– DEUTSCHLANDWEIT
                                        GERMANY                                                                                                                                                        MARKTBERICHT INVESTMENT/BÜROVERMIETUNG
                                                                                                                                                                                                        MARKET SURVEY  INVESTMENT/OFFICE LETTING 2018/Q1-2

Each of us being a leading commercial real estate company         We have founded German Property Partners with the aim
in its respective region, we have joined together to form a       of providing our special services in all of Germany’s major
Germany-wide real estate network. We are five strong              real estate centres. That way, whatever your commercial
partners.                                                         real estate requirements, wherever you are in Germany,
                                                                  you can obtain your advice from a single provider, and that
In Northern Germany, Grossmann & Berger offers its real           is us. Via our network and thanks to our respective market
estate services out of its locations in Hamburg and Berlin,       positions, we can offer you outstanding local knowledge           LOCAL EXPERTISE – ACROSS GERMANY
while E & G Real Estate covers Southern Germany from              and preferential market access throughout Germany.
its bases in Stuttgart and Munich. ANTEON Immobilien is                                                                             GERMAN PROPERTY PARTNERS
the firm to contact about property matters in and around          The many years of service our employees have put in with
Düsseldorf, while GREIF & CONTZEN Immobilien are your             us, make German Property Partners a reliable partner for          Dear Readers,
eyes and ears in the metropolitan area of Cologne and             long-term collaboration in the fields of commercial real
Bonn. blackolive guarantees full market coverage in the           estate and finance.                                               2018 started with demand for commercial properties re-            also on each of the top 7 locations and the sub-markets
Frankfurt region.                                                                                                                   maining high in Germany’s top 7 cities. Both property in-         within each of these.
                                                                                                                                    vestors and firms looking for offices are in search of real
                                                                                                                                    estate to suit their needs. The choice available, especially      We hope you find the survey an informative and illumi-
Partner                                                                                                                             to potential office tenants, is shrinking all the time, so that   nating read. We would be happy to hold personal talks with
                                                                                                                                    not every request can be satisfied fully or by the required       you and answer your specific questions about property
Grossmann & Berger                          Anteon                                       GREIF & CONTZEN                            dates. This has affected office take-up in the top 7 loca-        matters.
A real estate consultant with expe-         Anteon is an owner-managed real              This owner-managed service company         tions, and by the end of the first half year the result was
rience stretching back for over 80          estate consultancy firm that spe-            has been providing consultancy, evalu-     slightly lower than in 2017. When it came to investments,         Guido Nabben
years, Grossmann & Berger is one of         cializes in brokering office lets, invest-   ation, brokering and management ser-       however, the top 7 cities closed the 1st half year with a con-    Spokesman for German Property Partners
the leading service providers for the       ments and industrial & logistics prop-       vices for commercial and residential       siderably larger volume of transactions than before.
sale and letting of commercial and resi-    erties. In addition, as one of the market    properties in the metropolitan region of
dential real estate in Northern Germany,    leaders, Anteon offers property mar-         Cologne | Bonn for over 40 years, and is   This market survey provides a review of the first half of
and is an affiliate in the HASPA-group of   keting, project support and research         experienced in the entire value chain of   2018 as it played out on Germany’s top 7 markets. In ad-           CONTENT
companies.                                  services.                                    real estate transactions.                  dition to drawing comparisons between the top 7 markets,
                                                                                                                                    we offer a detailed look at the investment and office              Top 7 | Overview and Key figures.................................4/5
                                                                                                                                    letting markets in Hamburg, Berlin, Düsseldorf, Cologne,           Economic environment.................................................... 6
blackolive                                  E & G REAL ESTATE                                                                       Frankfurt, Stuttgart and Munich. This survey includes a            Spotlight: Coworking space............................................ 7
blackolive is an owner-managed real         E & G is one of the leading providers of                                                new section on the economic environment and one called             Top 7 | Investment.........................................................8/9
estate consultancy firm that focuses on     real estate services in South Germany                                                   “Spotlight” - in this edition we shall be shedding more light      Top 7 | Office letting..................................................10/11
office letting and investment. The man-     and has many years’ experience in the                                                   on the providers of coworking space.                               Hamburg....................................................................12/13
aging directors both have more than 26      fields of investment in commercial and                                                                                                                     Berlin..........................................................................14/15
years of experience and stand for an in-    residential properties and the com-                                                     This market survey was made possible by the partnership            Düsseldorf.................................................................16/17
depth understanding of the market.          mercial letting of office, retail, indus-                                               between five of the leading service providers specialized in       Cologne......................................................................18/19
                                            trial or logistics premises.                                                            commercial properties based in north, central and south            Frankfurt................................................................... 20/21
                                                                                                                                    Germany - the nationwide network German Property                   Stuttgart................................................................... 22/23
                                                                                                                                    Partners (GPP). Our detailed knowledge of local markets            Munich....................................................................... 24/25
                                                                                                                                    gives us access not only to data on the overall market, but

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LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                               MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

OVERVIEW                                                                                                                        KEY FIGURES
TOP 7 | 2018/Q1-2                                                                                                               TOP 7 | 2018/Q1-2
INVESTMENT                                                      OFFICE LETTING
»» Hamburg, Stuttgart and Frankfurt grow most, Cologne          »» Take-up of office space sinks further due to lack of prop-
   slips furthest back                                             erties
»» Prime net returns on office investments sink further,        »» Amount of empty space shrinks to new, all-time low           HAMBURG                                                                               BERLIN
   apart from in Stuttgart                                      »» Average rents rising in all cities but premium rents          250,000 m²   (-17 %)                                                                    330,000 m²     (-20 %)
»» Sale of the “Gallileo” office tower block in Frankfurt is       slightly down in Hamburg and Stuttgart                        26.00 €/m²   (-2 %)                                                                     32.00 €/m²     (+12 %)

   biggest 2nd-quarter transaction in the top 7                 »» Shortage of space forces providers of coworking space         15.70 €/m²   (+6 %)                                                                     20.50 €/m²     (+20 %)
                                                                                                                                 3.9 %        (-1.0 pp)                                                                  2.0 %          (-0.9 pp)
»» Lower total sales volume expected for 2018                      to look outside the centre                                    € 2.30bn     (+70 %)                                                                    € 2.45bn       (-4 %)
                                                                                                                                 2.90 %       (-0.4 pp)                                                                  3.00 %         (-0.2 pp)

Office letting
                            Hamburg       Berlin   Düsseldorf     Cologne    Frankfurt    Stuttgart     Munich        Top 7
Take- up of space                                                                                                               DÜSSELDORF
                             250,000     330,000     182,000      125,000      259,300     120,000      450,500   1,716,800
                                                                                                                                 182,000 m²   (-11 %)
Year-on-year change [%]          -17         -20         -11           -22          +2          +4         +16           -6      27.00 €/m²   (+2 %)

Average rent                                                                                                                     15.80 €/m²   (+9 %)
                               15.70       20.50        15.80        14.40       20.50       14.60        18.00            -     8.0 %        (-1.5 pp)
[net €/m²/mth]
                                                                                                                                 € 1.16bn     (+25 %)
Year-on-year change [%]          +6         +20           +9           +6          +11          +4          +8             -     3.30 %       (-0.4 pp)
Premium rent
                               26.00       32.00        27.00        22.00       42.00       23.50        36.10            -
[net €/m²/mth]
Year-on-year change [%]           -2        +12           +2           +2           +8           -2         +2            -
Vacant space
                             536,200     390,000     590,000      230,000      875,000     172,000     520,000    3,313,200
Year-on-year change [%]          -20         -29         -18          -32          -26         -17          -31         -25
Vacancy rate                                                                                                                    COLOGNE                                                                               FRANKFURT
                                 3.9         2.0          8.0          2.9          7.6         2.2         2.3          3.7
[%]                                                                                                                              125,000 m²   (-22 %)                                                                    259,300 m²     (+2 %)
Year-on-year change                                                                                                              22.00 €/m²   (+2 %)                                                                     42.00 €/m²     (+8 %)
                                -1.0        -0.9         -1.5         -1.5         -2.5        -0.5        -1.0         -1.2     14.40 €/m²                                                                              20.50 €/m²
[percentage points (pp)]                                                                                                                      (+6 %)                                                                                    (+11 %)
                                                                                                                                 2.9 %        (-1.5 pp.)                                                                 7.6 %          (-2.5 pp)
                             330,000     612,000     218,000      200,000      319,000     215,000      500,000   2,394,000      € 0.73bn     (-28 %)                                                                    € 3.23bn       (+43 %)
                                                                                                                                 3.40 %       (-0.4 pp)                                                                  3.30 %         (-0.3 pp)
Pre-let rate [%]                 59           58          68           79           59          53           77          65

