COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE NVESTMENT/OFFICE LETTING COMMERCIALPROPERTYMARKET GERMANY’S TOP 7 CITIES 2017/Q1-4

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

Dear Readers, Property business professionals will long remember the year 2017. This is because office markets in Germany’s top 7 locations posted their best result in over ten years to close the year on an all-time high. The investment markets in the top 7 cities likewise returned results that outstripped figures seen in recent years, so that the final total was second only to that posted in 2007. This market survey provides a review of the year 2017 as it played out on Germany’s top 7 markets.

In addition to drawing comparisons between the top 7 markets, we offer a detailed look at the investment and office letting markets in Hamburg, Berlin, Düsseldorf, Cologne, Frankfurt/Main, Stuttgart and Munich.

TOP 7 . 4 HAMBURG . 8 BERLIN . 10 DÜSSELDORF . 12 COLOGNE . 14 FRANKFURT . 16 STUTTGART . 18 MUNICH . 20 The process of preparing and interpreting the data was made possible thanks to a partnership between four of the leading service providers specialized in commercial prop- erties based in north, central and south Germany - the nationwide network German Property Partners (GPP). Our knowledge of local markets is as broad as it is deep, giving us access to data on the entire market, the top 7 locations and the sub-markets within each one.

The present survey offers you a general view of the market.

We would be happy to hold personal talks with you and answer your specific questions about property matters. Guido Nabben Spokesman for German Property Partners LOKALE KOMPETENZ – DEUTSCHLANDWEIT WWW.GERMANPROPERTYPARTNERS.DE MARKTBERICHT INVESTMENT/BÜROVERMIETUNG 2017/Q1-4 LOCAL EXPERTISE – ACROSS GERMANY GERMAN PROPERTY PARTNERS Grossmann&Berger A real estate consultant with expe- rience stretching back for over 80 years, Grossmann & Berger is one of the leading service providers for the sale and letting of commercial and residential real estate in Northern Germany, and is an affiliate in the HASPA-group of companies.

ELLWANGER&GEIGER ELLWANGER & GEIGER Real Estate offers a full range of services in connection with commercial property assets. With the re- sources of the parent company’s private banking business, this service provider has over 100 years of experience. ANTEON ANTEON is an owner-managed real estate consultancy firm that specializes in brokering lets and investments in com- mercial, logistics and residential prop- erties. In addition, as one of the market leaders, ANTEON offers property mar- keting, project support and research ser- vices.

GREIF&CONTZEN This owner-managed service company has been providing consultancy, evalu- ation, brokering and management ser- vices for commercial and residential properties in the metropolitan region of Cologne|Bonnforover40years,andisex- perienced in the entire value chain of real estate transactions.

blackolive blackolive is an owner-managed real estate consultancy firm that focuses on office letting and investment. The managing directors both have more than 26 years of experience and stand for an in-depth understanding of the market.

Each of us being a leading commercial real estate company in its respective region, we have joined together to form a Germany-wide real estate network. We are five strong partners. In Northern Germany, Grossmann & Berger offers its real estate services out of its locations in Hamburg and Berlin, while ELLWANGER & GEIGER Real Estate covers Southern Germany from its bases in Stuttgart and Munich. ANTEON Immobilien is the firm to contact about property matters in and around Düsseldorf, while GREIF & CONTZEN Immo- bilien are your eyes and ears in the metropolitan area of Cologne and Bonn. blackolive guarantees full market cov- erage in the Frankfurt region.

We have founded German Property Partners with the aim of providing our special services in all of Germany’s major real estate centres. That way, whatever your commercial real estate requirements, wherever you are in Germany, you can obtain your advice from a single provider, and that is us. Via our network and thanks to our respective market positions, we can offer you outstanding local knowledge and preferential market access throughout Germany. The many years of service our employees have put in with us, and the affiliation of Grossmann & Berger and ELL- WANGER & GEIGER Real Estate with reputable regional banks, make German Property Partners a reliable partner for long-term collaboration in the fields of commercial real estate and finance.

Partner ABOUT US GERMAN PROPERTY PARTNERS LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 3

