Market survey Commercial Office letting 2018/Q1-3 Hamburg Hamburg Sylt Berlin
Key Facts Office letting 430,000 m² 27.00 /m² 15.60 /m² 3.5% 13.71m m² -8% year-on-year change +3.8% year-on-year change +4.0% year-on-year change -1.0 pp year-on-year change +1.0% year-on-year change pp = percentage point Premium rent mth (net) Average rent mth (net) Vacancy rate Office stock In view of the shortage of available properties the risks associated with speculative developments in top locations are considerably lower. Users are competing for locations and space. It has become a landlords market. Andreas Rehberg Managing director Business is down despite great demand Despite great demand for space, office take-up in the first three quarters of the year was 8% lower than the result for the same period of 2017. The main reason is a drastic reduction in available properties. With vacancy rates hovering at 3.5%, companies are finding it difficult or nearly impossible to expand as planned in premises and locations that meet expectations. totalled some 430,000 m². Owner-occupiers share of the market was 16%, or 70,000 m², and thus somewhat higher than a year ago. The biggest owner-occupier transaction was the construction start for the new Beiersdorf AG headquarters on Troplowitzstrasse in the Eimsbüttel submarket that will provide around 45,000 m² of office space. The company reports that, including laboratories and special purpose areas, the project will deliver some 100,000 m² GFA (above and below ground). Completion is scheduled in several stages. The main building is due to open by the end of 2021 and the entire complex should be finished by the middle of 2023. fell year on year by 16% from 137,000 m² to 115,000 m², this size category still accounted for the largest share of take-up at 27% of the total. In the 3rd quarter IT consultancy akquinet signed the biggest rental agreement for 12,000 m² in the Bramfelder Spitze now being developed by Evoreal at Bramfelder Chaussee 106-112, sub-market Hamburg East. The next biggest agreement was the 1st quarter lease for 10,000 m² taken by insurance group Signal Iduna for temporary space in the Vattenfall Building (Überseering 12, City North). Design Offices, a provider of coworking space, signed the third-biggest rental agreement and will be taking 8,600 m² in the as yet to be completed Olympus Campus (Wendenstrasse 14-18, City South). 2014-2018/Q1-3 in 000s m² incl. owner-occupiers 10-year average (2008 2017): ca. 512,000 m² Q3 180 Including the Beiersdorf construction start, so far the biggest transaction of the year, the 3rd quarter closed with an unchanged number of agreements (ten) for over 5,000 m² of office space signed by tenants or owner-occupiers. Although take-up 525 540 550 640 430 2014 2015 2016 2017 2018/Q1-3 www.grossmann-berger.de Page 2
Selected top contracts 2018/Q1-3 1. Beiersdorf AG Troplowitzstraße ca. 45,000 m² 2. akquinet AG Bramfelder Chaussee 106-112 ca. 12,000 m² 3. Signal Iduna Überseering 12 ca. 10,000 m² 4. Design Offices Wendenstraße 14-18 ca. 8,600 m² 5. f & w Heidenkampsweg 96-98 ca. 8,500 m² 6. Harburg-Freudenberger Schlachthofstraße ca. 7,700 m² 7. Amt für Bauordnung Nagelsweg 47 ca. 6,900 m² 8. Europcar Autovermietung Anckelmannsplatz 1 ca. 5,600 m² 9. Lufthansa Essener Bogen 21-23 ca. 5,300 m² 10. Zeaborn Ludwig-Erhard-Straße 22 ca. 5,300 m² Source: Beiersdorf AG Beiersdorf AG New corporate headquarters, Troplowitzstraße Eimsbüttel ca. 45,000 m² 2018/Q1-3 in 000s m² by size and no. of lettings No. of lettings 16% 68 500 20% 85 1,000 2018/Q1-3 by industry Other 265 122 71 22 10 Public sector 42% 10% 21% 89 2,000 13% 11% 17% 73 5,000 27% 115 over 5,000 12% 12% Tourism/transport Research/ development IT & telecommunication Construction/ property At the end of the 3rd quarter City was, as expected, top of the table of sub-markets. Its share of take-up was 22%, exactly as it was the year before, but actual turnover had fallen by about 11% from 103,700 m² to 92,700 m². One reason for the high volume recorded in this sub-market was the successful letting of office space in the Tower am Michel (Ludwig-Erhard-Strasse 22), which contributed some 14,800 m² to the final tally. Two other agreements for more than 4,000 m² were noted in the 3rd quarter. A large social media company from the