                            Hamburg       Berlin   Düsseldorf     Cologne    Frankfurt    Stuttgart     Munich        Top 7
Transaction volume
                               2,300       2,450        1,160         725        3,227         860        3,332      14,054     STUTTGART                                                                             MUNICH
Year-on-year change [%]         +70           -4         +25           -28        +43          +46         +37          +27      120,000 m²   (+4 %)                                                                     450,500 m²     (+16 %)
                                                                                                                                 23.50 €/m²   (-2 %)                                                                     36.10 €/m²     (+2 %)
Share CBD [%]                    29           28           0           47           29          11            3          20      14.60 €/m²   (+4 %)                                                                     18.00 €/m²     (+8 %)

Share of foreign                                                                                                                 2.2 %        (-0.5 pp)                                                                  2.3 %          (-1,0 pp)
                                 19           65          30           34           50          50           66          49      € 0.86bn     (+46 %)                                                                    € 3.33bn       (+37 %)
investors [%]
                                                                                                                                 3.50 %       (0 pp)                                                                     3.00 %         (-0.2 pp)
Share of asset class
                                 60           50          60           54           84          35           65          63
Office [%]
Prime yield
                                2.90        3.00         3.30         3.40        3.30        3.50         3.00        3.20
Office [%]
Year-on-year change [pp]       -0.40       -0.20        -0.40        -0.40       -0.30         0.00       -0.20       -0.27
Prime yield                                                                                                                                                KEY FIGURES OFFICE LETTING/INVESTMENT:
                                2.90        2.90         3.20         2.90        3.00         2.80        2.45        2.88
Commercial premises [%]
                                                                                                                                                              Take-up of space (year-on-year change)   Vacancy rate (year-on-year change)
Year-on-year change [pp]       -0.40       -0.10        -0.30        -0.60       -0.40        -0.50       -0.25       -0.36
Prime yield                                                                                                                                                   Premium rent (year-on-year change)       Transaction volume (year-on-year ch.)
                                4.60        4.40         4.60         4.50        4.40         4.50        4.20        4.46
Logistics [%]
                                                                                                                                                              Average rent (year-on-year change)       Prime yield office (year-on-year ch.)
Year-on-year change [pp]       -0.30       -0.70        -0.30        -0.40       -0.50        -0.60       -0.90       -0.53

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LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                  MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

GERMANY                                                                                                                                                        SPOTLIGHT
BUSINESS ENVIRONMENT                                                                                                                                           PROVIDERS OF FLEXIBLE OFFICE SPACE
                                                                                                                                                               Companies such as Design Offices, WeWork or rent24 are         PREFERRED LOCATIONS
The latest surveys revealed that business managers are                              yielding just under 3.11 % in mid-May, their highest rate in               renting increasing amounts of space in the top 7 cities. In    The providers of flexible office space prefer premises in
tending to roll back their expectations of the economy.                             the past four years. In consequence, most 10-year Federal                  2017 their take-up of space rose by 276 % compared with        the centres of the top 7 cities. Alternative locations can
This probably has something to do with the opaque pol-                              bonds rose from their low in mid 2016 (-0.16 %) to 0.70 % in               2016 to 224,000 m². They focussed on central city loca-        be chosen for strategic reasons, e.g. at airports or in cre-
icies of the president of the USA. So far the economic in-                          January 2018. Mortgage rates usually track the changes in                  tions, which accounted for 62 % of the total. In the 1st       ative districts of the the city. Due to the shortage of space
dicators for Germany have not been affected by recent                               Federal bond rates. The ECB continues, for the moment,                     half of 2018 these firms took 40,500 m² of office space in     in the top 7 locations, some providers, such as Design Of-
developments and remain at high levels. Therefore, when                             to pursue a zero-interest policy, so that it is unlikely that              Munich, 30,500 m² in Frankfurt and 16,900 m² in Berlin.        fices, are expanding into B and C locations such as Leipzig,
business people make decisions on location and invest-                              mortgage rates will rise by very much before the end of                    Overall, the industry absorbed some 117,000 m² of office       Nürnberg or Heidelberg.
ments they still find favourable conditions in Germany.                             2018. Thus the cost of borrowing money for real estate re-                 space in the top 7 cities during the 1st half of 2018. The
                                                                                    mains at an all-time low. Experts do not expect to see a rise              volume taken up is thus double the amount rented in the        OUTLOOK
LABOUR MARKET IN GERMANY                                                            in the base rate before the spring of 2019.                                same period last year. The industry’s strong growth illus-     The larger providers of coworking space remain on an ex-
In June 2018 the number of jobless people in Germany                                                                                                           trates a pressing need for flexible workspaces.                pansionary course. Their flexible workspace concepts are
dipped below the 2.3m mark. Seasonally, it rose slightly in                         IFO SURVEY OF BUSINESS CONFIDENCE IN GERMANY                                                                                              a response to the demands of a new generation of workers
July. Year on year the unemployment rate fell by 0.5 per-                           The ifo index of business confidence shows that German                     TYPES OF PROVIDER                                              and the desire of companies to reduce their fixed overhead
centage points to 5.1 %. Despite growing conflict about                             business managers are in slightly less optimistic mood,                    In general this new trend is known as coworking, although      costs. This trend has, however, had no effect on demand
trade and a more sceptical view of economic prospects, ex-                          largely due to the current protectionist tendencies of                     this form - open plan offices and a focus on communication     for classic long-term rental agreements. On the other
perts expect unemployment to fall further. Many German                              certain countries. In June the index stood at 101.8 points,                and cooperation - is not the only model in the new work        hand, the increased amount of coworking space is exac-
companies have full order books and are thus able to                                down from 102.3 a month before. Service providers were                     world. Classic business centres, which have existed since      erbating the shortage of office space on the market, espe-
continue adding to their payrolls. The ifo employment ba-                           slightly less optimistic when rating both their current and                the 1990s, focus on providing private spheres for their cus-   cially in central locations.
rometer indicated an inclination among German business                              future business expectations.                                              tomers. The most rapidly growing model is a hybrid mix of
                                                                                                                                                                                                                               TOP KNOWN OFFICE LETTINGS | TOP 7 CITIES
managers to create more new jobs. The index slipped                                                                                                            both of these concepts. Only between 10 % and 20 % of           2018/Q1-2
slightly in June 2018, falling to 104.0, having reached its                         FORECAST GDP                                                               coworking space is actually in open plan offices.
highest mark in January 2018 at 105.5 points. In the case                           The major economic institutions in Germany forecast                                                                                                                                                   rented space
                                                                                                                                                                                                                               Provider      Project/Property
of service industries, the firms most likely to be seeking                          growth of 1.8 % to 2.1 % in 2018. Some of the insti-                       WHO USES COWORKING SPACE?
                                                                                                                                                                                                                               The Office    “Oper 46”                                           6,500
additional workers are those in the logistics and transport                         tutes expect to see the German economy take a “cyclical                    Part of the demand for flexible office space comes from         Group         Bockenheimer Anlage 46 | Frankfurt
sector.                                                                             downturn” because heightened “potential for geopolitical                   workers in the “gig economy”, i.e. free-lancers and inde-
                                                                                                                                                                                                                               Spaces        “3hoch5”                                            6,000
                                                                                    and global economic conflict” poses threats to the German                  pendent contractors who are hired for short-term “gigs”.        (Regus)       Breite Strasse 3-5 | Düsseldorf
INTEREST RATES                                                                      economy. In particular, a trade war with the USA would en-                 But large companies also relocate individual departments        Design        Erftstrasse 19 | Köln                               5,600
Mortgage rates bottomed out in mid-2016. There is an in-                            danger the economy.                                                        or project groups into flexible office space. Usually the       Offices
creasing number of reports about rising interest rates. The                                                                                                    hybrid model is their first choice, as the company can hire     Spaces        “Kornmarkt Kontore 1+2”                              5,100
ECB’s exit from its quantitative easing programme and                                                                                                          private offices and also benefit from the innovative buzz       (Regus)       Berliner Strasse 55 | Frankfurt
developments on the US capital markets are thought to                                                                                                          generated by fellow coworkers.                                  Design        Koppenstrasse 93 | Berlin                           5,000
indicate coming rises. Ten-year US treasury bonds were

