metres or 16.7 percent of total rented space. As was the case last year, the public sector was a source of major demand. This segment accounted for around 14.5 percent of total rented space or some 27,800 square metres of office space. Demand from the “energy” and “industry” sectors, which had been particularly high in 2011, declined somewhat last year. These sectors none­ theless leased around 17,800 square metres of space. ­Demand for office space from the “IT/telecommunication” category also declined in 2012 to around 22,300 square metres. Last year companies in this sector leased 27,400 square metres of space. Users in the “media/communication” category continued to be a source of strong demand for office space and leased a total of 10,000 square metres of space in 2012. This was closely comparable with the figure for last year of 10,900 square metres. Less demand was generated by financial service providers in 2012. While this category of users leased 24,700 square metres of space in 2011, this had fallen to around about 14,600 square metres last year. This represents a decline of about 41 percent. 2004 2005 2006 2007 2008 2009 2010 2011 2012 Media/communication 4.00 8.00 6.64 6.27 5.56 6.14 4.07 3.82 5.20 Financial service providers 34.00 12.00 9.93 10.36 15.78 8.36 8.41 8.67 7.60 Consultants 5.00 10.00 20.29 18.4 13.39 7.72 13.35 8.00 16.70 Public sector 9.00 21.00 3.21 17.75 7.22 30.41 8.14 13.68 14.50 Other 29.00 28.00 35.21 37.28 36.94 40.94 48.04 40.42 35.00 Energy/industry 9.00 13.00 12.86 – – – – 15.79 9.30 IT/Telecommunications 10.00 8.00 11.86 9.94 21.11 6.43 17.99 9.62 11.70 Total 100 100 100 100 100 100 100 100 100 Take-up by sectors in % Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012
  15. 15. 14 15 LOSSES FOR LARGE PREMISES. Small premises have traditionally been the mainstay of Stuttgart’s office market. In fact, in 2012 most contracts were again signed for space of up to 500 square metres. Of a total of 292 leases, 197 contracts were signed in this segment. However, since last year the number of contracts signed in the small premises segment has fallen by 21 percent. With a total rental volume of around 36,000 square ­metres – or around 19 percent of total rental turnover – the largest share of signings was again for space of less than 500 square metres in the central business district and city centre. Fifty-nine contracts were signed in the range from 501 to 1,000 square metres, accounting for 21 percent of the rental turnover. This was better than the previous year’s figure of 46. The figures for the ranges from 1,001 to 2,000 square metres and from 2,001 and 5,000 square metres were ­similar to last year. In the segment up to 5,000 square metres an important role was again played in 2012 by the Bosch and Porsche groups, both of which engaged in land development activities at their locations in Feuerbach and Zuffenhausen. A further 2,500 square metres of office space was acquired for its own use by Porsche on the Xcel Campus in Zuffenhausen. Bosch leased around 5,000 square metres on the former Akzo Nobel industrial site in Feuer- bach. Further progress towards completing the OASIS II office and commercial project on Heilbronner Strasse in Feuerbach was made with the letting of around 4,000 square metres to a retail company operating in the car parts industry. There was a substantial drop in the number of transactions for premises of over 5,000 square metres compared to last year. Only four contracts for lettings on this scale were signed, covering around 28,800 square metres, including a contract for around 12,000 square metres in Stuttgart’s central business district. Total space 2011: 285,000 sq. m 2011 COMPARISON OF NEW CONTRACTS BY SIZE 59,500 54,720 44,500 40,868 35,900 24,003 < 500 sq. m 501 – 1,000 sq. m 1,001 – 2,000 sq. m 2,001 – 5,000 sq. m > 5,000 m² 2012 Total space 2012: 191,500 sq. m Total number 2011: 361 2011 197 249 59 62 18 24 14 14 4 12 < 500 sq. m 501 – 1,000 sq. m 1,001 – 2,000 sq. m 2,001 – 5,000 sq. m > 5,000 m² 2012 Total number 2012: 292 COMPARISON OF NEW CONTRACTS BY NUMBER Source for both charts: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 41,900 43,146 103,200 28,763