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

Munich Stuttgart Frankfurt Cologne Düsseldorf Berlin Hamburg 36 % Open-end/specialized funds 27 % Pension schemes 31 % 30 % 29 % 51 % Asset managers Other Funds Open-end/specialized funds Open-end/specialized funds 24 % Open-end/specialized funds Munich Stuttgart Frankfurt Cologne Düsseldorf Berlin Hamburg 16 % IT & telecommunication 23 % Public administration 12 % 19 % 24 % 20 % Industry and Trade Public administration, associations Financial services Industry 40 % Industry FACTS & FIGURES 2017/Q1-4 Key figures top 7 Hamburg Berlin Düsseldorf Cologne Frankfurt Stuttgart Munich Top 7 Take- up of space [m²] 640,000 900,000 358,700 310,000 729,100 270,000 877,600 4,085,400 Year-on-year change + 16 +10 +8 -30 +30 -38 +15 +5 Average rent [net €/m²/mth] 15.20 19.50 15.35 13.70 20.30 13.70 16.90 - Year-on-year change - 2 +21 +7 -3 +13 +6 +9 - Premium rent [net €/m²/mth] 26.00 30.00 27.00 21.50 39.75 24.30 35.00 - Year-on-year change [%] 0 +9 +2 0 +3 +6 -1 - Vacant space [m²] 580,200 430,000 630,000 280,000 1,005,700 167,000 580,000 3,672,900 Year-on-year change - 15 -39 -16 -22 -19 -24 -31 -24 Vacancy rate [%] 4.3 2.2 8.4 3.6 8.7 2.1 2.5 4.1 Year-on-year change [percentage points (pp)] -0.8 -1.5 -1.5 -1.0 -1.8 -0.7 -1.1 -1.3 Transaction volume [m €] 3,600 7,300 2,960 2,300 6,716 1,200 5,872 29,948 Year-on-year change - 20 +45 +13 +28 +3 -34 -9 +4 Share of asset class Office [%] 68 71 81 45 91 78 59 72 Prime yield Office [%] 2.90 3.00 3.40 3.70 3.30 3.50 3.00 3.26 Year-on-year change [pp] -0.40 -0.30 -0.40 -0.10 -0.60 0 -0.10 -0.27 Prime yield Commercialpremises[%] 2.90 2.90 3.50 3.20 3.40 3.10 2.45 3.06 Year-on-year change [pp] -0.40 -0.20 -0.10 -0.40 -0.10 0 -0.15 -0.19 Prime yield Logistics [%] 4.60 4.90 4.75 4.70 4.80 4.50 4.60 4.69 Year-on-year change [pp] -0.30 -0.20 -0.25 -0.30 -0.30 -0.60 -0.40 -0.34 Investment:strongest buyer groups by location Office letting:strongest industries by location HAMBURG 640,000 m² (+16 %) 26.00 €/m² (0 %) 15.20 €/m² (-2 %) 4.3 % (-0.8 %-Pkt.) € 3.60bn (-20 %) 2.90 % (-0.4 %-Pkt.) COLOGNE 310,000 m² (-30 %) 21.50 €/m² (0 %) 13.70 €/m² (-3 %) 3.6 % (-1.0 pp) € 2.30bn (+28 %) 3.70 % (-0.1 pp) STUTTGART 270,000 m² (-38 %) 24.30 €/m² (+6 %) 13.70 €/m² (+6 %) 2,1 % (-0,7 pp) € 1.2bn (-34 %) 3.50 % (0% pp) DÜSSELDORF 358,700 m² (+8 %) 27.00 €/m² (+2 %) 15.35 €/m² (+7 %) 8.4 % (-1.5 pp) € 2.96bn (+13 %) 3.40 % (-0.4 pp) BERLIN 900,000 m² (+10 %) 30.00 €/m² (+9 %) 19.50 €/m² (+21 %) 2.2 % (-1.5 pp) € 7.3bn (+45 %) 3.00 % (-0.3 pp) FRANKFURT 729,100 m² (+30 %) 39.75 €/m² (+3 %) 20.30 €/m² (+13 %) 8.7 % (-1.8 pp) € 6.72bn (+3 %) 3.30 % (-0.6 pp) MUNICH 877,600 m² (+15 %) 35.00 €/m² (-1 %) 16.90 €/m² (+9 %) 2.5 % (-1.1 pp) € 5.9bn (-9 %) 3.00 % (-0.1 pp) KEY FIGURES 2017/Q1-4 TOP 7 (share of transaction volume) (share of take-up of space) KEY FIGURES OFFICE LETTING/INVESTMENT: Take-up of space (year-on-year change) Premium rent (year-on-year change) Average rent (year-on-year change) Vacancy rate (year-on-year change) Transaction volume (year-on-year ch.) Prime yield office (year-on-year ch.) LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 4 5

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

At the close of 2017 the volume of investment transac- tions in commercial properties (excluding buy-to-let res- idential) located in Germany’s top 7 cities had reached a total of €29.9bn. Compared with the prior year’s €28.8bn, this represented an increase of 4 %. Not only did the top 7 cities surpass the prior year’s volume of transactions, but the result was also the second highest since 2007. TRANSACTION VOLUME At the end of 2017 Berlin posted the biggest increase in the volume of transactions, which rose by 45 % to €7.3bn. Five transactions, each priced at over €200m, were partly behind this result, the capital city’s second highest ever.

The “Sony Center” on Potsdamer Platz was one such sale; a consortium headed by Oxford Properties paid €1.1bn for this complex alone. In 2017 it was the biggest single com- mercial investment transaction in any of the top 7 cities. Cologne also set a new record with year-on-year growth of 28 %. The transaction volume of €2.3bn was some 20 % higher than the previous record set in 2015. A new record was also set in Düsseldorf, where the sales of com- mercial properties reached a total of €3.0bn by the end of the year. The result in Frankfurt rose year on year by a moderate 3 % to €6.7bn. Despite a 9 % drop compared with 2016, sales in Munich totalled €5.9bn.

With a trans- actions result of €3.6bn, Hamburg slipped 20 % short of the record €4.5bn posted in the prior year. Stuttgart gen- erated a transaction volume of €1.2bn and thus attracted much less investment activity than in prior years. INVESTORS AND VENDORS International investors continued to take a great interest in commercial properties located in Germany’s top 7 cities and, having increased their activities somewhat, these players accounted for nearly half of the total volume traded. Berlin remained the hot spot for international capital, where foreign investors accounted for 73 % of total trades.

Year on year portfolio sales in the top 7 cities accounted for the same proportion of transactions by value, at 23 % of the total.

YIELDS In view of the mismatch between supply and demand, the prime net yield continued its downward slide across all asset classes and top 7 cities. The lowest prime net yield was the 2.45 % noted for commercial buildings in Munich, followed by 2.90 % for commercial buildings in Hamburg and Berlin. Yields on offices ranged from 2.90 % in Hamburg to 3.70 % in Cologne. The most expensive city for logistics properties was Stuttgart, where the yield was 4.50 %. OUTLOOK In 2018 commercial properties in Germany’s top 7 cities are set to remain a good investment. However, this pre- supposes a stable, predictable environment on the capital markets and on the political stage.

In view of the re- markably high demand and the glut of cash for investment it is unlikely that there will be any great atmospheric changes this year on the property investment markets in the top 7 cities. Due to the shortage of real estate, the transaction volume is not expected to be as high in 2018. INVESTMENT OFFICE LETTING with appreciably reduced amounts of vacant space. The other top 7 cities saw vacancies drop by between 22 % Co- logne) and 15 % (Hamburg). Some 260 office new builds are scheduled for completion this year and next, offering a total rental space of around 2.5m m². A majority of this space has, however, been pre-let or is being constructed for an owner-occupier.

OUTLOOK In view of the economic stability, the market for office let- tings in Germany will continue to boom in 2018. However, it is to be expected that total take-up of space will be lower than in 2017 because the shortage of available property will become more acute. In view of burgeoning demand and the low rates of completion scheduled for this year, speculative new builds would possibly serve to steady office rents but would not ease the situation in the short to medium term. Clients in Cologne, Düsseldorf and Frankfurt are still looking for large suites of offices, which may result in agreements in 2018.

Considering that supply is becoming ever shorter, it is unlikely that this year’s take-up totals in the top 7 office-letting locations will match the record re- sults of 2017. Nevertheless, the office-letting business is set to have a very good year because the overall stability of the economy and a resilient labour market will continue to fuel demand for office space.

At the close of the year 2017 a new record take-up of 4.1m m² was announced for Germany’s top 7 office letting markets. This result was the best in over ten years and for the first time in history the four-million mark was passed. TAKE-UP OF SPACE By the end of 2017, office-letting in Frankfurt had reached an all-time high of 729,100 m², which was 30 % above the figure for 2016 and on a par with the property mar- ket’s high-water mark in 2000. In Hamburg the take-up of space rose by 16 % in 2017, reaching a new record level of 640,000 m². Year on year 15 % more office space was taken up in Munich, leading to a total of 878,000 m².