    Employment                                                                         Ifo business climate Germany                                             Providers of flexible office space                               Top 7 | Take-up of space by flexible office space
    2013-2018/06 | year end values | in millions                                       2013-2018/06 | Index 2015 = 100                                                                                                           2013-2018/Q1-2 | in 000s m2
                                                                                                                                                                Business centre
      Unemployed          Unemployment rate          Registered job offers                    Business situation                                                »» Target groups: companies,                                        Share CBD
     6.9%                                                                                     Business climate                                                     self-employed persons/freelancers                                Take-up of space                                62 %
                                6.4%                                                          Business expectations
                                                                                                                                                    105.1       »» Focus on private atmosphere (individual + group offices)
                                                            5.7%                                                                                                »» Providers: Regus, Contora, Dussmann, etc.
                   0.49                                                                       Employment barometer                                  104.0
                                0.57                                     5.1%
                                              0.66                                                                                                              Coworking space
                                                                                                                                                    101.8       »» Target groups: companies, self-employed persons/
                                                                                                                                                                   freelancers, startups
                                                                                                                                                                »» Focus on communication and collaboration, open                                                                               38 %
                                                                                                                                                    98.6           spaces
                                                                                                                                                                »» Providers: Beehive, Places, etc.                                                                     50 %

                                                                                                                                                                Hyprid model: mix of business centre and coworking
                                                                                                                                                                »» Target group: mix of the target groups business                  86 %         19 %       53 %
      2,95         2,90         2,80          2,69          2,53         2,32
                                                                                                                                                                   centre and coworking, corporates                                         11          9    30          82         224         117
     2013      2014             2015          2016          2017       2018/07         2013          2014          2015   2016   2017        2018               »» Mix of open space, individual + group offices                    2013         2014       2015       2016         2017     2018/Q1-2
                                                                                                                                                                »» Providers: Design Offices, WeWork,
                                       Source: Destatis, Bundesagentur für Arbeit                                                       Source: ifo Institut
                                                                                                                                                                   rent24, Spaces, Mindspace, etc.                                                                 Source: German Property Partners (GPP)

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LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                                             MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

TOP 7 | 2018/Q1-2
In the 1st half of 2018 the volume of investment transac-                     INVESTORS AND VENDORS
tions in commercial properties (excepting buy-to-let res-                     International investors accounted for about half of the                         TOP 10 TRANSACTIONS | TOP 7 LOCATIONS | 2018/Q1-2
idential) in Germany’s top 7 cities totalled €14.05bn and                     volume sold. Year on year, their share of the market has                                                                                                                                                                                 Purchase
translates into robust year-on-year growth of 27 %.                           thus grown further. Their share of the transaction volume                       City              Project/property                                         Buyer                            Investor                                         price
                                                                              was highest in Berlin (65 %) and Munich (66 %). Portfolio                                                                                                                                                                                 [ca. €m]
TRANSACTION VOLUME                                                            sales also took a larger slice of the market, although still
                                                                                                                                                                                Local government centre,                                                                  Wealthcap
Buyers concentrated on office properties, which ac-                           modest at 10 %.                                                                 Frankfurt                                                                  Aroundtown                                                                           500
                                                                                                                                                                                Gutleutstrasse 116-124                                                                    HFS Deutschland
counted for 63 % (€8.86bn) of the volume traded. The next
most popular class of asset was the hotel property, ac-                       YIELDS                                                                                                                                                     Management company for
                                                                                                                                                                                “Springer Quartier” (Sections                                                             MOMENI / Black Horse
                                                                                                                                                              Hamburg                                                                    professionals’ pensions,                                                             400
counting for a 10 % share of the market (€1.44bn). €2.81bn,                   Without exception the top 7 cities saw falling prime yields                                       A+B), Kaiser-Wilhelm-Strasse                                                              Investments
or a fifth of the volume of transactions in the top 7 cities,                 on offices, commercial buildings and logistics properties.
involved property sales in the central business districts                     On office buildings in the top 7 locations the prime yield is                                     “Gallileo”,                                              Capital and Commercial Trust     Fund managed by Triuva for
                                                                                                                                                              Frankfurt                                                                                                                                                       356
                                                                                                                                                                                Gallusanlage 7/Kaiserstrasse                             (CCT)                            South Korean investor
(CBD). This proportion was practically identical to last                      now only 3.20 %. This is also a reflection of the narrow cor-
year’s.                                                                       ridor in which prime net yields move throughout the top 7
                                                                                                                                                                                Hilton Berlin,                                                                            Listed property investment com-
                                                                              cities, from 2.90% in Hamburg at one extreme to 3.50 % in                       Berlin                                                                     Aroundtown                                                                           297
                                                                                                                                                                                Mohrenstrasse 30                                                                          panies - AG/REITs
Munich accounted for about a quarter of the total volume                      Stuttgart at the other.
traded in the top 7 cities (€3.3bn, +37 %). Frankfurt was                                                                                                                       “Correo Quartier”,
close behind, with total trades of €3.23bn (+43 %), followed                  OUTLOOK                                                                         Munich            Paul-Heyse-Strasse/Bayerstrasse/                         Credit Suisse                    Postbank                                            275
by Berlin with €2.45bn (-4 %). The biggest year-on-year rise                  There has been no change in the dynamics of the in-
was 70 %, noted in Hamburg (€2.30bn). The biggest known                       vestment market for commercial real estate observed in                                            “SZ-Tower”,
                                                                                                                                                                                                                                                                          Axa Real Estate Managers /
transaction of 2018 was concluded in Frankfurt. The                           the 1st quarter. At some locations the pace has noticeably                      Munich                                                                     Art-Invest                       Norges Bank Real Estate                             244
                                                                                                                                                                                Hultschiner Strasse 8
closed property fund Wealthcap HFS Deutschland sold                           accelerated, although results could have been better
the building at Gutleutstrasse 116-124, let on a long-term                    if it were not for the shortage of properties. A great deal                                       Old police headquarters,
                                                                                                                                                              Frankfurt         Friedrich-Ebert-Anlage/                                  Gerch Group                      State government of Hesse                           213
lease to local government departments, to Aroundtown for                      remains in the pipeline for the 2nd half of the year. The                                         Mainzer Landstrasse
some €500m. The second-biggest transaction involved the                       coming weeks are expected to bring several big-ticket
“Springer Quartier” in Hamburg (Kaiser-Wilhelm-Strasse,                       transactions in nearly every one of the cities. The year                                          “AVIVA”,
                                                                                                                                                              Munich                                                                     Korean state fund                KGAL                                              >200
City); it was sold for €400m by a joint venture comprising                    2018 is forecast to end with a total transaction volume of                                        Carl-Wery-Strasse 34
the MOMENI Group and Black Horse Investments to a                             €28.8bn in the top 7 cities.
company that manages professionals’ pensions.                                                                                                                                   “Sumatrakontor”,
                                                                                                                                                              Hamburg                                                                    REAL I.S.                        The Blackstone Group                                190
                                                                                                                                                                                Überseeallee 1-3

                                                                                                                                                              Frankfurt                                                                  Credit Suisse                    The Blackstone Group                      confidential
                                                                                                                                                                                Theodor-Stern-Kai 1