  16. 16. RENTAL RATES GO UP ONCE AGAIN. The trend for rental rates in Stuttgart’s office market continued to be encouraging throughout 2012. On 31 December 2012, the average rental rate was around 12.40 euros per square metre, 0.80 euros above the level a year before. A third of all contracts signed were for premises in the 10.00 euros per square metre price segment. In the range from 10.01 to 13.00 euros per square metre, there were 118 signings (2011: 141). Forty-eight signings, or two ­more than last year, were made in the 13.01 to 15.00 euros per square metre price segment. There were 25 contracts at prices of above 15.00 euros per square metre. Of these, eight were for rental rates of over 17.00 euros per square metre. CENTRAL BUSINESS DISTRICT: PRIME RENTS BREAK 20 EUROS LIMIT The average rent in Stuttgart’s central business district went up from around 14.30 euros in 2011 to around 14.50 euros per square metre in 2012. The weighted top rent also rose by 6 percent to around 20.00 euros per square metre, going up to levels which have been predic- ted by many market participants for many years. This pri- ce rise is due not only to the high quality of new buil- dings, but also to higher land prices. Rents are also very high in Stuttgart’s neighbouring city centre. Rental rates were also strongly affected by transactions in new and revitalisation properties in particular, such as in the “Quadrat” hospital district near the central business district. The weighted top rent in 2012 was consequently around 16.00 euros per square metre. At 11.50 euros per square metre, the average rent remained the same as last year. FAVOURABLE DEVELOPMENTS IN SUBMARKETS Prime rents also rose in the northern submarkets of Feuer- bach, Zuffenhausen and Weilimdorf. This was positively ­influenced above all by the OASIS II office and commercial project in Feuerbach, where several large transactions pushed up average rents. Prime and average rents also went up in 2012 in the submarkets of southern Stuttgart in Degerloch, Vaihingen, Möhringen and Fasanenhof. Rental rates in the Bad Cannstatt, Wangen and Hedelfingen districts of eastern Stuttgart went up compared to last year. This was, however, mainly affected by large rental transactions in newly built or refurbished buildings. Prime rents Average rents Prime and average central business district rents 2000 – 2012 in €/sq. m 14.90• 16.87 15.34• 18.41 14.80• 17.89 14.50• 17.50 14.50• 17.00 13.50• 17.00 13.60• 17.50 14.50• 17.50 14.50• 18.00 13.60• 18.00 14.30• 17.50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 14.30• 18.80 14.50• 20.00
  17. 17. 16 17 XXX Prime and average rents 2012 in €/sq. m 14.50 20.00 11.50 16.00 10.75 12.50 10.00 11.50 10.50 14.30 Average rentsPrime rents Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 Central busi- City centre Outlying districts Outlying districts Outlying districts ness district to the north to the east to the south
  18. 18. Stuttgart’s office market was only just able to satisfy ­demand for new space from potential tenants in 2012. Although a total of about 36,910 square metres of office space was completed, most of this was built for use by its owners or pre-let prior to construction. The supply of office space available changed in Stuttgart’s central ­business district and in the city centre in particular. ­Compared with last year the available supply in the ­central business district rose by around 10,000 square metres, although this was due to the vacation of existing premises – in some cases following corporate restructuring – rather than the creation of new space. In contrast, the scale of transactions and modest number of existing new office premises vacated in Stuttgart city centre resulted in a sharp decrease in the supply of office space. The available supply in 2011 was still around 93,500 square metres or some 30 percent higher than in 2012. There will