The office market in Berlin surged forward to the best result of the 7 cities and total take-up of 900,000 m², (+10 %) to place ahead of Munich. The year-end total for Düsseldorf was 358,700 m² of office space taken up. This translated into an 8 % higher result than in 2016. In Cologne, however, the take-up of office space fell by 30 % to 310,000 m², largely due to outlier transactions in the record year of 2016. In Stuttgart the take-up of office space declined by 38 % year on year to 270,000 m².

In 2017 the operators of co-working space or business centres were very active in the pursuit of new premises to rent. In almost all the top 7 cities these enterprises posted rising shares of total take-up. The industry’s total of 214,000 m² represented some 5 % of the total take-up of space or nearly three times the amount rented in 2016. RENTS As a result of tight supply and a shortage of vacant space, almost all the top 7 cities reported rising office rents in 2017. The biggest leap was seen in Berlin, where the av- erage rent rose by 21 % to €19.50/m²/month and the premium rent rose by 9 %, thus reaching €30.00/m²/ month for the first time.

Two other factors, apart from the mismatch between supply and demand, are driving up office rents: owners and landlords are passing on to their tenants both the ever higher prices for building land as well as the rising construction costs.

AVAILABLE AND VACANT SPACE With the total stock of office space including sub-let space standing at 90.7m m², the reserve of available space in the top 7 cities has contracted further to total a mere 3.7m m² at the end of the 4th quarter. This trans- lates into 4.1 % of the total stock of office space. The most dramatic decline in office space available at short notice was seen in Berlin, where supply contracted by 39 %. Munich (-31 %) and Stuttgart (-24 %) also struggled TOP-7 Other | 1 % Logistics | 2 % 8 % 8 % 72 % Undeveloped land Office Hotel Retail 6 % Commercial premises | 3 % 2013 2014 2015 2016 2017 2018 17.3 21.8 29.3 28.8 29.9 26.0 5-year average (2013-2017): ca.

€25.4bn Transaction volume top 7 Transaction volume by asset classes top 7 (in €bn) 2013 2014 2015 2016 2017 2018 2.9 2.9 3.5 3.9 4.1 3.5 5-year average (2013-2017): ca. 3.5 million m2 (in 000s m2 , incl. owner-occupiers) Take-up of space top 7 LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 6 7

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

INVESTMENT HAMBURG Year on year the volume of investments in commercial properties in Hamburg fell by a fifth below the record result of 2016 (€4.5bn) to close the year 2017 at €3.6bn. The number of properties traded also fell; a decline from 174 to 125 translates into a dip of 28 %. INVESTMENT PROPERTIES The 4th quarter of 2017 was the year’s strongest, with a total of€1.3bn.Thiswasprimarilyduetotheportfoliotransactionin whichSignaHoldingboughtatotaloffivepropertiesfromRFR Holding.TwoofthepropertiesintheportfolioareinHamburg’s City district and the selling prices were each in the treble-digit millions bracket.

The transaction involved the two office and commercial buildings named “Arkadenhof” (Neuer Wall/Jun- gfernstieg)and“Kaufmannshaus”(Bleichenbrücke10/Grosse Bleichen).Othertransactionswithpricetagsinthethree-figure millions were already announced in earlier quarters: Wenaas- gruppen paid Azur Property Investments about €200m for the “Radisson Blu Dammtor” (hotel, Marseiller Strasse 2, Alster West); Patrizia paid Orion Capital Managers around €175m for the “HafenCity Gate” (office , Am Sandtorkai 74-77, HafenCity) and the “Kaisergalerie” (office and commercial building, Grosse Bleichen 23-27, City) was sold for some €170m by Quantum Immobilien and the alstria office REIT to the Swiss investor in foreign real estate Anlagestiftung für Immobilien- anlagen im Ausland.

In 2017 the most desirable class of asset was,asintheprioryear,officeproperties,whichaccountedfor 68%(€2.4bn)ofthetotaltradedvolume. Primeyieldsonallclassesofassetcontinuedtheirdownward slide. At the end of the 4th quarter the prime yield on office and commercial buildings fell below the three-per-cent threshold for the first time, to 2.9 %. The premium yield on logistics properties fell to 4.6 %.

INVESTORS AND VENDORS In 2017 open-end/specialist funds were the most active buyers of Hamburg properties and responsible for 36 % of the total traded volume (some €1.3bn). Asset/property portfolio managers were the biggest single group of sellers, with a share of 27 % (€968m). OUTLOOK In view of the unwillingness of owners to sell their com- mercial properties in Hamburg, 2018 is unlikely to set any new records. Nevertheless, several large trades are in the pipeline, such as the “Hanse-Viertel”, the “Wandel- halle” concourse in the main station or the new Olympus headquarters. For this reason 2018 is expected to return a transaction total higher than the ten-year average volume of €2.8bn.

Transaction volume Hamburg 2013 2014 2015 2016 2017 2018 2.8 3.7 4.0 4.5 3.6 3.0 5-year average (2013-2017): ca. €3.7nb (in €bn) 2014 2015 2016 2017 2013 2012 24.00 24.00 24.50 25.00 26.00 14.00 14.00 14.50 14.50 15.50 15.20 26.00 2013 2014 2015 2016 2017 2018 440 525 540 550 640 550 5-year average (2013-2017): ca. 539,000 m2 The take-up of office space in Hamburg set a new record. In the year 2017 some 640,000 m² of office space was let and thus 16 % more than in the year before. This ap- preciable increase is a reflection of the dynamic state of Hamburg’s office-letting market.

TAKE-UP OF SPACE In 2017 clients seeking office suites offering 5,000 m² or more generated 26 % of total take-up, almost the same proportion as in 2016.

Overall, 13 contracts for large premises were signed. The three biggest contracts of the year included two rental agreements for new builds, when Olympus Deutschland signed for 34,500 m² (Wen- denstrasse 14-18, City South) and Gruner + Jahr signed for 34,000 m² (Am Hannoverschen Bahnhof, HafenCity); the University of Hamburg took 19,700 m² in an existing building (Überseering 35, City North). Some 55 % of the space taken up and 52 % of the agreements signed in 2017 related to premises in the central sub-markets City, City South and HafenCity. As before, Hamburg City district was top of the league.