    Top 7 | Transaction volume                                                   Top 7 | Strongest buyer groups by location                                     Top 7 | Prime Yields Office                                                                  Top 7 | Transaction volume
    2013-2018/Q1-2 | in € bn                                                     2018/Q1-2 | Transaction volume in € millions                                   2013-2018/Q2 | (Net) initial yield | in %                                                    2018/Q1-2 | by asset class
                                                                                                                                                                     Hamburg    Berlin     Düsseldorf    Cologne     Frankfurt      Stuttgart    Munich

       5-year average (2013-2017):                                                                  Listed property investment companies-AGs/REITs                                                                                                           Logistics
                                                             Forecast             Frankfurt   983
       ca. € 25.4bn                                                                                                                                                                                                                                                                       3%3%
                                                                28.8                                                                                                                                                                                         Other
                                                                                                    Fund managers
                                                                                     Berlin   718                                                                                                                                                            Undeveloped land
                                                                                                    Pension insurers and providers of professional pensions                                                                                                  Commercial
                                                                                  Hamburg     679                                                                                                                                                            premises
                                                                                                    Project developers
                                                                                    Munich    434
                                                                                                                                                                                                                                                  3.50       Hotel                                                       Office
                                                                                                    Other Funds                                                                                                                                   3.40                      10%                             63%
                                                                                   Cologne    370                                                                                                                                                 3.30

                                                                Q1-2                                Asset managers                                                                                                                                3.00
      17.3       22.0        29.3       28.8        29.9        14.1             Düsseldorf   205                                                                                                                                                 2.90

     2013       2014        2015        2016        2017     2018/Q1-2                                                                                               2013           2014         2015         2016               2017       2018/Q2
                                                                                                    Open-end real estate funds
                                                                                  Stuttgart   153                                                                       Hamburg              Berlin                Düsseldorf             Köln
                                                                                                                                                                        Frankfurt            Stuttgart             München
                                     Source: German Property Partners (GPP)                                       Source: German Property Partners (GPP)                                                   Source: German Property Partners (GPP)                                            Source: German Property Partners (GPP)

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LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                                             MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

TOP 7 | 2018/ Q1-2
Take-up of office space in Germany’s top 7 cities de-                          RENTS
creased further due to a shortage of properties. In the                        Rents increased in almost every top 7 location. Only                          TOP OFFICE LETTINGS >10,000 m² | TOP 7 LOCATIONS | 2018/Q1-2
1st half of 2018 take-up fell by some 6 % year on year to                      Hamburg and Stuttgart, where premium rents were down
1.72m m². The somewhat stronger 2nd quarter accounted                          by 2 %, reported any decline at all. Premium rents were                                                                                                                                                                               Rented space
                                                                                                                                                             City                   Project/Property                                                    Tenant/Owner-occupier
                                                                                                                                                                                                                                                                                                                          [ca. m²]
for about 868,000 m².                                                          at their highest in Frankfurt at €42.00/m²/month and in
                                                                               Munich at €36.10/m²/month. The highest average rents
                                                                                                                                                                                    Bludenzer/Steiermärker Strasse                                      Robert Bosch GmbH
TAKE-UP OF SPACE                                                               were posted in Frankfurt and Berlin, at €20.50/m²/month.                      Stuttgart                                                                                                                                                      50,000
                                                                                                                                                                                    (Project development)                                               (owner-occupier, construction start)
Although German business managers are slightly less                            Berlin posted the biggest increases in rents; here the
optimistic, the demand for office space remained very                          average rent grew by 20 % to €20.50/m²/month and the                                                 “Heinrich Campus”,
                                                                                                                                                             Düsseldorf                                                                                 Deloitte GmbH Wirtschaftsprüfungsgesellschaft                       35,500
high in the 1st half of 2018, but suitable premises are in                     premium rent by 12 % to €32.00/m²/month.                                                             Heinrich-Erhardt-Strasse 61
short supply. Although take-up of space was actually
higher in Munich (+16 %), Stuttgart (+4 %) and Frankfurt                       AVAILABLE AND VACANT SPACE                                                    Berlin                 Hildegard-Knef-Platz 2                                              Vattenfall GmbH                                                     29,000
(+2 %), this should not obscure the fact that in some lo-                      The vacancy rate in the top 7 locations fell even further,
cations available space has reached a critically low level.                    to a new, all-time low of 3.7 %. Without exception, the
At the end of the 2nd quarter the other top 7 cities posted                    stock of space available at short notice sank in each city.                   Frankfurt              Europa-Allee 92, building lot 43                                    Frankfurter Allgemeine Zeitung GmbH (FAZ)                           24,000
two-figure declines in the amount of space taken up. The                       Hardest hit by the shortage of space are Berlin, Stuttgart
biggest drop was -22 % in Cologne.                                             and Munich, where vacancy rates range between 2.0 %
                                                                                                                                                                                                                                                        Department of IT and Communications Technology
                                                                               and 2.3 %. In Germany’s top 7 cities 253 developments are                     Munich                 Agnes-Pockels-Bogen 1                                                                                                                   23,000
                                                                                                                                                                                                                                                        (State Capital Munich)
Munich posted the largest share of overall take-up of                          scheduled for completion in 2018 and 2019, delivering a
space in the top 7 locations, reporting 450,000 m² or 26 %                     projected 2.39m m² of space. Contracts have, however,
of the total. Berlin and Frankfurt placed second and third                     already been signed for 65 % of this total. In 2018 only                      Munich                 Hofmannstrasse 61, 63, 69                                           State Capital Munich                                                17,000
with 330,000 m² and 259,300 m² respectively.                                   a quarter of the office space in new developments will
                                                                               become available on the open market.
                                                                                                                                                             Munich                 Werinherstrasse 83-95                                               Deutsche Postbank AG                                                16,900
Take-up of space by the providers of coworking facilities
or business centres was almost double its share a year                         OUTLOOK
before (117,000 m² and 7 % of total take-up). Only 38 % of                     Office premises will continue in great demand. Although
                                                                                                                                                             Berlin                 Am Borsigturm 100                                                   S-Servicepartner Berlin GmbH                                        14,300
this office space is in the CBD of a top 7 location. Although                  some clients in Berlin, Düsseldorf and Frankfurt are
their turnover in the CBDs rose year on year by a modest                       looking for large office suites, it would seem that the top 7
3 %, as a proportion of total take-up the CBD share fell                       cities are far from settingy any new records on the office                    Berlin                 Euref-Campus                                                        GASAG AG                                                            12,000
from 72 % to 38 %. This indicates that providers of cow-                       market. This situation is not expected to ease before 2020
orking space are also obliged to seek space in non-central                     and firms must therefore be prepared to face rising rents
                                                                                                                                                                                                                                                        State government of Baden-Württemberg
areas.                                                                         for offices in the top 7 cities.                                              Stuttgart              Kriegsbergstrasse 32                                                                                                                    10,800
                                                                                                                                                                                                                                                        (bought by occupier)

     Top 7 | Take-up of space                                                     Office letting | Strongest industries by location                            Top 7 | Vacancy rate                                                                             Top 7 | Completions | Pre-let rate
     2013-2018/Q1-2 | in millions m2 | incl. owner-occupiers                      2018/Q1-2 | Take-up of space in m2                                           2013-2018/Q2 | in %                                                                              2014-2019 | in 000s m2
                                                                                                                                                                    Hamburg    Berlin     Düsseldorf    Cologne    Frankfurt      Stuttgart    Munich                                                                     131
                                                                                      Berlin   98,000                                                                                                                                                                                                         122
        5-year average (2013-2017):                                                                                                                                                                                                                                                   114                                 57 %
        ca. 3.5m m²                                           Forecast                                  Public administration/Social services providers                                                                                                                                           104
                                                                                     Munich    83,000                                                                                                                                                           Number of projects
                                                                                  Düsseldorf   57,400   Lawyers/Tax accountants
                                                                                                                                                                                                                                                                                                              75 %
                                                                                                        Industry                                                                                                                                7.6%
                                                                                   Stuttgart   53,000