be an ­increase in available space in the central business district VACANCY RATE CONTINUES TO FALL. The supply of vacant office space declined again last year. On 31 December 2012 some 399,000 square metres were unoccupied, including approximately 23,000 square metres of sub-let space. With the total office space at 7.42 million square metres, this corresponds to a vacancy rate of around 5.4 percent. Completion volume in sq. m 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 87,000 59,200 84,400 43,900 160,000 130,000 312,000 220,000 145,000 80,000 143,500 131,500 68,500 51,400 49,000 28,500 32,600 23,400 115,600 104,900 40,000 22,000 42,400 23,200 45,900 41,200 37,000 36,300 Pre-lettingBuilding completion
  19. 19. 18 19 and city centre areas in the years ahead when the large- scale projects currently under construction are completed. There was little change in the availability of space in southern Stuttgart’s submarkets in Vaihingen, Möhringen and Degerloch. There is above all a lack here of modern new office space, particularly in the small premises ­segment. Office space in the Stuttgart Engineering Park, which is in Vaihingen, is almost fully let, for example. The low rental take-up in Weilimdorf meant that there was no noticeable change in supply at this location either. In the eastern submarkets of Bad Cannstatt, Hedelfingen and Wangen some space became available again with the ­vacation of existing premises. The supply of space increased from around 19,300 square metres last year to around 30,600 square metres on 31 December 2012. Vacant office space as of 31 December 2012 Stuttgart central business district > 70,500 sq. m Stuttgart city centre > 71,200 sq. m Möhringen > 41,700 sq. m Weilimdorf > 41,100 sq. m Bad Cannstatt, Wangen etc. > 30,600 sq. m Fasanenhof > 23,400 sq. m Feuerbach, Zuffenhausen > 13,500 sq. m Degerloch > 11,600 sq. m Vaihingen > 27,300 sq. m Leinfelden-Echterdingen > 68,100 sq. m 17.8% 100% (corresponds to approx. 399,000 sq. m) 17.7% 17.0% 10.5% 10.3% 7.7% 6.8% 5.9% 3.4% 2.9% Source for both charts: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012
  20. 20. A total of 2.97 million square metres – some 9.5 percent less than in 2011 – was let in the “Big Seven” – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. The increase was biggest in Frankfurt at 12.7 percent, followed by 4.6 percent for Berlin. In ­contrast, rental turnover was significantly lower in ­Stuttgart, where it fell by 48.8 percent back to normal ­levels after the ­record figures for 2011. Turnover declined strongly in Hamburg by 25.5 percent and in Munich as well by around 17 percent. With the exception of Cologne, average rents rose in all cities compared with 2011. Rents in Berlin went up by 1.3 percent, in Munich by 4.7 percent, in Stuttgart by 6 percent and in Düsseldorf by as much as 7.8 percent. Average rents in central business districts – apart from in Frankfurt – have developed positively. Rents rose in Hamburg by 11.1 percent, in Munich by 5.8 percent and in Cologne by about 4.3 percent. Average rents increased in Stuttgart and Berlin by between 1.3 and 1.8 percent. Vacancy rates in the Big Seven fell once again in 2012. The main factors here were the relatively low volume of new construction and the number of new buildings which are still under construction or not yet completed. In Stuttgart the supply of available space decreased by 5.3 percent, in Munich by 11.2 percent and in Hamburg by as much as 15.7 percent. In contrast, vacancy rates in Düsseldorf fell by a minimal 0.8 percent. We anticipate a further sideways trend in 2013. Whether top rental rates will continue to go up, however, will ­depend on how the economy performs in general. Nationwide office market stagnates. The upturn in 2011 was transformed into a sideways trend in 2012. The situation was much the same across the whole of Germany: rental turnover decreased while prime rents went up practically everywhere. The same was true of average rents. The supply of vacant office space declined in all markets.