USA decided to take about 4,700 m² of office space in the HAD Quarter / Haus am Domplatz (Schopenstehl 13) development project and the business law firm GÖRG signed an agreement for 4,100 m² in the Alter Wall development (Alter Wall 2-32). City South held on to its position as second most popular submarket, although its share of take-up fell from 21% (99,500 m²) to 19% (82,000 m²). This sub-market scored in the 3rd quarter by adding two agreements for over 5,000 m² to its total: Design Offices took some 8,600 m² in the Olympus Campus (Wendenstrasse 14-18) and Europcar took 5,600 m² in the Berliner Bogen (Anckelmannsplatz 1). In the 2nd quarter, City South had already registered agreements by f & w fördern und wohnen (about 8,600 m², Economic Quarter, Heidenkampsweg 96-98) and by the Amt für Bauordnung/ Department of Building Regulations and Civil Engineering (about 6,900 m², Nagelsweg 47). Due to the Beiersdorf construction start, the third-ranked submarket was Eimsbüttel with a share of 13% and take-up of 57,000 m². Hamburg East (8%, 33,700 m²) and Harburg (6%, 26,400 m²) followed in fourth and fifth places. At the close of the 3rd quarter, as at the end of the half-year, the tourism and transport sector emerged as the major group of customers. Whereas in the previous year the sector accounted for a mere 5% of take-up, by the end of the quarter their share was 13% (56,900 m²). Tourism and transport posted a volume of some 36,000 m², including 15 agreements for more than 1,000 m² of space each. The biggest agreements for this sector were signed by Europcar ( Berliner Bogen, Anckelmannsplatz 1), Lufthansa (Essener Bogen 21-23) and Zeaborn. In the ranking of take-up by industry, places two and three, each with www.grossmann-berger.de Page 3
Premium and average rent 2014-2018/Q3 in /m²/mth (net) 24.50 25.00 26.00 26.00 27.00 about 12% and 52,000 m² of office space, went to Research and Development as a result of the Beiersdorf construction start, and to IT and telecommunications, which registered two rental agreements for large amounts of office space in the 3rd quarter, namely the akquinet agreement in the Bramfelder Spitze (Bramfelder Chaussee 106-112) and the social media company from the USA that took space in HAD Quarter / Haus am Domplatz (Schopenstehl 13). Construction and property management firms followed in fourth place, taking about 11% (46,100 m²). Providers of coworking space and business centres fall into this latter category, generating over 40% of take-up in the sector. Rents Premium rent hits 27 for first time Premium rent Average rent 14.50 14.50 15.50 15.20 15.60 As a result of several rental agreements for expensive new developments in inner city locations, by the end of the 3rd quarter the premium rent had risen to 27.00/m²/month (net, ex services). The average rent, weighted by space taken, was 15.60/ m²/month (net, ex services) and thus 10 cents lower than in the preceding quarter but 60 cents higher than a year ago. 2014 2015 2016 2017 2018/Q3 Vacant space Vacancy rate 2014-2018/Q3 in 000s m² 6.0% 5.2% 5.1% 798 698 684 580 482 Completions Pre-let rate 2015-2019 in 000s m² 4.3% 3.5% 2014 2015 2016 2017 2018/Q3 Available and vacant space Need to allow more time for fit-out The amount of empty space continued to shrink in the 3rd quarter. By the end of the quarter only 482,200 m² of space was available within the next three months, about 137,000 m² less than a year ago. The vacancy rate fell further to 3.5%. Potential clients are noticing that they now have a limited range of choices in Hamburg. In many cases with short lead times it is not possible to find the space required within the desired period because the construction boom, and consequently full order books for firms in the building trades, mean longer fit-out times or appreciable delays. At present, in view of the shortage of empty space, speculative developments in good locations stand an excellent chance on the market. The completion of 63 developments in 2018 and 2019 will, in all likelihood, add around 345,000 m² of office space. However, 62% (212,000 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 132,000 m² of office space will come onto the market. Building activity in 2018/2019 is concentrated in the City, where 19 developments are set to deliver 89,000 m² of space. 50% 80% 120 192 260 132 212 2015 2016 2017 2018 2019 www.grossmann-berger.de Page 4