                                                                                   Frankfurt   51,300
                                                                                                        Tourism/transport                                                                                                                       2.9%
                                                                 Q1-2              Hamburg     41,800                                                                                                                                           2.3%
       2.9         2.9         3.5        3.9         4.1         1.7                                                                                                                                                                           2.0%               971        927     983         946         983        1,412
                                                                                                        Public facilities, associations and federations
      2013        2014        2015       2016        2017     2018/Q1-2             Cologne    19,000                                                               2013           2014         2015         2016              2017       2018/Q2                 2014        2015    2016        2017        2018        2019
                                                                                                                                                                       Hamburg              Berlin                Düsseldorf            Köln
                                                                                                                                                                       Frankfurt            Stuttgart             München
                                      Source: German Property Partners (GPP)                                        Source: German Property Partners (GPP)                                                Source: German Property Partners (GPP)                                               Source: German Property Partners (GPP)

10                                                                                                                                                                                                                                                                                                                                 11

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                               MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                            OFFICE LETTING
                                                                                                                                            The first half of 2018 has closed with office take-up in                      AVAILABLE AND VACANT SPACE
                                                                                                                                            Hamburg some 50,000 m² below the results of the prior                         In the 2nd quarter the vacancy rate contracted once more
                                                                                                                                            year. The result for the half year was a total of 250,000 m².                 and stood at 3.9% at the end of the quarter. Therefore,
                                                                                                                                            This translates into a 17% drop in office take-up. The pro-                   the four per cent barrier has fallen. Year on year 20 % less
                                                                                                                                            portion of owner-occupiers was slightly higher than in                        office space was available to tenants within three months
                                                                                                                                            the first quarter, rising to 7%.                                              as vacancies fell to only 536,000 m².

                                                                                                                                            TAKE-UP OF SPACE                                                              OUTLOOK
                                                                                                                                            Six very large lets were registered in the 1st half of 2018.                  Many companies are still looking for new offices. There
                                                                                                                                            The biggest agreement was the 1st quarter lease taken by                      are limits to how well their demands can be met due to the
                                                                                                                                            insurance group Signal Iduna for temporary space in the                       drastic reduction of available premises and the resultant
                                                                                                                                            “Vattenfall Building” (Überseering 12, City North). A further                 keener competition. The final figures for office take-up
                                                                                                                                            three large agreements were signed in the 2nd quarter.                        are not expected to match the record set in 2017 and the
                                                                                                                                            f & w fördern und wohnen, a social housing company owned                      year should end somewhere in the region of the ten-year
INVESTMENT                                                                                                                                  by the Free and Hanseatic City of Hamburg, will be moving                     average of 512,000 m².
                                                                                                                                            into some 8,600 m² of offices in the “Economic Quarter” at
HAMBURG                                                                                                                                     Heidenkampsweg 96-98. Other clients taking more than
                                                                                                                                            5,000 m² included the Federal Building Dep. of the Ministry
56 transactions on the market for commercial properties        OUTLOOK                                                                      for Urban Development and Housing (BSW) which took
were reported in Hamburg, totalling €2.3bn at the close        Although the market seems to be practically sold out, no                     some 6,900 m² at Nagelsweg 47 (City South) and Lufthansa                        TOP 3 SUB-MARKETS (take-up of space / average rent)
of the 1st half of 2018. Year on year, the result has soared   downturn in trading is anticipated. Investors are still very                 which opted for around 5,300 m² in the “Hanse 10ter Grad”
by 70 %. Adding to the two sales for over €100m each in        willing to buy and enough building developments that have                    (Essener Bogen 21-23, Hamburg West). The biggest new                            CITY / 60,500 m² / €19.40/m²/month
the 1st quarter, two more big transactions followed in the     not yet been sold remain on the market. Developers are,                      lease in the City was signed by Zeaborn for space in the                        CITY SOUTH / 46,500 m² / €12.40/m²/month
2nd quarter.                                                   moreover, actively seeking to buy existing properties and                    “Tower am Michel” (Ludwig-Erhard-Strasse 22) in the first                       HARBURG / 22,800 m² / €10.10/m²/month
                                                               plots of land in order to begin new projects. It is therefore                quarter of the year.
INVESTMENT PROPERTIES                                          highly likely this year’s total will exceed the €3.6bn traded                                                                                                TOP 3 CONTRACTS
The first quarter sale of the “Springer Quartier” (Kai-        last year and that 2018 will close at more than €4.0bn.                      RENTS
ser-Wilhelm-Strasse, City) was the biggest transaction in                                                                                   The premium rent dropped by 50 cents year on year, which                        1. SIGNAL IDUNA GRUPPE
the 1st half year; a joint venture comprising the MOMENI                                                                                    translated into a modest fall of 1.9%. At the close of the                      “Vattenfall building”, Überseering 12 / ca. 10,000 m²
Group and Black Horse Investments sold the property for                                                                                     1st half of 2018 the premium rent was €26.00/m²/month.                          2. F & W FÖRDERN UND WOHNEN AÖR
some €400m to a company that manages professionals’                                                                                         However, the average rent, weighted by rental area, rose by                     “Economic Quarter”, Heidenkampsweg 96-98 / ca. 8,600 m²
pensions. And in the 2nd quarter Blackstone sold the “Su-                                                                                   6.1% from €14.80/m²/month a year ago to its current level                       3. HARBURG-FREUDENBERGER MASCHINENBAU GMBH
matrakontor” (Überseeallee 1-3, HafenCity) for around                                                                                       of €15.70/m²/month.                                                             Schlachthofstrasse / ca. 7,700 m²
€190m to REAL I.S. The next-biggest transaction in the
€100m plus bracket was the sale of the mixed use property
“LaHoMa” (Langenhorner Markt 1-18, Hamburg East) that             Hamburg | Transaction volume                                                 Hamburg | Take-up of space                                                    Hamburg | Premium and average rent
was announced in the first quarter.                               2013-2018/Q1-2 | in € bn                                                     2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                           2013-2018/Q2 | in €/m²/mth (net)

Prime yields on all asset classes fell further below the                                                                  Forecast                                                                                                                                     Premium rent
                                                                                                                                                   5-year average (2013-2017):
levels seen a year before. The prime net yield on offices            5-year average (2013-2017):                             4.5
                                                                                                                                                   ca. 539,000 m²                                        Forecast                                          26.00       26.00       26.00
                                                                     ca. € 3.7bn                                                                                                                                                                 25.00
and commercial buildings dipped below the 3 per cent                                                                                                                                                        550                24.00
mark, dropping 0.4 percentage points to 2.90 %.

With a share of 30 % (€680m) professional pension schemes
                                                                                                                                                                                                                                                                         Average rent
and pension funds were the biggest group of buyers on the
market in the 1st half of 2018. As a group, project devel-                                                                                                                                                                                                 15.50       15.20
                                                                                                                                                                                                                                        14.50    14.50
opers were easily the most dominant vendors, accounting                                                                                                                                                                        14.00
                                                                                                                             Q1-2                                                                           Q1-2
for 48 % of the market (€1.1bn). National players also pre-         2.8         3.7         4.0       4.5         3.6         2.3                 440        525         540        550         640         250
dominated on the selling side of the market, with a 69 %
                                                                   2013        2014        2015      2016        2017     2018/Q1-2              2013        2014        2015       2016        2017     2018/Q1-2             2013     2014     2015       2016        2017      2018/Q2
share of the volume traded (€1.6bn).
                                                                                                   Source: German Property Partners (GPP)                                        Source: German Property Partners (GPP)                                  Source: German Property Partners (GPP)

12                                                                                                                                                                                                                                                                                           13