RENTS At the close of the year the premium rent was unchanged at €26.00/m²/month. The average rent softened slightly and fell from €15.50 in 2016 to €15.20/m²/month. In the various sub-markets considerable variations in rentals were observed, generally depending on the quality of the space on offer. Year on year the average rents in the central sub-markets of City and City South stayed the same. In HafenCity they rose by 16 % due to numerous lets in new builds. AVAILABLE AND VACANT SPACE As had been expected, the amount of space standing empty was further reduced. By the end of 2017 the va- cancy rate had sunk to the new record low of 4.3 %.

A mere 580,000 m² of space was available to new tenants within a period of three months. 32 developments are likely to add some 160,000 m² of space in 2018, followed in 2019 by a further 167,000 m² in 24 developments. OUTLOOK The positive economic and job market forecasts indicate that demand for office space will increase. Nevertheless, the growing shortage of suitable offices makes a new take-up record unlikely. In all likelihood the take-up of space will dip back below the 600,000 m² mark in 2018. TOP 3 SUB-MARKETS (take-up of space / average rent) CITY / 153,000 m² / €19.50/m²/month CITY SOUTH/ 115,300 m² / €12.40/m²/month HAFENCITY / 85,100 m² / €19.60/m²/month TOP 3 CONTRACTS 1.

OLYMPUS DEUTSCHLAND GMBH Wendenstrasse 14-16 / ca. 34,500 m² 2. GRUNER + JAHR GMBH Am Hannoverschen Bahnhof / ca. 34,000m² 3. UNIVERSITY OF HAMBURG Überseering 35 / ca. 19,700m² OFFICE LETTING HAMBURG Take-up of space Hamburg Rents Hamburg (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 8 9

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

INVESTMENT BERLIN The volume of investment transactions in commercial properties rose by 45 % year on year to a total for 2017 of €7.3bn. This was the second highest total ever seen, topped only by the €7.8bn posted in 2015. INVESTMENT PROPERTIES In 2017 more than 130 sales of commercial properties were reported in Berlin. The three biggest sales were the “Sony Center”, sold in the 3rd quarter by the National pen- sions Service for around €1.1bn to a consortium led by Oxford Properties (offices, Potsdamer Platz, Potsdamer/ Leipziger Platz sub-market), and the two Axel-Springer buildings. One was the new build “Axel-Springer Medi- encampus” sold in the 3rd quarter by Axel Springer for around €425m to the Norwegian Government Pension Fund Global (offices, Axel-Springer Strasse, Mitte 1a sub- market) and the “Axel-Springer-Passage” (offices, Zim- merstrasse, Mitte 1a sub-market) that changed hands for €330m in the 3rd quarter and is now owned by Blackstone.

As in previous years office properties were the dominant asset class on the market, accounting for a share of 71 % (about €5.2bn); hotels followed with 11 % of the market (€780m) and retail with about 8 % (€584m). The proportion of portfolio sales rose slightly from 29 % to 32 %. The prime net yield on office properties fell year on year by 0.3 percentage points to an all-time low of a mere 3.0 %. In the case of commercial buildings a decline of 0.2 per- centage points brought the yield down to 2.9 %. INVESTORS AND VENDORS Due to the sale of the “Sony Center” to a pension fund, buyers belonging to this sector accounted for the lion’s share of the traded volume, equivalent to 27 %.

The selling side of the market was dominated by project developers/ builders who accounted for 18 %, and pension funds which comprised 17% - likewise a result of the “Sony Center” transaction. The proportion of international investors rose slightly from 64 % to 73 %.

OUTLOOK The volume of transactions forecast for 2018 is around €5.0bn, because no-one expects to see the same level of big-ticket trades as 2017. Transaction volume Berlin 2013 2014 2015 2016 2017 2018 3.4 4.0 7.8 5.0 7.3 5.0 5-year average (2013-2017): ca. €4.8bn (in €bn) 30.00 22.00 22.00 22.50 24.00 27.50 19.50 13.20 12.30 13.20 14.90 16.10 2014 2015 2016 2017 2013 2012 2013 2014 2015 2016 2017 2018 521 630 810 820 900 750 5-year average (2013-2017): ca. 736,200 m2 Year on year take-up of space in Berlin offices rose by 10 % thanks to a high number of agreements to rent large amounts of space and construction starts for owner-oc- cupiers; the total of 900,000 m² set another new record.

The three biggest rental or owner-occupier transactions alone accounted for take-up of 129,000 m². TAKE-UP OF SPACE By the end of the year 32 agreements involving more than 5,000 m² had been recorded, and eleven for more than 10,000 m² of space, including the purchase of the former Vattenfall headquarters (about 47,000 m², Puschkinallee 52, Periphery South) which the new owner, the Federal real estate corporation Bundesan- stalt für Immobilienaufgaben, will use itself, and the two large premises let to Zalando (about 45,000 m² at Tama- ra-Danz-Strasse 7, Friedrichshain, and about 42,000 m² at Koppenstrasse 8, Friedrichshain).

The most popular sub-market was Friedrichshain with a share of some 14.9 %, followed by Periphery South (about 12.4 %) and Kreuzberg (about 11.9 %). For the first time ever, the top 3 sub-markets included neither Mitte nor Mitte 1a, thus un- derlining the shift in take-up locations. Public adminis- tration/federations/social facilities accounted for 23 % of the total take-up of space, dislodging the information and communications sector from the top slot it held in the year before.

RENTS Within the space of a year the average rent rose by 21 % to the new record level of € 19.50/m²/month. The premium rent was 9 % higher and its new level of € 30.00/m²/month was last seen in 2000. AVAILABLE AND VACANT SPACE Empty space stood at a record low of 2.2 % or 430,000 m², which was 39 % below the level noted in the prior year. Berlin therefore has almost no space left to rent, which makes life difficult for companies that wish to move premises or expand their offices. Many firms that need larger amounts of space are turning to new build develop- ments. This trend is leading to a further rise in new space being built, but the effects will not be very noticeable until 2019.

In 2018 some 294,000 m² of office space will be completed, in 2019 the scheduled volume is 417,000 m². OUTLOOK In the medium to long term more space on the market will ease the situation for tenants and keep rents reasonable. In 2018 take-up is expected to total some 750,000 m² be- cause so little space is available on the market. TOP 3 SUB-MARKETS (take-up of space / average rent) FRIEDRICHSHAIN / 134,100 m² / €25.50/m²/month PERIPHERY SOUTH / 111,600 m² / €13.20/m²/month KREUZBERG / 107,100 m² / €20.20/m²/month TOP 3 CONTRACTS 1. FEDERAL INSTITUTE FOR REAL ESTATE MANAGEMENT Puschkinallee 52 / ca.