  21. 21. 20 21 Turnover of space in sq. m Prime rent in € Average rent in the central ­business district in € Vacancy rate in % 2012 2011 2012 2011 2012 2011 2012 2011 Berlin 600,000 572,000 22.00 21.70 16.30 16.00 8.0 8.4 Düsseldorf 325,000 365,000 25.50 23.50 17.50 17.00 11.7 11.8 Frankfurt 470,000 410,000 36.00 36.00 21.50 21.50 13.7 14.4 Hamburg 430,000 515,000 24.00 23.00 15.20 13.50 7.0 8.1 Cologne 245,000 280,000 20.50 21.00 11.50 11.00 7.8 8.2 Munich 716,700 853,000 32.00 30.50 14.90 14.20 6.8 7.7 Stuttgart 191,500 285,000 20.00 18.80 14.50 14.30 5.4 5.7 Frankfurt Düsseldorf Cologne Munich Berlin Hamburg Stuttgart Comparison of vacancy rates in Germany in % 10.3 9.6 8.3 8.9 8.2 7.8 7.9 9.1 9.7 8.3 7.7 8.0 9.4 8.2 8.4 8.9 8.4 8.0 7.2 6.7 7.5 9.8 8.1 7.0 6.4 6.2 6.1 6.5 5.7 5.4 11.5 11.8 11.7 9.8 10.3 10.3 Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 Turnover of space of the Big Seven 2003 – 2012 in sq. m 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Research Bankhaus Ellwanger & Geiger KG ©, figures as of 31 December 2012 149,000 152,000 145,000 140,000 169,000 180,000 171,000 194,000 191,500 280,000 510,000 480,000 580,000 620,000 820,000 765,000 540,000 590,000 716.700 Munich Frankfurt Hamburg Berlin Düsseldorf Cologne Stuttgart Stuttgart compared to other German cities 15.0 13.9 14.3 15.1 14.4 13.7 2007 2008 2009 2010 2011 2012 853,000
  22. 22. EuG_RE-J-13014_B Inh_2012_lay02_A Vers1.jpg Stuttgart central business district/city centre: Record levels of construction activity. Never before have so many new construction projects been launched in Stuttgart’s city centre as in 2012 – a response to consistently high demand for modern office space. As expected, rental take-up in Stuttgart’s central business district and city centre was again well above average. The largest contract, for around 12,000 square metres, was signed with a law firm in Bülow Carré. The office and commercial project near the revitalised Postquartier will soon be completed and will add considerably to the ­attractiveness of Lautenschlagerstrasse. The pit for the “CityGate” project has now been excavated. Construction is underway here – as in many other cases – without the ensuing buildings having been pre-let. Consistently strong demand in recent years has encouraged developers to build without advance rental agreements. A total of four new construction projects are underway near the Österreichischer Platz, including the Gerber development, the Caleido and Pauline office and commercial buildings as well as the new WGV building. Some 11,000 square metres of office space are also being created on the old AOK site in western Stuttgart’s Rosenberghöfen. Almost half of this space is used by the AOK itself. After some tough negotiations concerning architecture and size, the planning decision for the Dorotheen Quarter was finally taken. The plans envisage an area which will accommodate around 25,000 square metres of offices, 10,000 square metres of high-end retail and restaurant space, and around 3,150 square metres of apartments. Construction work is due to begin in late 2013/early 2014. Of the 81 leases recorded in Stuttgart’s central business district, 53 were signed for areas of less than 500 square metres. This is equal to around 22.6 percent of total space rented in the central business district. Rents for around 29.7 percent of space were as high as 11.00 euros per square metre. For 24.6 percent of space rents were between 11.01 and 15.00 euros. 18 leases – equal to 45.6 percent of the space – were signed for rents of 15.00 euros per square metre; seven of these leases were for rents of over 17.00 euros. These contracts were for lar- ge premises, mostly newly built properties. A total of 106 contracts were signed in Stuttgart’s central business district, of which 77 were for properties in the segment up to 500 square metres. Around 55 percent of premises let – under 53 contracts – were for rental rates of no more than 11.00 euros per square metre. Forty-six contracts, or 36 percent of space let in the central business district, were signed at rental rates of between 11.01 and 15.00 euros. The price segment between 15.01 and 18.00 euros per square metre accounted for 9 percent of the to- tal space let.