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                              OFFICE LETTING
                                                                                                                                              Year on year take-up of space in Berlin offices sank by                      AVAILABLE AND VACANT SPACE
                                                                                                                                              20 % despite a large number of agreements to rent big                        Empty space stood at a record low of 2.0 % or 390,000 m²,
                                                                                                                                              amounts of space, thus closing with a rather average                         which was 29 % below the level noted in the prior year.
                                                                                                                                              total of 330,000 m². However, this decline is not because                    Berlin therefore has almost no space left to rent. This
                                                                                                                                              demand is flagging, but because not enough space is                          poses problems for firms wishing to move or expand their
                                                                                                                                              available.                                                                   premises and those seeking large amounts of space are
                                                                                                                                                                                                                           turning to new build projects. This trend is leading to a
                                                                                                                                              TAKE-UP OF SPACE                                                             further rise in new developments being built, but the ef-
                                                                                                                                              At the end of the half year twelve agreements for more than                  fects will not be clearly felt until 2019 or 2020. In 2018 some
                                                                                                                                              5,000 m² of space had been noted and six for more than                       237,000 m² of office space will be completed, in 2019 the
                                                                                                                                              10,000 m²; these included premises let to power company                      scheduled volume is 375,000 m².
                                                                                                                                              Vattenfall (about 29,000 m², Hildegard-Knef-Platz 2,
                                                                                                                                              Periphery South), to S-Servicepartner Berlin (about                          OUTLOOK
                                                                                                                                              14,300 m², Am Borsigturm 100, Reinickendorf) and to                          In the medium to long term more space on the market will
INVESTMENT                                                                                                                                    energy supplier GASAG (about 12,000 m², Euref-Campus,                        ease the situation for tenants and keep rents reasonable.
                                                                                                                                              Schöneberg).                                                                 In 2018 take-up is expected to total some 850,000 m² even
BERLIN                                                                                                                                                                                                                     though so little space is available on the market.
                                                                                                                                              The most popular sub-market was Charlottenburg with a
Overall, commercial properties valued at some €2.5bn             INVESTORS AND VENDORS                                                        share of some 17 %, followed by Periphery South (about
were sold in the 1st half year. Despite a drop of 4 %, this      International investors played a bigger role in Berlin than                  16 %) and Mitte (about 15 %). The Periphery South sub-                         TOP 3 SUB-MARKETS (take-up of space / average rent)
nevertheless represents the third-highest volume of trans-       in the year before. Their share of the volume of transac-                    market now frequently places in the top 3 districts, thus
actions recorded during a half year in the national capital.     tions rose by about a third to 65 %. As vendors, interna-                    underlining the shift in take-up locations. With a 23 %                        CHARLOTTENBURG / 56,000 m² / €15.50/m²/month
                                                                 tional traders accounted for 54 % of the market. With 29 %                   share of the total take-up of space, the Internet/media/                       PERIPHERY-SOUTH / 54,000 m² / €16.00/m²/month
INVESTMENT PROPERTIES                                            of investments in the Berlin market, fund managers were                      telecoms sector was the biggest group of new tenants.                          MITTE / 48,000 m² / €25.70/m²/month
The market’s dynamism showed particularly in properties          the biggest group of buyers. Developers were prominent
traded for over €100m each. Their number jumped from two         among the vendors, accounting for a quarter of the total                     RENTS                                                                          TOP 3 CONTRACTS
in the 1st quarter to eight by the end of the 2nd quarter. In    traded.                                                                      Within the space of a year the average rent rose by 20 % to
what is thus far the biggest sale to be announced in Berlin,                                                                                  the new record level of € 20.50/m²/month. What is now the                      1. VATTENFALL GMBH
Aroundtown paid Park Hotels & Resorts some €300m for             OUTLOOK                                                                      average rent was the premium rent in 2011. The premium                         Hildegard-Knef-Platz 2 / ca. 29,000 m²
the “Hilton Berlin” (Mohrenstrasse 30, Mitte 1a) in the 2nd      In the 2nd half year a number of property sales agreements                   rent grew by 12 % and its new level of € 32.00/m²/month                        2. S-SERVICEPARTNER BERLIN GMBH
quarter of this year.                                            will be ready for signing, so that the volume traded is set to               was last seen in 1995.                                                         Am Borsigturm 100 / ca. 14,300 m²
                                                                 grow considerably and is likely to reach €5.0bn.                                                                                                            3. GASAG AG
Although still the most sought-after asset class, office prop-                                                                                                                                                               Euref-Campus / ca. 12,000 m²
erties made up only 50 % of the total volume, down from
72 %. Mixed-use properties were the second-most traded
assets, accounting for 17 % of the market. Much of this             Berlin | Transaction volume                                                  Berlin | Take-up of space                                                    Berlin | Premium and average rent
result is attributable to the 2nd-quarter sale of the “Forum        2013-2018/Q1-2 | in € bn                                                     2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                          2013-2018/Q2 | in €/m²/mth (net)
Landsberger Allee” (Landsberger Allee 177, Periphery East)                                                                                                                                                                                                                           32.00
for which Patrizia Grundinvest paid Peakside Capital around                                                                                                                                                                                                              30.00
€100m. Hotel properties made up 15 % of the market.                                                                                                 5-year average (2013-2017):
                                                                                                                                                    ca. 736,200 m²                                         Forecast                                           27.50
Several hotels were traded in the 2nd quarter, including the           5-year average (2013-2017):                                                                                                           750
“Hilton Berlin” which passed into new ownership.                       ca. € 5.5bn                                                                                                                                              Premium rent       24.00
                                                                                                                                                                                                                                22.00     22.50                            Average rent
Whereas prime yields on office properties and commercial                                                                        5.0                                                                                                                                                  20.50
buildings fell appreciably less than before, dropping by
0.2 and 0.1 percentage points respectively, the yield on                                                                                                                                                                                                     16.10
logistics properties plummeted. Prime yields on the latter
fell 0.70 percentage points to 4.40 %. On office properties                                                                                                                                                                     12.30
                                                                                                                               Q1-2                                                                          Q1-2
the prime yield was 3.00 %, and on commercial buildings               3.4         4.0         7.8       5.0         7.3         2.5                521        630         810        820         900         330
2.90 %. In the CBD and adjoining neighbourhoods yields
                                                                      2013       2014        2015      2016        2017     2018/Q1-2              2013       2014        2015       2016        2017     2018/Q1-2             2013      2014     2015       2016        2017      2018/Q2
are moving sideways, whereas in non-central and pe-
ripheral locations they are still falling.                                                           Source: German Property Partners (GPP)                                       Source: German Property Partners (GPP)                                   Source: German Property Partners (GPP)

14                                                                                                                                                                                                                                                                                             15

