Market survey. 2018/Q1-2 Hamburg. Commercial Office letting. Hamburg Sylt Berlin

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1 Market survey Commercial Office letting Hamburg Hamburg Sylt Berlin

2 Commercial Office letting Key Facts Office letting 250,000 m² /m² /m² 3.9 % 13.66m m² -17 % year-on-year change -1.9 % year-on-year change +6.1 % year-on-year change -1.0 pp year-on-year change +1.0 % year-on-year change pp = percentage point Premium rent mth (net) The vacancy rate continues to fall and is having an impact on take-up results. Clients are finding it appreciably harder to rent the kind of space they want. Andreas Rehberg Managing director Low vacancy level depresses take-up The first half of 2018 has closed with office take-up in Hamburg some 50,000 m² below the results of the prior year. The result for the half year was a total of 250,000 m². This translates into a 17% drop in office take-up. The proportion of owner-occupiers was slightly higher than in the first quarter, rising to 7%. While the same number of agreements for over 5,000 m² of office space were signed as in the prior year, the actual volume of take-up dropped by 47%. Six large lets were registered in the 1st half year, involving a total of around 44,000 m². This size category therefore accounted for a relatively modest 18% share of total take-up. The biggest agreement was the 1st quarter lease taken by insurance group Signal Iduna for temporary space in the Vattenfall Building (Überseering 12, City North). Three new large agreements were signed in the 2nd quarter. f & w fördern und wohnen, a social housing company owned by the Free and Hanseatic City of Hamburg, will be moving into some 8,600 m² of offices in the Economic Quarter (formerly called the Economic Centre ) at Heidenkampsweg Other clients taking more than 5,000 m² included the Department of Building Regulations and Civil Engineering which took some 6,900 m² at Nagelsweg 47 (City South) and Lufthansa which Average rent mth (net) Vacancy rate Office stock opted for around 5,300 m² in the Hanse 10ter Grad (Essener Bogen 21-23, Hamburg West). The biggest new lease in the City was signed by Zeaborn for space in the Tower am Michel (Ludwig-Erhard-Strasse 22) in the first quarter of the year. In May the firm moved into some 5,300 m² spread over four floors of the tower. The most popular size of office in the first half year was between 1,001 and 2,000 m²; this segment accounted for a quarter of total take-up (63,000 m²). The next most popular segments were properties sized 2,001 to 5,000 m² and 500 m² or less, each accounting for a share of 20% (49,000 m²) in 000s m² incl. owner-occupiers 10-year average ( ): ca. 512,000 m² Q Page 2

3 Selected top contracts 1. Signal Iduna Überseering 12 ca. 10,000 m² 2. f & w Heidenkampsweg ca. 8,600 m² 3. Harburg-Freudenberger Schlachthofstrasse ca. 7,700 m² 4. Dep. of Building Regs. Nagelsweg 47 ca. 6,700 m² 5. Lufthansa Essener Bogen ca. 5,300 m² 6. Zeaborn Ludwig-Erhard-Strasse 22 ca. 5,300 m² 7. SPIE Deutschland Deelbögenkamp 4 ca. 4,400 m² 8. Ocean Network Express Anckelmannsplatz 1 ca. 4,100 m² 9. Hamburger Pensionsverw. Brooktorkai 20 ca. 3,900 m² 10. Baugen. Bergedorf-Bille Bergedorfer Straße ca. 3,900 m² f & w fördern und wohnen Economic Quarter, Heidenkampsweg City South ca. 8,600 m² in 000s m² by size and no. of lettings No. of lettings 20% % 45 1,000 by industry Other Construction/ property 43% 9% 25% 63 2,000 17% 9% 20% 49 5,000 18% 44 over 5,000 9% 13% Tourism/transport Public sector Manufacturing industry Insurance companies Only City and City South sub-markets returned two-figure shares of overall take-up in the first half year for a joint total of 43%. At the end of the 2nd quarter, with take-up of space totalling around 60,500 m² and thus 24% of the total, City remained well ahead of other locations. The successful letting of office space in one building alone, the Tower am Michel (Ludwig-Erhard-Strasse 22), contributed some 14,800 m² to the final tally. For example, in the 2nd quarter the British petrol station company EG Deutschland (Euro Garages) announced that it will be occupying around 1,700 m² of space in the tower. Several rental agreements totalling some 4,700 m² of office space in the new build Stadthaus, part of the Stadthöfe development (Stadthausbrücke 6-8), were completed in the first half year, including a lease for about 1,500 m² taken by another business centre provider (CS Business Center GmbH). City South submarket placed second, with a share of about 19% of the total (46,500 m²). Here about a third of the take-up of space was attributable to the big 2nd-quarter leases already mentioned, namely those taken by f & w fördern und wohnen (about 8,600 m², Economic Quarter, Heidenkampsweg 96-98) and the Department of Building Regulations and Civil Engineering (about 6,900 m², Nagelsweg 47). Harburg came third, with a share of 9% (22,800 m²). Harburg profited from a relatively high number of agreements signed in the industrial/logistics sector. One such agreement was the construction start of a new building on Schlachthofstrasse for Harburg-Freudenberger Maschinenbau, which is to include some 7,700 m² of office space. In addition the Technical University of Hamburg-Harburg (TUHH) rented around 3,000 m² in the 1st section of the Hamburg Innovation Port/HIP ONE new build, further boosting figures for Harburg. Apart from City, City South and Harburg, where take-up was concentrated, office lets were distributed in relatively small clusters across the other sub-markets. Only HafenCity (7%, 16,500 m²) and City North (6%, 15,000 m²) succeeded in reaching shares of take-up above the five per cent mark. The tourism and transport industry was the driving force in the first half of 2018, accounting for 17% (41,800 m²) of the total take-up of office space. This good result is mainly due to four large agreements which comprised a full 40% of take-up by this Page 3