  23. 23. Bueromarktber_ Ansicht_18-19_ 22 23 Feuerbach/Zuffenhausen The character of Feuerbach and Zuffenhausen is strongly determined by the automotive industry and transactions with this sector were again the main influences on locations here in 2012. Compared with the two previous years ­during which the Bosch and Porsche groups expanded considerably, rental take-up rates in 2012 fell again to normal levels of around 15,000 square metres. Extensive revitalisation resulted in the creation of modern loft-style office space in the former Akzo Nobel industrial estate. In addition to a large rental transaction by Bosch for some 5,000 square metres of space, contracts were ­also signed with many small-scale users. It is still not clear when the Skyline Project will get underway. Construction of a residential tower has been delayed by a noise study. The commercial part of the project, which covers around 10,000 square metres, will be built only when advance rental agreements are in place. A total of 13 contracts have been signed in Stuttgart Feuerbach. Around 82 percent of the leases were signed at prices between 11.01 and 13.00 euros per square metre. Eight transactions were completed in the segment up to 500 square metres. The biggest transaction, however, was the contract signed by Bosch referred to above. ­Another contract for around 4,000 square metres was ­signed for the OASIS II new building project. In Zuffenhausen four leases were signed at prices between 7.50 and 10.00 euros per square metre. A contract ­completed with Porsche for approximately 2,500 square metres was the largest transaction in the Zuffenhausen submarket. Weilimdorf Demand for office space in Weilimdorf had already ­started to decline in previous years. Stuttgart’s Business Develop- ment Department launched a business location offensive after it was announced that Ernst & Young would be ­leaving the Weilimdorf business park. The round table, which convened under the motto “Weilimdorf, the Green Location”, focused primarily on energy issues. With the owners’ participation the electric heating found in many buildings, for example, will be replaced by more energy-efficient technologies. Action will also be taken to make Weilimdorf more attractive, such as creating more day nursery and kindergarten places and improving local facilities. A total of 11 leases were signed in Weilimdorf business park. Seven contracts were for properties in the segment up to 500 square metres. The biggest transaction was for premises of around 1,200 square metres. Around 82 per- cent of premises were let at prices of between 8.00 and 10.00 euros per square metre. One contract for premises with correspondingly high-quality fixtures was signed at a price of 12.40 euros per square metre. Northern Stuttgart: Plans for enhancement.
  24. 24. Eastern Stuttgart: Plenty of space for new projects. Bad Cannstatt/Wangen/Hedelfingen Substantial progress was made in 2012 on planning the Neckarpark on the site of the former goods station in Bad Cannstatt. The fundamental idea underlying this ­project is the concept of sustainability. The lion’s share of the energy required will come from renewable energy sources – such as heat recovery from waste water. The first plots of land are due to be sold in the first half of 2013. As office projects in eastern Stuttgart are still ­relatively few and far between, the marketing prospects are good in this area. The area between Cannstatter Wasen and Bad Cannstatt railway station has been upgraded, for example by re- building the former Ahoj sherbet factory and the Friedel lofts to create a successful mixed-use development of apartments, offices and ateliers. Plans by Daimler AG to add a Mercedes-Benz World to its existing Mercedes-Benz Museum has also added to the attractiveness of this location. This project will bring ­together both brand presentations and Mercedes-Benz Classic – the service department for owners of classic cars. The architectural competition will be decided in the first quarter of 2013. It should be possible to complete the project by late 2015 or early 2016. Eighty-five percent of leases signed in the Hedelfingen, Wangen and Bad Cannstatt area – 17 in total – were for properties in the segment up to 500 square metres. One large-scale contract for 5,400 square metres was also signed in 2012 as part of the expansion of Deutsche Telekom. Forty-five percent, or 14 contracts, were signed at prices of between 9.00 and 12.00 euros per square metre. Most of the users of leased office space fell within the category of “other office users”, such as medical service providers, security companies or medical insurers. As well as the premises which are already available, office space on a scale typical for the area of up to 5,000 square metres can also be provided on the former Schaudt grounds.