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                              OFFICE LETTING
                                                                                                                                              The 1st half year closed with take-up of office space in                     AVAILABLE AND VACANT SPACE
                                                                                                                                              Düsseldorf totalling 182,000 m². Thus 11 % less space                        The amount of office space standing empty in Düsseldorf
                                                                                                                                              was let than in the same period a year ago, down from                        continues to fall, and has dropped year on year by some
                                                                                                                                              205,000 m².                                                                  130,000 m² to 590,000 m². This is equal to a vacancy rate of
                                                                                                                                                                                                                           8.0 %. In mid 2017 the figure was 9.5 %.
                                                                                                                                              TAKE-UP OF SPACE
                                                                                                                                              The biggest group of clients in the 1st half of 2018 was                     New developments are expected to deliver 103,000 m² of
                                                                                                                                              comprised of lawyers and tax consultants; altogether                         space this year and 115,000 m² in 2019. The latest figure
                                                                                                                                              these clients rented some 57,400 m². Deloitte was instru-                    for the total stock of office space is 7,400,000 m², or 2 %
                                                                                                                                              mental to this good result, signing the biggest transaction                  less than in the same period a year ago.
                                                                                                                                              to date, a lease for 35,500 m² in the “Heinrich Campus”
                                                                                                                                              (Heinrich-Ehrhardt-Strasse 61) new development in the                        OUTLOOK
                                                                                                                                              Kennedydamm/Derendorf sub-market, and propelling this                        A forecast of 400,000 m² of take-up by the end of 2018 is
                                                                                                                                              district to the top of the sub-market ranking with a total                   perfectly realistic since several clients are still seeking
INVESTMENT                                                                                                                                    53,700 m² of take-up. The next-biggest rental agreement                      premises with over 10,000 m², which would take the result
                                                                                                                                              in the 1st quarter of 2018 was signed by the Rhineland tax                   higher than in 2017 (about 358,700 m²).
DÜSSELDORF                                                                                                                                    and finance office (Oberfinanzdirektion Rheinland) to rent
                                                                                                                                              some 5,260 m² of office space in the “Bürocenter Nord”
A very strong 2nd quarter on the investment market in            OUTLOOK                                                                      (Kanzlerstrasse 2-6/Oberrather Strasse 2-6); the third-
Düsseldorf meant that the first half of 2018 closed with         The signs are that the brisk activity on the Düsseldorf                      biggest was a lease for 5,247 m² in the “Shift” (Klaus-Bun-                    TOP 3 SUB-MARKETS (take-up of space / average rent)
a good result. Totalling some €1.16bn, the volume traded         property market will continue during the rest of the year.                   gert-Strasse 7) taken in the 2nd quarter by tax consul-
was 25 % higher than the prior year’s result of €930.1m.         Because some big-ticket sales are expected by the end                        tancy WTS Steuerberatungsgesellschaft; both are located                        KENNEDYDAMM/DERENDORF / 53,700 m² / €19.40/m²/month
                                                                 of the year, the total traded is likely to close with a simi-                in Airport City/North sub-market.                                              CITY / 39,400 m² / €17.00/m²/month
INVESTMENT PROPERTIES                                            larly good result as in prior years and could even pass                                                                                                     AIRPORT CITY/NORTH / 28,000 m² / €15.60/m²/month
Office properties remained the most-traded asset class,          the €2.6bn mark. Several properties costing in excess of                     RENTS
accounting for 60 % of the total volume of transactions          €100m are currently the subject of exclusive due diligence                   Year on year the average rent has risen by 9 % from €14.50/                    TOP 3 CONTRACTS
(€695.0m). Two of the biggest transactions seen in Düs-          processes.                                                                   m²/month to €15.80/m²/month. The premium rent in-
seldorf during the 1st half of 2018 were the sale of the                                                                                      creased by 2 % over the same period from €26.50/m²/                            1. DELOITTE GMBH (ACCOUNTANTS/AUDITORS)
“Fürst & Friedrich” development (Fürstenwall/Friedrich-                                                                                       month to €27.00/m²/month in the 1st half of 2018.                              Heinrich-Erhardt-Strasse 61 / ca. 35,500 m²
strasse) and of the “DUO” office building (Louise-Rain-                                                                                                                                                                      2. RHINELAND TAX AND FINANCE OFFICE
er-Strasse 7-11). The volume of portfolio sales declined                                                                                                                                                                     Kanzlerstrasse 2-6 / Oberrather Strasse 2-6 / ca. 5,260 m²
- from €282.7m (30 %) in the first six months of 2017 to                                                                                                                                                                     3. WTS STEUERBERATUNGSGESELLSCHAFT MBH
€237m (20 %) in the half-year just ended.                                                                                                                                                                                    Klaus-Bungert-Strasse 7 / ca. 5,247 m²

The prime net yield on office properties was 3.30 % in the
period under review, and thus 0.4 percentage points below           Düsseldorf | Transaction volume                                              Düsseldorf | Take-up of space                                                Düsseldorf | Premium and average rent
the first half of 2017. On commercial buildings the prime           2013-2018/Q1-2 | in € bn                                                     2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                          2013-2018/Q2 | in €/m²/mth (net)
net yield was 3.20 %, and 4.60 % on logistics properties.
                                                                                                                                                                                                                                                                         Premium rent
INVESTORS AND VENDORS                                                                                                                               5-year average (2013-2017):                              400                27.50
                                                                                                                                                                                                                                                             26.50       27.00       27.00
                                                                       5-year average (2013-2017):                          Forecast                ca. 338,900 m²                                                                       26.00     26.00
As in the prior year, asset managers were the most active              ca. € 2.4bn
group of investors. But whereas their share in 2017
was 42 % (€387.2m) this group accounted for only 18 %
(€204.5m) of all investments in the half year just ended.
Developers were the biggest vendors in the 1st half of                                                                                                                                                                                                                     Average rent
2018, and sales of €509.7m translated into a 44 % share of                                                                                                                                                                                         15.25                 15.35       15.80
the total traded. In the 1st half year foreign investors spent                                                                                                                                                                           13.80

€351.1m on commercial properties in Düsseldorf, taking
                                                                                                                               Q1-2                                                                          Q1-2
a 30 % of the total market. This figure represents a 26 %             1.8        1.9         2.7        2.6         3.0         1.2                347        238         420        331         359         182
drop following investments from overseas of €475.6m in
                                                                     2013       2014        2015       2016        2017     2018/Q1-2              2013       2014        2015       2016        2017     2018/Q1-2             2013     2014      2015       2016        2017      2018/Q2
the first half of 2017.
                                                                                                     Source: German Property Partners (GPP)                                       Source: German Property Partners (GPP)                                   Source: German Property Partners (GPP)

16                                                                                                                                                                                                                                                                                             17

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                              MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                            OFFICE LETTING
                                                                                                                                            In the 1st half of 2018 take-up of office space in Cologne                   unlikely to total more than about 60,000 m² of new space.
                                                                                                                                            was some 125,000 m². The result was thus around 14 %                         About 140,000 m² may be completed in 2019, however
                                                                                                                                            below the median figure (about 145,000 m²) over the past                     some 75 % of this space has already been pre-let.
                                                                                                                                            five years.
                                                                                                                                            TAKE-UP OF SPACE                                                             Overall the economic environment, which is the basis for
                                                                                                                                            Although there is still considerable demand for office                       office demand in Cologne, remains favourable. The most
                                                                                                                                            space, available properties, especially in the city centre,                  plausible forecast for take-up by the end of the year is a
                                                                                                                                            are in increasingly short supply. Potential tenants                          figure below the five-year average of some 300,000 m².
                                                                                                                                            therefore have problems finding the right premises for                       In view of the shortage of space, rents are unlikely to see
                                                                                                                                            their firms. The biggest agreements included one by re-                      much change, although a further rise would not come as
                                                                                                                                            cycler DSD Duales System to rent about 6,000 m² (Ed-                         a surprise.
                                                                                                                                            mund-Rumpler-Strasse 5) and one by Design Offices for
                                                                                                                                            some 5,600 m² in the “Kaiser Hof” (Erftstrasse 19) new
INVESTMENT                                                                                                                                  build development. Public facilities, associations and fed-
                                                                                                                                            erations were the most active group on the market with
COLOGNE                                                                                                                                     about 15 % of total take-up.

By the end of the 1st half of 2018 the volume of investment    OUTLOOK                                                                      RENTS
transactions in commercial properties in Cologne to-           Depending on the availability of properties, it could be pos-                The falling supply of premises coupled with high demand                        TOP 3 SUB-MARKETS (take-up of space / average rent)
talled some €725m. The year-on-year contraction of 28 %        sible to end the fourth quarter with transactions totalling                  has served to push rents higher. For the first time, the
is due to the shortage of available properties.                some €2.0bn. The cash-rich are still urgently seeking in-                    premium rent reached some €22.00/m²/month. New                                 CBD NORTH / 20,000 m² / €16.30/m²/month
                                                               vestment opportunities. Although selling prices are al-                      build properties and space in Rheinaufhafen district                           COLOGNE RING ROAD / 12,000 m² / €16.80/m²/month
INVESTMENT PROPERTIES                                          ready high, further increases cannot be ruled out for any                    commanded especially high rents. Year on year the av-                          COLOGNE NORTH / 12,000 m² / €9.20/m²/month
Office buildings accounted for about half of the total         segment of the market. It remains to be seen when prices                     erage rent, weighted by area, rose by around 6 % to reach
traded. However, the most expensive property traded            will start to plateau.                                                       € 14.40/m²/month.                                                              TOP 3 CONTRACTS
was the Maritim Hotel, centrally located at Heumarkt
20, which changed hands for around €120m. A relatively                                                                                      AVAILABLE AND VACANT SPACE                                                     1. DSD DUALES SYSTEM HOLDING GMBH (RECYLING)
large proportion of transactions took the form of portfolio                                                                                 In nearly every sub-market the amount of empty office                          Edmund-Rumpler-Strasse 5 / ca. 6,000 m²
trades (about 20 %). In these cases the buyers were fre-                                                                                    space sank in the 1st half year to around 230,000 m². This                     2. DESIGN OFFICES GMBH
quently foreign investors. Year on year the prime net yields                                                                                translates into a mere 2.9 % of total stock. In some sub-                      Erftstrasse 19 / ca. 5,600 m²
on office and logistics properties have fallen by 40 basis                                                                                  markets, such as MediaPark, extremely little property                          3. FOND OF GMBH (OWNER-OCCUPIER)
points to 3.40 % and 4.50 % respectively; the decline on                                                                                    is available at all. The volume of completions in 2018 is                      Vitalisstrasse / ca. 5,000 m²
retail properties was a massive 60 basis points to 2.90 %.
Investors are very willing to part with money if they have
the chance to buy top grade properties.                           Cologne | Transaction volume                                                 Cologne | Take-up of space                                                   Cologne | Premium and average rent
                                                                  2013-2018/Q1-2 | in € bn                                                     2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                          2013-2018/Q2 | in €/m²/mth (net)
Various types of fund were responsible for more than                                                                                                                                                                                                                  Premium rent
half of the volume of transactions. A number of different                                                                 Forecast
                                                                     5-year average (2013-2017):                                                                                                                                                          21.50       21.50
types of investor sold properties, but no single group dom-          ca. € 1.6bn                                             2.0
                                                                                                                                                  5-year average (2013-2017):
                                                                                                                                                                                                                              21.25    21.25    21.25