4 Premium and average rent /Q2 in /m²/mth (net) Premium rent sector. Four firms in this segment, Lufthansa, Zeaborn, Ocean Network Express and Kühne + Nagel, added take-up of some 18,000 m² to the total. Public administration, associations and churches followed in second place, taking a good 13 % (31,500 m²) of the total. This ranking owes much to two large leases totalling 15,000 m² signed in the 2nd quarter by f & w fördern und wohnen and the Department of Building Regulations and Civil Engineering. Three industries, namely insurance, manufacturing, and construction & real estate, each contributed over 22,000 m² or 9% to the result. The lease for temporary premises signed by Signal Iduna was the biggest contract of the year and instrumental to the ranking of the insurance industry; the manufacturing sector s good result was partly due to the construction start of the building for owner-occupier Harburg-Freudenberger Maschinenbau. Several lets for more than 1,000 m² boosted the volume of take-up by the construction and real estate industry; three agreements were with business centre providers; Regus, CS and Dussmann took a total of 3,700 m². Average rent Vacant space Vacancy rate /Q2 in 000s m² 6.0% 5.2% 5.1% Completions Pre-let rate in 000s m² % /Q2 3.9% /Q2 48% Rents Premium rent drops slightly The premium rent dropped by 50 cents year on year, which translated into a modest fall of 1.9%. At the close of the 1st half of 2018 the premium rent was 26.00/m²/month. However, the average rent, weighted by rental area, rose by 6.1% from 14.80/m²/month a year ago to its current level of 15.70/m²/ month. Available and vacant space Competition is becoming keener The four per cent barrier has fallen. In the 2nd quarter the vacancy rate contracted once more and stood at 3.9% at the end of the quarter. Year on year 20% less office space was available to tenants within three months as vacancies fell to only 536,000 m². In view of a vacancy rate below 4% clients have to rethink their policies. Competition for good office space has become much keener. Companies are now advised to appreciably accelerate the speed with which they choose and rent offices to avoid being left out of the race. If the market remains as brisk as it is now, the completions scheduled in the next two years will fail to generate an increase in available office space which would lead to a looser market. The completion of 58 developments in 2018 and 2019 will, in all likelihood, add around 330,000 m² of office space. However, 59% (195,000 m²) of this space has already been pre-let or is being built for an owner-occupier. The result is that over a two-year period a mere 135,000 m² of office space will come onto the market. Building activity in 2018/2019 is concentrated in the City, where 18 developments are set to deliver 87,000 m² of space. 77% Page 4

5 Overview of office sub-markets Hamburg Airport Hamburg West Eppendorf Alster City North Hamburg East Barmbek Alster East Wandsbek A 7 Eimsbüttel Alster West Bahrenfeld Außenalster A 24 Elbe Altona A 7 Port Rim St. Pauli Norderelbe City Binnenalster HafenCity St. Georg City South Harburg A 253 A 1 Sub-market in m² incl. owner-occupiers Vacant space in m² Vacancy rate in % Rents paid longer-term in /m²/mth (net) Average rent in /m²/mth (net) Completions 2018/2019 in m² 1 City 60, , ,000 2 HafenCity 16,500 28, ,000 3 Port Rim 5,000 6, Alster West 4,000 7, Alster East 10,500 20, ,000 6 St. Georg 3,300 18, ,000 7 City South 46,500 76, ,000 8 St. Pauli 11,300 17, ,000 9 Altona 8,500 18, , Bahrenfeld 9,000 59, , Eimsbüttel 2,300 13, , Eppendorf 6,500 16, Airport 2,900 24, , City North 15,000 14, , Barmbek 2,500 16, , Wandsbek 4,300 40, , Harburg 22,800 15, , Hamburg East 10,800 25, , Hamburg West 7,800 16, ,000 Total 250, , ,000 Page 5