47,000 m² 2. ZALANDO Tamara-Danz-Strasse 7 / ca. 45,000 m² 3. ZALANDO Koppenstrasse 8 / ca. 42,000 m² OFFICE LETTING BERLIN Take-up of space Berlin Rents Berlin (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 10 11

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INVESTMENT DÜSSELDORF A new record result was posted for Düsseldorf in 2017. The year closed with sales of commercial real estate valued at some €3.0bn. The volume of transactions surpassed the previous two best marks, beating last year’s figure by 13 % and the previous record of 2015 by 8 %. The biggest transaction of the year involved the Vodafone Campus, which AGC Equity Partners sold in the 4th quarter to Mirae Asset Global Investments for some €280m. Over the course of the year the prime net yields in Düsseldorf softened further, slipping to 3.40 % on office properties and 3.50 % on commercial buildings.

INVESTMENT PROPERTIES Office properties were the most popular investments in Düsseldorf, where they accounted for a share of 81 % and a total of some €2.4bn. Building land followed with 5 % (about €154m), retail properties with 5 % (about €136m) and mixed use properties accounted for 4 % (about €133m). Hotels comprised 3 % of the market (about €77m). INVESTORS AND VENDORS Opportunity and equity funds were the biggest vendors of the year as they took advantage of the fact that in- vestors were willing to pay high prices to sell properties for €806m, which translated into 27 % of the transaction volume.

Asset managers were the most active group of buyers. They spent about €911m on properties. That is equivalent to 31 % of the market. Last year foreign in- vestors remained very much in evidence in Düsseldorf. By the end of the year their share of total trades had reached €1.4bn (49 %).

OUTLOOK It is to be assumed that investor demand for properties in Düsseldorf will remain high, even if the low yields are unlikely to encourage record levels of trading. Some new developments will come onto the market in 2018, offering potential buyers the opportunity to sign forward deals or make commitments. Portfolio adjustments provide other investment alternatives; in 2017 transactions of this kind comprised an appreciable slice of total turnover. As in pre- vious years, the two options just named will probably drive investment turnover in 2018 to similarly high levels. Transaction volume Düsseldorf 2013 2014 2015 2016 2017 2018 1.8 1.9 2.7 2.6 3.0 2.5 5-year average (2013-2017): ca.

€2.4bn (in €bn) 27.00 26.00 27.50 26.00 26.00 26.50 15.35 14.10 14.90 13.80 15.25 14.40 2014 2015 2016 2017 2013 2012 2013 2014 2015 2016 2017 2018 347 238 420 331 359 400 5-year average (2013-2017): ca. 338,900 m2 In 2017 the office market in Düsseldorf continued its upward trajectory. Over the past twelve months let- tings rose to a total of 358,700 m². The result is some 8 % higher than in 2016, when about 330,800 m² of space was let to new tenants.

TAKE-UP OF SPACE Once again, the most popular sub-market was City, where 82,200 m² of space was taken up. The left bank district Linksrheinisch/Seestern was a close second with about 78,800 m². Third-placed Kennedydamm/Derendorf sub- market totalled around 43,900 m². Industrial and trading firms were the biggest single group of clients for Düsseldorf office space in 2017, renting about 44,700 m². Two agreements for large amounts of space in new developments brought the total for banks and financial services to about 39,700 m². RENTS Compared with the prior year the average rent rose by 95 cents to €15.35/m²/month.

The premium rent, which had appeared settled at a high level, actually increased slightly. From €26.50/m²/month at the end of 2016 it has crept up to €27.00/m²/month.

AVAILABLE AND VACANT SPACE Year on year the amount of space standing empty fell by about 120,000 m² to some 630,000 m². This translates into a vacancy rate of 8.4 % based on a slightly reduced total stock of office space of around 7.5m m². New building developments in 2017 totalled 105,000 m², but most of the space has already been let. The new of- fices are spread over 11 development projects. Eight new build projects are in the pipeline for 2018 (74,000 m²) and the same number is due in 2019 (127,000 m²); here too future tenants have reserved a large proportion of the space.

OUTLOOK Düsseldorf continues to be a very popular city for office users.

Good economic growth will be reflected in the take-up of space in 2018. Some clients are still in the market for more than 10,000 m² of office premises, so that the total letting result for 2018 could well be similar to that returned in 2017. TOP 3 SUB-MARKETS (take-up of space / average rent) CITY / 82,200 m² / €15.10/m²/month SEESTERN/LEFTBANKOFTHERHINE/78,800m²/€14.20/m²/month KENNEDYDAMM/DERENDORF/ 43,900 m² / €17.90/m²/month TOP 3 CONTRACTS 1. HSBC TRANSACTION SERVICES GMBH Hansaallee 1-3 / ca. 20,100 m² 2. BANKHAUS LAMPE Schwannstrasse 10 / ca. 13,000 m² 3. BERUFSGENOSSENSCHAFT HOLZ UND METALL Arcadiapark / ca.

11,200 m² OFFICE LETTING DÜSSELDORF Take-up of space Düsseldorf Rents Düsseldorf (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 12 13

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

INVESTMENT COLOGNE A transaction volume totalling €2.3bn makes 2017 a new record year for investments in commercial properties in Cologne. The result surpassed that of 2015, the previous high-water mark, by more than 20 %. INVESTMENT PROPERTIES Six trades had price tags in the three-figure millions. The city centre “Gerling Quarter” (Christophstrasse, Hilde- boldplatz) was sold to Quantum and Proximus for some €200m. Tristan Capital and the developer Concepta Projektentwicklung paid an estimated €150m for the “DuMont Carré” (Breite Strasse), an inner-city shopping centre with a sales area of about 20,000 m².

Gerchgroup bought a large development site in Cologne-Mühlheim (Deutz-Mühlheimer-Strasse); here too the price paid is thought to be €150m.

Year on year offices accounted for a smaller proportion of total trades, closing at some 45 %. More retail properties were traded, increasing their share of the market to 20 %. Building complexes and property portfolios comprised roughly half of total turnover and were instrumental in producing the record result. In 2017 the prime net yields on offices and logistics properties contracted slightly to 3.70 % and 4.70 % re- spectively. The price of commercial buildings rose more steeply. Prime yields thus sank from 3.60 to 3.20 %. INVESTORS AND VENDORS Foreign buyers furnished about 30 % of the capital.