  25. 25. 24 25 Southern Stuttgart: Supply of new space scarce. Degerloch Although Degerloch offers an attractive infrastructure, there continued to be a shortage of space for new office buildings in 2012. While a new building project on Alb- platz continues to offer large amounts of space, there are currently no further plans for modern office space. The area directly adjacent to the exit from the B 27 main road, which was originally envisaged as a project site, has been sold to buyers who plan to use it for their own purposes. The Wilhelmshöhe new building project was fully let in 2012. The rental turnover of 4,800 square metres was almost the same as in the previous year. Seventeen percent of premises let – three contracts in total – were in the price segment of up to 9.00 euros per square metre. Another Forty-four percent, or four contracts, were signed at a rental rate of between 12.01 and 13.00 euros per square metre. The contracts in the newly built part of the ­Compas Commerce Park and in the newly constructed Wilhelmshöhe were let at prices of between 12.00 and 15.00 euros per square metre. Forty-two percent, or ­seven transactions, were signed in the segment of under 500 square metres. Two contracts were signed for ­premises up to 1,000 square metres and the biggest ­transaction was for around 1,400 square metres. Leinfelden-Echterdingen The departure of Telekom from Unteraichen continued to make itself felt in 2012. At 5,200 square metres the rental volume was 35 percent below the figure for last year. The Humboldt Carré, which was completed in 2011, was fully let in 2012 to an IT company which rented some 1,300 square metres in what was easily the biggest ­transaction to take place on this market. Fifty-two percent of contracts were for premises up to 500 square metres and 23 percent for premises of between 501 and 1,000 square metres. ­Sixty-two percent of let premises were in the price segment up to 9.00 euros per square metre. A rental rate of around 12.00 euros per square metre was obtained for new office space. Work is due to begin on the “Airport City” office location at Stuttgart Airport in 2013. This new development will offer capacity for some 250,000 square metres of office and service space which will be marketed in smaller units of around 10,000 to 15,000 square metres per year. The ball for this development has been set rolling by the leasing decision taken some time ago by Ernst & Young. The lease is due to be signed in 2013 and the building is scheduled for completion in 2015. Apart from the announced Macs Resort project – a 100,000 square metre hotel, office and health complex develop- ment – there are currently no further new building projects.
  26. 26. Fasanenhof The volume of space rented in Fasanenhof fell by 40 per- cent in 2012 to around 7,400 square metres. This was mainly due to the current supply side of the equation: modern office spaces are hard to come by and the few rental contracts which are concluded are taken by ­property owners with flexible structures and small units. The sale of formerly rented property to owners who ­intend to use it themselves also impacts turnover figures. Although the location was upgraded thanks to improve- ments in local facilities it has not yet attained the stan- dards required for a modern commercial area. However, the extension of the urban railway will turn Fasanenhof into the commercial area with the best connections to Stuttgart Airport, which is sure to arouse the interest of larger-scale users. Ninety-free percent of transactions – equivalent to twelve contracts – were completed in the 9.01 to 10.00 euros per square metre price segment. The largest share of around 35 percent of these transactions – ten contracts – were for small premises of up to around 500 square met- res. Only two transactions were completed for properties between 501 and 1,000 square metres. As in previous ye- ars, most users rented space in the Business Park. Vaihingen/Möhringen and STEP Rental take-up rates have fallen in the previously very strong location of Vaihingen/Möhringen. Office space ­totalling some 18,200 square metres was let in the entire area in 2012 – well below the ten-year average of around 23,000 square metres. One of the reasons for this was the currently low vacancy rates in the Stuttgart Engineering Park (STEP), where the highest turnover has been ­generated in recent years. Planning activity will be increased up in 2013 in response to the low vacancy rate in the STEP: there are plans to build around 11,000 square metres of office space on plots 7.1 and 7.2. In addition, Baden-Württemberg’s Centre for Solar