6 Outlook Cyclical downturn expected in 2019 In the 2nd quarter the labour market continued to make good progress. In June the number of jobless fell year on year by 4,800 to 63,800. The unemployment rate was 6.1%, down from 6.7% in June Many German companies are still planning to hire more staff. However, the current state of the labour market is such that it can prove difficult to find suitable candidates for the jobs on offer. In June 2018 the ifo employment barometer indicated an inclination among German business managers to create more new jobs. In the case of the service industries, the firms most likely to seek additional workers are those in the logistics and transport sector. The ifo index of business confidence in the manufacturing and trades sector paints a less rosy view of the future. In June the index sank to points, down from in May. Service providers were slightly less optimistic when rating their current and future business expectations. The World Economy Institute (HWWI) now expects the German economy to experience a cyclical downturn. The Institute continues to predict economic growth of 2.1% in 2018 and of 1.6% in Overall, the HWWI identifies increased risks for the German economy as a result of heightened potential for geopolitical and global economic conflict. In particular, a trade war with the USA would endanger the economy.. Many interesting companies are still looking for new offices. There are, however, limitations on how well demands can be met due to the drastic reduction of available premises leading to keener competition on the market for Hamburg offices. The final figures for office take-up are not expected to match the record set in 2017 and the year should end somewhere in the region of the ten-year average of 512,000 m². Rents. Over the course of the second half year the run on well-designed space in sought-after locations will intensify and influence the asking rents; these will rise appreciably in some sub-markets. Available space. It is very likely that there will be further reductions in the amount of vacant space because the volume of speculative building completions remains low. The vacancy rate will remain below the four per cent threshold. New office building looking towards Speicherstadt and Elbphilharmonie. Grossmann & Berger s Promise. Bei den Mühren 5 City ca. 5,122 m² Available from 2020/Q1 Page 6

7 Skilled consultancy Services und contacts From left to right: Sonja Ebert Anna Martens Tatjana Merger What can we do for you? An analysis of the property markets is an important part of the wide-ranging consultancy services offered by Grossmann & Berger. We would be pleased to be of assistance in your decision-making process and can draft an offer that is tailored to your specific requirements. Sonja Ebert MBA Real Estate Management Research Phone: +49 (0)40 / Mail: Anna Martens Diplom-Ingenieur Master of Urban Planning Research Phone: +49 (0)40 / Mail: Tatjana Merger Master of Science Urban Planning Research Phone: +49 (0)40 / Mail: Glossar Definitions, office market : is the total of all space newly let plus that sold to or built by an owner-occupier during the period under review. The operative date for inclusion in the statistics is the date on which the lease or purchase agreement was signed. Lease renewals are not counted as take-up. Areas are stated on the basis of the guide for calculating the rental area in commercial leases (MF/G). 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 is stated as the average of such rents. Average rent: The average rent paid is calculated by taking the individual rents 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 ex services. Vacancies: Vacancies include all office space that is available to new tenants within three months. Sub-let space is counted as vacancy. Photo credits: Cover: Millerntor, Millerntorplatz 1/ Dancing Towers, Reeperbahn 1 Jörg Bucher, Page 2: View from Dancing Towers, Reeperbahn 1 Jörg Bucher, Page 3: Economic Quarter, Heidenkampsweg 96-98, Page 6: Bei den Mühren 5 FAIRPLAY TOWAGE Schleppdampfschiffs-Reederei Richard Borchard GmbH We draw your attention to the fact that all statements made here are non-binding. Most of the information is based on third-party reports. The sole intention of this market survey is to provide general infomation for our clients. Grossmann & Berger GmbH Bleichenbrücke 9 (Bleichenhof) D Hamburg Phone: +49 (0)40 / Fax: +49 (0)40 / Managing directors: Andreas Rehberg, Holger Michaelis, Lars Seidel, Axel Steinbrinker Chairman of the supervisory board: Frank Brockmann Registered office Hamburg Registered at Hamburg no. B Page 7