Ac- counting for 30 % of the volume traded, the biggest single group of buyers were “Other funds”. These are funds that cannot be counted in the usual categories, such as “specialist funds” because, e.g., they are subject to foreign regulations. Family offices and private investors were the biggest sellers on the market. They accounted for about 16 % of the total volume of transactions. No reduction in demand for investment properties in 2018 is foreseeable. The critical parameter remains the amount of property on the market. The growing trend towards cashing in trading profits and re-structuring portfolios could lead to more properties on offer.

In addition, devel- opment sites offer potential trades, so that a transaction volume in the region of €2.0bn is within the range of pos- sibility in 2018.

Transaction volume Cologne 2013 2014 2015 2016 2017 2018 0.8 1.3 1.9 1.8 2.3 2.0 5-year average (2013-2017): ca. €1.6bn (in €bn) 21.50 21.00 21.25 21.25 21.25 21.50 13.70 10.80 12.70 12.70 12.40 14.10 2014 2015 2016 2017 2013 2012 2013 2014 2015 2016 2017 2018 280 260 290 440 310 300 5-year average (2013-2017): ca. 316,000 m2 In 2017 total turnover of space was some 310,000 m². Compared with the record set in 2016 this total is some 30 % lower but is nevertheless the third-highest result of the past ten years.

TAKE-UP OF SPACE The two biggest agreements of the year were the 18,800 m² rental by the Federal Office for Family and Social Affairs (BAFZA) at Von-Gablenz-Strasse 2-6 and the construction start of new headquarters for the own- er-occupier STRABAG AG.

This building will offer some 17,100 m² (Siegburger Strasse 241). Both properties are located in Cologne-Deutz, and this district accordingly gained a 19 % share of the total market in 2017 to lead the ranking of sub-markets. Federations, associations and public facilities were behind about 19 % of the total take-up of space.

RENTS The average weighted rent came to €13.70/m²/month. This is some 3 % lower than the figure in 2016, largely because fewer agreements for large amounts of expensive space were signed. Compared with 2015, however, there has been a rise of 10 %. In the premium segment, several con- tracts were signed for rentals above the current premium rent of €21.50/m²/month, the highest being a rent of €26.50/m²/month. AVAILABLE AND VACANT SPACE In 2017 there was a further decline in the amount of space available in Cologne city centre. In several popular central sub-markets, such as the Rings, MediaPark and Deutz district, there was less empty space than the average amount taken up in a year.

The vacancy rate has slumped to 3.6 %. Around 95,000 m² of new office space was com- pleted in 2017, the figure for 2018 is likely to be some 80,000 m².

OUTLOOK The strong economic upturn is pushing demand for office space. A large number of clients are seeking space in Cologne ranging from thousands to tens of thousands of square metres and contracts could be signed in 2018 - provided suitable premises in existing buildings or pro- jected new-builds can be found. Overall, a total take-up of 300,000 m² once again seems to be attainable in 2018. TOP 3 SUB-MARKETS (take-up of space / average rent) DEUTZ / 57,000 m² / €15.50/m²/month CBD NORTH / 27,000 m² / €15.00/m²/month MÜLHEIM / 23,000 m² / €10.50/m²/month TOP 3 CONTRACTS 1.FEDERAL OFFICE FOR FAMILY AND SOCIAL AFFAIRS (BAFZA) Von-Gablenz-Strasse 2-6 / ca.

18,800 m² 2. STRABAG AG (OWNER-OCCUPIER) Siegburger Strasse 241 / ca. 17,100 m² 3. DESIGN OFFICES Untersachsenhausen 17-27 / ca. 9,000 m² OFFICE LETTING COLOGNE Take-up of space Cologne Rents Cologne (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 14 15

COMMERCIAL PROPERTY MARKET GERMANY'S TOP 7 CITIES

INVESTMENT FRANKFURT The volume of investment transactions in Frankfurt was €6.7bn in 2017, just 1 % higher than in 2016. 40 % of this total was traded in the 4th quarter. INVESTMENT PROPERTIES The biggest sale of the year was the “Tower 185” (Frie- drich-Ebert-Anlage 35-37) which Deka purchased for three open-ended funds, paying CA Immo, WPI Fund SCS-Fis, Fagas Asset GmbH and a pensions company some €775m. Another 4th-quarter sale was the “Japan Center” (Taunustor 2) for which GEG German Estate Group paid Commerz Real AG €280m. Finch Properties and a US fund sold the “MAC” (Unterschweinsstiege 2-14) by the airport for about €245m to CapitaLand and Lum Chang Holdings from Singapore.

As usual, the most popular assets were office properties, which accounted for 91 % of the total investment trade. A disproportionately large number of plots of land changed hands - but the over 20 transactions made up only 2 % of the total volume. Port- folio purchases comprised 12 % of the total in 2017, com- pared with 26 % the year before. This was largely due to the big single transactions just described. Twice the number of value-add properties were sold compared with 2016, - a result of the growing shortage of core properties. With core properties still in great demand, however, the prime net yield on office properties slid down to 3.3 %.

INVESTORS AND VENDORS The biggest group of buyers consisted of open property mutual funds and open-ended special property funds, which together accounted for 30 % of the total volume. However, project developers were involved in the largest number of transactions (46). The first-named types of funds were the most active sellers in the market with a share of 33 %. International investors took a 45 % share of the total market, slightly less than the year before. This is mainly attributable to the fact that two of the three most expensive transactions featured buyers from Germany. OUTLOOK 2018 will continue to see unabated high demand but it will be increasingly difficult to find suitable investments.

Even if buyers tend to hold their properties for shorter periods, investors are still resorting to B and C locations, high- er-risk properties (core+, value-add) and other classes of asset (mixed use buildings). International investors will continue to play an important part in 2018. Transaction volume Frankfurt 2013 2014 2015 2016 2017 2018 3.4 5.0 5.7 6.5 6.7 6.5 5-year average (2013-2017): ca. €5.5bn (in €bn) 39.75 35.00 38.00 38.00 39.50 38.50 20.30 17.50 18.50 19.50 18.00 18.00 2014 2015 2016 2017 2013 2012 2013 2014 2015 2016 2017 2018 448 368 389 561 729 575 5-year average (2013-2017): ca.