Energy and Hydrogen Research with a total of 9,500 square metres of office space will go up on site 7.3 by 2014. Fifty-five percent of the space in the STEP – corresponding to five contracts – was let in the 11.00 to 12.00 euros per square metre price segment and 39 percent in the 12.00 to 13.00 euros segment. Of the leases, 31 percent were in the small premises segment up to 500 square metres and 68 percent in the range from 501 to 1,000 square metres. Aurelis is planning a project for 20,000 square metres of office space at Vaihingen’s metropolitan train station. Another project which will change and modernise the location is the planned European headquarters of the Lapp Kabel Group, one of the world’s leading providers of cables, leads, etc. The growth of the Dekra Group will also result in around 6,000 square metres of new construction, which will probably be ready for occupancy in the fourth quarter of 2013. The redevelopment of the Koch, Neef & Volckmar site on the corner of Wallgraben/Industriestrasse and around Schockenriedstrasse also looks exciting. The aim here is to develop an overall concept for both sites (approximately 80,000 square metres) which both meets users’ needs and implements the idea of a synergy park. The IBM site, which has been under discussion since early 2011, still awaits a new user, although the situation as a whole (ownership, listed status) means that a clear ­planning concept will have to be developed before further marketing activities are launched. Work is currently underway on this concept. Forty-six percent of space – equivalent to 14 leases – was let in Vaihingen/Möhringen at prices of up to 10.00 euros per square metre. The square metre price of 53 percent of premises, let under eight contracts, was between 10.00 and 12.00 euros. Around 27 percent of the rented premises were in the up to 500 square metres segment, and a further 36 percent of office space in the 501 to 1,000 square metres segment. The largest transaction, for 2,700 square metres, was signed in OFFICIVM.
  27. 27. 26 27 A8 towards Karlsruhe Stuttgart motorway intersection A 81 towards Singen A 81 A8 towards Munich A 81 towards Heilbronn Northern Stuttgart Eastern Stuttgart Central Stuttgart Southern Stuttgart Western Stuttgart Overview of the Stuttgart Office Market. < 10,000 sq. m 10,000 – 20,000 sq. m 20,000 – 30,000 sq. m 30,000 – 40,000 sq. m above 40,000 sq. m A8 towards Karlsruhe Stuttgart motorway intersection A 81 A8 towards Munich Industrial parks/office locations StuttgartStuttgart Southern Stuttgart Western Stuttgart Turnover of office space in 2012
  28. 28. Focus on new development One of the main issues in 2013 will be the marketing of the large volume of new space which is currently being provided in Stuttgart’s office market. The completion ­volume will more than double compared with previous years. Nonetheless, 80 percent of space has already been let. The consistently high level of demand in recent years, in particular, has resulted in new buildings going up in the central business district even before the required ­advance rental agreement ratio has been met. The market will continue to be dominated by demand for high-­ quality, energy-efficient and optimally arranged space. Several large transactions will be signed on the market in 2013 which may have a significant impact on rental take-up. These include the signing of the lease at Stuttgart Airport by Ernst & Young. Record prices in the central business ­district Rent trends have also benefitted from strong demand. Some contracts were signed in the central business ­district for prices of over 20.00 euros per square metre. Although rental rates have also developed positively in submarkets, there are still structural deficits in some of these areas. Opportunities for increasing rental volumes will only be available if efforts are made in the future to meet the requirements users have for a modern office and service setting. This not only concerns the appearance of properties but, above all, important factors such as energy efficiency, local facilities and accessibility. Prospects are good for 2013. Although rental take-up in 2012 was somewhat lower than in the outstanding previous year, at 191,500 square metres it was still very good. Demand has simply returned to normal levels. This is ­certainly in part due to the current state of the world economy. It is all but impossible to make economic forecasts for the year 2013 based on global economic developments and particularly on developments in the eurozone. Nonetheless, turnover of office space of around 200,000 square metres is anticipated for 2013.