Overview of office sub-markets Hamburg 2018/Q1-3 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 92,700 83,600 2.9% 13.50 29.00 19.90 89,000 2 HafenCity 23,500 24,100 4.4% 10.00 30.00 19.70 31,000 3 Port Rim 6,800 7,300 3.4% 15.00 22.50 18.90 0 4 Alster West 5,400 4,600 0.8% 14.00 25.00 19.80 0 5 Alster East 11,800 20,800 6.5% 11.50 27.00 19.90 6,000 6 St. Georg 3,100 18,100 4.1% 9.50 21.00 16.80 11,000 7 City South 82,000 60,300 3.7% 8.00 17.50 12.90 11,000 8 St. Pauli 20,200 6,600 1.5% 10.00 17.50 17.90 7,000 9 Altona 11,000 19,400 2.7% 8.50 19.00 13.90 40,000 10 Bahrenfeld 12,500 61,200 13.9% 8.50 17.00 11.80 51,000 11 Eimsbüttel 57,000 15,700 7.3% 11.00 23.30 13.10 8,000 12 Eppendorf 6,500 6,500 2.1% 8.00 14.00 12.60 0 13 Airport 2,800 21,800 2.5% 7.00 13.20 10.20 25,000 14 City North 14,800 15,800 2.8% 8.50 14.00 10.10 1,000 15 Barmbek 7,700 18,200 3.0% 6.50 15.50 11.30 7,000 16 Wandsbek 4,400 43,800 7.4% 7.00 15.00 12.30 23,000 17 Harburg 26,400 16,300 1.7% 6.00 15.80 10.70 16,000 18 Hamburg East 33,700 21,400 2.2% 6.00 12.50 12.20 15,000 19 Hamburg West 7,700 16,700 3.9% 6.00 12.50 10.60 4,000 Total 430,000 482,200 3.5 % 6.00 30.00 15.60 345,000 www.grossmann-berger.de Page 5
Outlook Despite a slowing pace, post-2018 economic prospects remain good Commercial Office letting The Hamburg labour market remains in good shape. Year on year the unemployment rate fell by 0.5 percentage points to reach 6.2% in September 2017. The outlook for the German labour market is likewise good. German firms are continuing to add to their pay-rolls, according to the ifo research institute s employment barometer for September 2018. Above all, demand for workers in service jobs remains unabated and high. Although the record figures posted for the preceding quarter were not repeated, the sector still remains a prime motor of job growth in Germany. Despite the good indicators, the ifo index of business confidence shows that the bosses of Germany s manufacturing firms are rather less optimistic. Accordingly, the index sank from 103.9 points in August to 103.7 points in September. However, findings by the World Economy Institute (HWWI) in Hamburg show that the upswing remains intact. Although the institute revised its forecast economic growth for the full year 2018 from 2.1% to 1.9%, the experts reiterate their positive estimate of 1.6% growth in 2019. First and foremost, consistent domestic demand has kept the upswing in motion, but current geopolitical uncertainties, in particular possible trade war with the USA, is making managers less willing to invest, and a slower pace of business is to be expected.. Despite a great many enquiries about space, the shortage of available property continues to hamper take-up. In all probability, therefore, the year will end with take-up well below the record figure of 640,000 m² posted in 2017. A figure of 550,000 m² is within reach. Rents. The ongoing reduction of the amount of empty space and rising construction costs point to a further increase in rents, which will be especially noticeable in the sought-after inner-city locations. Hamburg is now a landlords market. Available space. Remedies are not in sight. The amount of vacant space will continue to fall and the relatively low volume of speculative completions will not ease the market in any significant manner. 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 www.grossmann-berger.de Page 6
Skilled consultancy Services und contacts From left to right: From Sonja left Ebert to right: Anna Sonja Martens Ebert Tatjana Anna Martens 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 / 350 80 2-641 Mail: s.ebert@grossmann-berger.de Anna Martens Diplom-Ingenieur Master of Urban Planning Research Phone: +49 (0)40 / 350 80 2-615 Mail: a.martens@grossmann-berger.de Glossary 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: Beiersdorf AG, Troplowitzstraße Beiersdorf AG, Page 6: Kaiser-Wilhelm-Straße. 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 - 20354 Hamburg Phone: +49 (0)40 / 350 80 2-0 Fax: +49 (0)40 / 350 80 2-36 info@grossmann-berger.de www.grossmann-berger.de 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 25866 www.grossmann-berger.de Page 7