498,820 m2 In Frankfurt around 729,100 m² of office space was let, 30 % more than in 2016. The result is comparable to volumes seen in the early 2000s.

TAKE-UP OF SPACE Railway operator Deutsche Bahn AG was the biggest player on the Frankfurt office market in 2017, just as it had been in 2016. As of 2020 the firm will be occupying some 52,600 m² in “The Brick” (Europa-Allee 70-76) and the neighbouring “Office Tower”, two building develop- ments in the Europaviertel district (City Periphery). The next biggest transaction of the year was an agreement by the central bank Deutsche Bundesbank to take some 44,400 m² in the “FBC” (Mainzer Landstrasse 46, Financial District). Demand was greatest in the Central Business District (CBD), where 42 % of the total was registered.

Be- cause Deutsche Bahn AG selected property in the City periphery district, this sub-market accounted for 17 %. Financial services comprised the biggest group of new tenants,takingagoodquarterofthetotalspace.Transport and construction & property firms shared second place. Deutsche Bahn AG was by far the biggest of the transport companies; the good result returned by property services is partly a result of a vast increase in demand by the pro- viders of co-working space, who secured over 40,000 m² of space compared with 7,500 m² the year before. RENTS Several rental agreements for large amounts of space in top-quality properties in the CBD pushed the average rent up by 13 % to € 20.30/m²/month.

The premium rent rose by 3 % to € 39.75/m²/month.

AVAILABLE AND VACANT SPACE The vacancy rate at the end of 2017 was 8.7 % and thus 1.8 percentage points below the prior year’s figure. Less space stood empty in almost all the sub-markets. The biggest reduction was in the Banking District, where only half as much space stood empty as 12 months ago. Frankfurt North was the only sub-market to register an in- crease in empty space (+11 %). Following the low level of completionsin2017,when81,100m²cameontothemarket, the figure for 2018 will be around 138,200 m²; however, 73 % of this space has already been pre-let. As of 2019 con- siderably more building projects will be completed.

OUTLOOK Demand will remain high in 2018. Considering that some clients are still searching for large premises, the annual total take-up of space could be just under 600,000 m². TOP 3 SUB-MARKETS (take-up of space / average rent) FINANCIAL DISTRICT / 193,100 m € 31.00/m²/month CITY PERIPHERY / 127,300 m € 18.00/m²/month WESTEND / 60,400 m € 21.00/m²/month TOP 3 CONTRACTS 1. DEUTSCHE BAHN AG “The Brick”/”Office-Tower”, Europa-Allee / ca. 52,600m² 2. DEUTSCHE BUNDESBANK “FBC”, Mainzer Landstrasse 46 / ca. 44,400 m² 3. HELABA LANDESBANK HESSEN-THÜRINGEN “Mainblick³”, Kaiserleistrasse 26 / ca. 26,500 m² OFFICE LETTING FRANKFURT Take-up of space Frankfurt Rents Frankfurt (in 000s m2 , incl.

owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 16 17

INVESTMENT STUTTGART Some €1.2bn were invested in commercial real estate in Stuttgart in 2017. The total fell far short of the prior year’s - contracting by €600m or 34 %. INVESTMENT PROPERTIES The following transactions accounted for some €320m in total. The “Mercedes-Benz-Bank” (Siemensstrasse 7) was bought by the Baden-Würtemmberg Stiftung gGmbH, a foundation, and the “City Plaza” (Rotebühlplatz) was sold again. The building at Mittlerer Pfad 13-15 in Stutt- gart-Weilimdorf, also changed hands. Altogether, 65 transactions were completed in the past twelve months, about 50 % of them priced in the two or three-figure mil- lions.

Once again, the focus of investment activity - partly as a result of the three large sales noted in the foregoing - lay on office properties, which accounted for around 78 % of the total volume of transactions. Other sectors such as building sites, retail and hotel properties did not play a significant role this year. Portfolio trades accounted for some 10 % (by value) of properties sold. The prime net yield on office assets was 3.50 %, as it was in the prior year. Research showed a prime net yield on commercial buildings of 3.10 % and 4.50 % on logistics properties. INVESTORS AND VENDORS Amounting to 24 % of the total, open-end/specialist funds were the predominant buyers.

Private investors/family of- fices followed with a share of 13 % and insurance com- panies with 11 %. Public administration and opportunity funds each accounted for a share of some 10 %. Sales were very evenly distributed. Private sellers/family offices comprised about 14 % of the total traded, fol- lowed by corporates, project developers/builders and opportunity funds with some 13 % each. Foreign investors made up some 50 % of the total.

OUTLOOK It is expected that several outstanding transactions will be completed in the 1st half of 2018, so that the final tally for the year should be comparable with the total in 2017. Transaction volume Stuttgart 2013 2014 2015 2016 2017 2018 0.9 1.0 1.7 1.8 1.2 1.5 5-year average (2013-2017): ca. €1.3bn (in €bn) 2014 2015 2016 2017 2013 2012 24.30 20.00 20.00 21.50 22.80 23.00 13.70 12.40 12.00 12.50 12.50 12.90 2013 2014 2015 2016 2017 2018 258 278 290 432 270 250 5-year average (2013-2017): ca. 305,600 m2 2017 closed with take-up of office space in Stuttgart at about 270,000 m². The result was thus some 38 % lower than the prior year’s.

TAKE-UP OF SPACE In what remained the biggest single transaction of 2017, Daimler AG decided in the 1st quarter to have a new building erected in Leinfelden-Echterdingen that will provide over 50,000 m² of space. The two biggest rental agreements were signed in the 3rd quarter. Daimler AG took about 11,500 m² in the industrial estate Stuttgart Vai- hingen. And the law firm CMS Hasche Siegle took a lease for some 11,300 m² in a new build under development on Rotebühlplatz, Stuttgart City district. Strongly influenced by the Daimler AG development, Leinfelden-Echterdingen was the strongest sub-market with 61,300 m² of take-up.

Around 52,000 m² of office space was let in the Vaihingen/ Möhringen sub-market. Stuttgart City followed with 51,600 m² of space newly taken up. Once again industrial firms formed the biggest group of new office occupants in 2017.

RENTS The premium rent rose by 6 % year on year to €24.30/m²/ month. The average rent for the entire city area including Leinfelden-Echterdingen was about €13.70/m²/month, likewise a year on year increase of some 6 %. AVAILABLE AND VACANT SPACE By the end of 2017 the vacancy rate had reached 2.1 %, the lowest level for 16 years. The total space available at short notice stood at a mere 167,000 m². Meanwhile the shortage of space has spread beyond the City and central area. Peripheral locations likewise have little to offer. OUTLOOK In the next two years no significant increase in the meagre amount of space available in the City and central areas is expected.