  29. 29. 28 29
  30. 30. Your contact partners. ELLWANGER & GEIGER Privatbankiers is the ideal partner for marketing your office properties. Our many years of experience and unique range of services enable us to move the market and proactively identify budding trends. For us, having a sixth sense isn’t a supernatural ability but simply part of the service we offer you. Our team in Stuttgart is looking forward to your call or visit. Contact us: Phone: +49 (0) 711 2148297, Fax: +49 (0) 711 2148290. On the Internet: www.privatbank.de · www.bueroflaeche-stuttgart.de Sebastian Degen Consultant Office Letting Phone +49 (0) 7112148166 Sebastian.Degen@privatbank.de Alice Disam Commercial Property Assistant Phone +49 (0) 7112148297 Alice.Disam@privatbank.de Ulrich Nestel Head of Office Letting and Retail Projects Stuttgart Phone +49 (0) 7112148291 Ulrich.Nestel@privatbank.de Matthias Hägele Office Letting Consultant Phone +49 (0) 7112148292 Matthias.Haegele@privatbank.de Helga Schöner Research and Commercial Property Consultant Phone +49 (0) 7112148269 Helga.Schoener@privatbank.de Disclaimer: Although this study has been prepared with all due care, Ellwanger & Geiger Privatbankiers accepts no liability for the correctness of the assessments presented. We are sure that you will understand this.
  31. 31. 30 31 Our other publications Retail Market Report Logistics Market Report Investment Market Report You can obtain these free of charge from: Alice.Disam@privatbank.de Ellwanger & Geiger Real Estate. ELLWANGER & GEIGER Real Estate offers you a one-stop shop for a comprehensive range of services ­relating to the asset class of real estate. With the very highest discretion and integrity, we enable you to keep your bearings in rapidly changing markets. Our success is founded above all on excellent knowledge of the market and decades of experience in real estate business. COMMERCIAL PROPERTY Extensive research is the basis for our analyses of locations, portfolios and cost-effectiveness that reflect market conditions. From this, we ­derive strategies whose goal is to ­capitalise on potentials for earnings and efficiencies. Apart from comprehensive leasing services, our core expertise includes project consulting and transaction business. We adopt a holistic ­approach in consulting on real ­estate: we partner you all the way – from the development of marketing strategies and the preparation of ­data on properties to the implemen- tation of marketing processes. OUR SERVICES Research Investment analysis and consulting Transactions, renting and leasing of office, retail, industrial and logistics facilities FUNDS Asset Management We plan individual real estate invest- ments and create special funds for ­institutional and professional private investors (family offices). Each invest- ment approach is devised in close consultation with the customer. An investment volume is selected that permits niche investments and indivi- dual mandates. By creating portfolios for single investors or small groups, we are able to provide individual support for the duration of the invest- ment. Different investment vehicles are selected depending on the needs and product preferences of each ­investor: OUR SERVICES Special funds in accordance with the German Investment Act (KAG) Closed investment models (KG, GmbH) Luxembourg security funds and special funds, SICAV, SIF Individual schemes for offshore ­investors OUR OFFICES: Stuttgart Head Office Börsenplatz 1 70174 Stuttgart Phone +49 (0) 711 2148 286 Fax +49 (0) 711 2148 290 www.privatbank.de Munich Branch Office Herzog-Rudolf-Strasse 1 80539 Munich Phone +49 (0) 89 17 95 98 0 Fax +49 (0) 89 17 95 98 55 www.privatbank.de
  32. 32. Bankhaus Ellwanger Geiger KG Real Estate Börsenplatz 1, 70174 Stuttgart Phone: +49 (0) 711 2148 297, Fax: +49 (0) 711 2148 290 www.privatbank.de

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