Those who need large amounts of space will increasingly look to the periphery, as the less central lo- cations offer far more opportunities for new develop- ments. This will lead to further price rises in such loca- tions. Take-up of space in 2018 will probably be between 230,000 m² and 250,000 m².

TOP 3 SUB-MARKETS (take-up of space / average rent) LEINENFELDEN-ECHTERDINGEN/61,300m²/€12.20/m²/month VAIHINGEN/MÖHRINGEN / 52,000 m² / €12.30/m²/month CITY / 51,600 m² / €18.50/m²/month TOP 3 CONTRACTS 1. DAIMLER AG (OWNER-OCCUPIER) Meisenweg / ca. 50,000 m² 2. DAIMLER AG Industriestrasse / ca. 11,500 m² 3. CMS HASCHE SIEGLE Rotebühlplatz / ca. 11,300 m² OFFICE LETTING STUTTGART Take-up of space Stuttgart Rents Stuttgart (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 18 19

INVESTMENT MUNICH In 2017 the transaction volume on the market for invest- ments in commercial properties totalled about €5.9bn in Munich. This translates into a 9 % decline compared with the excellent result of 2016. 13 transactions with price tags of more than €100m together accounted for 47 % of total turnover. INVESTMENT PROPERTIES Apart from the period April to June, quarterly returns were relatively equal. The 4th quarter lacked the agility of pre- vious years, and some of the larger transactions have been postponed until 2018. Some of the year’s biggest transac- tions were the 1st-quarter sale of the “Kap-West” devel- opment project (Friedenheimer Brücke) for which Allianz paid some €225m and the sale of the retail store “Karstadt am Hauptbahnhof”, for which Signa Holding paid RFR ap- preciably more than €300m.

Once again, consistently high demand was registered for all types of asset in 2017 and competition was correspondingly keen. As in the past, of- fices were the most popular class of asset, accounting for 59 % of the market in 2017. Portfolio sales comprised less than 10 % of the total in 2017. The prime net yield on office properties was further squeezed over the course of the year and closed at 3.00 %.

INVESTORS AND VENDORS The Munich investment market was strongly charac- terized by national investors, whose share of the total traded was about 65 %. Correspondingly, around 35% of the capital came from overseas. International investors figured mainly in trades priced at more than €100m. In- ternational investors were involved in about 50 % of these big transactions. Once more, funds, above all open-end/ specialist funds and pension funds, figured largely on the buying side of the equation. They were, however, not as predominant as in past years. The same pattern was seen on the selling side of the market.

OUTLOOK No trend is discernible that would point to a weakening market in 2018. The first few months of the year are al- ready expected to produce a large volume of transactions, because some big-ticket trades that were near com- pletion were postponed to the new year. Overall, the Ba- varian capital of Munich is expected to return a volume of between €5.0bn and €6.0bn on the market for commercial property investments. Transaction volume Munich 2013 2014 2015 2016 2017 2018 4.2 5.0 5.5 6.5 5.9 5.5 5-year average (2013-2017): ca. €5.4bn (in €bn) 35.00 32.00 32.50 34.45 32.50 35.25 16.90 14.90 15.10 14.60 15.00 15.50 2014 2015 2016 2017 2013 2012 2013 2014 2015 2016 2017 2018 608 584 755 764 878 700 5-year average (2013-2017): ca.

717,760 m2 Totalling a take-up of 878,000 m², the office market in Munich returned an above-average result. The year on year increase was about 15 %. Owner-occupiers ac- counted for some 108,000 m² of the total. Lettings alone made up 770,600 m², which is still an exceptionally good result.

TAKE-UP OF SPACE As in the prior year, the biggest transaction of 2017 was one signed by BMW AG, this time as owner-occupier of an extension to the research and innovation centre. In several sections, a total of 157,000 m² of office space is to be built over the coming years in what is one of Europe’s biggest development projects. The 1st building section has been included in the statistics (74,000 m²) and is scheduled for completion in 2019. Other large agreements included a lease signed by Deutsche Pfandbriefbank for about 14,000 m² in the “Business Campus Garching” and the decision by Publicis Pixelpark GmbH to take some 13,000 m² in the “Atlas” development project on Rosen- heimer Strasse.

Eight lets were recorded for more than 10,000 m² of space each, with the result that in 2017 this size sector registered the largest share of take-up. As far as the separate sub-markets are concerned, Periperhy North easily led the field with a 21.5 % share of the market. RENTS As the supply of space contracts, the average rent has risen appreciably year on year. Average rents increased by 9 % to €16.90/m²/month. The premium rent, by contrast, softened slightlyto€35.00/m²/month.Thiswaspartlyduetoashortage of expensive properties and partly to two agreements for large amounts of space at rents just below the premium rate.

AVAILABLE AND VACANT SPACE The stock of empty space has once again shrunk dra- matically, so that by the end of the year it had fallen to 580,000 m², equivalent to a vacancy rate of 2.5 % for the city area and the environs. In some central locations there is next to no empty space at all.

OUTLOOK Property in Munich will soon be fully let. This is due to the great, unabated demand for office space and the per- sistently low number of new builds in the pipeline. A no- ticeable easing of the tense situation is not to be expected before 2020. TOP 3 SUB-MARKETS (take-up of space / average rent) PERIPHERY NORTH / 189,000 m² / €16.40/m²/month DOWNTOWN WEST / 110,000 m² / €18.70/m²/month DOWNTOWN / 105,000 m² / €28.20/m²/month TOP 3 CONTRACTS 1. DEUTSCHE PFANDBRIEFBANK AG Parkring 28-32 / ca. 14,000 m² 2. PUBLICIS PIXELPARK GMBH Rosenheimer Strasse 143a-d / ca. 13,000 m² 3. GEWOFAG GMBH Gustav-Heinemann-Ring 109-115 / ca.

13,000m² OFFICE LETTING MUNICH Take-up of space Munich Rents Munich (in 000s m2 , incl. owner-occupiers) (net in €/m2 /mth) premium rent average rent LOCAL EXPERTISE – ACROSS GERMANY WWW.GERMANPROPERTYPARTNERS.DE MARKET SURVEY INVESTMENT/OFFICE LETTING 2017/Q1-4 20 21