inated the market. The highest share fell to the property                                                                                         ca. 316,000 m²
AGs, which accounted for about 17 % of the total traded.
Around 34 % of the volume of transactions was due to                                                                                                                                                       280

foreign buyers.                                                                                                                                                                                                                                                         Average rent
                                                                                                                                                                                                                                                          14.10                   14.40
                                                                                                                                                                                                                              12.70    12.70    12.40

                                                                                                                             Q1-2                                                                          Q1-2
                                                                    0.8         1.3         1.9       1.8         2.3         0.7                280        260         290        440         310         125
                                                                   2013        2014        2015      2016        2017     2018/Q1-2              2013       2014        2015       2016        2017     2018/Q1-2             2013     2014     2015       2016        2017      2018/Q2

                                                                                                   Source: German Property Partners (GPP)                                       Source: German Property Partners (GPP)                                  Source: German Property Partners (GPP)

18                                                                                                                                                                                                                                                                                          19

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                                MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                             OFFICE LETTING
                                                                                                                                             Take-up of office space in Frankfurt was 259,300 m² and                       by 2.6 percentage points to 7.6 %. Vacancies declined in
                                                                                                                                             thus 2 % higher than at the mid-point of 2017; the number                     all sub-markets, but the Banking District saw the biggest
                                                                                                                                             of agreements was marginally higher at 377.                                   reduction, with 60 % less space empty. The vacancy rates
                                                                                                                                                                                                                           vary considerably from sub-market to sub-market, ranging
                                                                                                                                             TAKE-UP OF SPACE                                                              from 3.5 % (City Rand) to 18.2 % (Frankfurt North). Although
                                                                                                                                             In the 1st quarter the FAZ newspaper signed in advance                        37 development projects are set to deliver 319,000 m² of
                                                                                                                                             for 24,000 m² in a development at Europa Allee 92 in the                      space in 2018/2019, thus adding considerably more than in
                                                                                                                                             new Europaviertel (City Rand district). This was, by a wide                   recent years, 59 % of the total has already been let.
                                                                                                                                             margin, the biggest let in the first half year. The next-
                                                                                                                                             biggest agreement was for some 8,250 m² of space in                           OUTLOOK
                                                                                                                                             Frankfurt North (Olof-Palme-Strasse 35), signed by the                        Various reasons, such as search queries for large premises
                                                                                                                                             German Finance Agency. Although the financial industry                        adding up to over 500,000 m², the fact that Siemens AG has
                                                                                                                                             usually dominates take-up, it accounts for only 17 % and                      secured rights to the “Gateway Gardens” building site and
                                                                                                                                             third place in the current table of clients. The IT cluster of                that a financial services provider is on the verge of renting
INVESTMENT                                                                                                                                   industries was behind 20 % of take-up, which had much                         more than 30,000 m² in City West, lead experts to forecast
                                                                                                                                             to do with the large transaction already mentioned. Con-                      take-up for the year of between 570,000 and 600,000 m².
FRANKFURT                                                                                                                                    struction and property service providers are also big
                                                                                                                                             clients (18 %) and here demand is fuelled by coworking
By the end of the 1st half of 2018 the volume of investment     investors were involved in a good half of the transaction                    space providers (12 %), who are greatly expanding opera-
transactions in Frankfurt had surged 43 % year on year to       volume.                                                                      tions. The greatest amount of space, 58,800 m², was taken                       TOP 3 SUB-MARKETS (take-up of space / average rent)
€3.2bn. Over half of the total was attributable to seven                                                                                     up in the Banking District sub-market. The entire CBD is
big-ticket trades worth more than €100m each.                   OUTLOOK                                                                      much in demand, 43 % of the total take-up related to prop-                      BANKING DISTRICT / 58,100 m² / €30.70/m²/month
                                                                Despite the shortage of properties, the year is expected to                  erties in this district.                                                        CITY RAND / 50,000 m² / €18.60/m²/month
INVESTMENT PROPERTIES                                           close with a traded volume of €7.0bn, slightly higher than in                                                                                                CITY / 32,800 m² / €21.80/m²/month
The biggest sale was a property from the portfolio of           2017. A few large office properties are still in the pipeline.               RENTS
Wealthcap HFS Deutschland 10 in which Aroundtown paid           Foreign investors will continue to play a crucial role in the                Several rental agreements for large amounts of space                            TOP 3 CONTRACTS
some €500m for the building at Gutleutstrasse 116-124, let      market. Although building completions are adding more                        in expensive properties and new build developments
on a long-term lease to local government departments. In        space to the total, these do very little to counteract the                   pushed the average rent up by €2.50/m²/month to € 20.50/                        1. FRANKFURTER ALLGEMEINE ZEITUNG GMBH (FAZ)
the 2nd quarter the “Gallileo” office tower (Gallusanlage       shortage.                                                                    m²/month. The premium rent increased by € 3.00/m² to                            Europa-Allee 92 (building lot 43) / ca. 24,000 m²
7/Kaiserstrasse) changed hands for €356m. The property                                                                                       € 42.00/m²/month.                                                               2. GERMAN FINANCE AGENCY
was sold by a fund managed by Triuva for South Korean in-                                                                                                                                                                    Olof-Palme-Strasse 35 / ca. 8,250 m²
vestors to Capital and Commercial Trust (CCT).                                                                                               AVAILABLE AND VACANT SPACE                                                      3. FM INSURANCE COMPANY LIMITED
                                                                                                                                             Year on year the amount of empty space has contracted                           “T8”, Taunusanlage 8 / ca. 6,600 m²
Office properties accounted for 84 % of the total traded,
such a high proportion being typical of the Frankfurt
market. Hotels comprises 9 % of the trading volume. With           Frankfurt | Transaction volume                                               Frankfurt | Take-up of space                                                  Frankfurt | Premium and average rent
a share of only 3 %, portfolios played a very minor role. For      2013-2018/Q1-2 | in € bn                                                     2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                           2013-2018/Q2 | in €/m²/mth (net)
several years now, investors have reacted to the shortage
of core properties by turning to core-plus and value-add                                                                                                                                                                                                                Premium rent
options. However, demand for core properties remains                  5-year average (2013-2017):
                                                                                                                               7.0                                                                                                                39.50                 39.75
strong, a fact that is keeping yields low. Over the course of         ca. € 5.5bn                                                                                                                         Forecast              38.00    38.00
                                                                                                                                                    5-year average (2013-2017):
a year the prime net yield on office properties has slipped                                                                                         ca. 389,820 m²                                           570
back a further 0.3 percentage points, but has remained
unchanged at 3.30 % since the start of 2018.

                                                                                                                                                                                                                                                                         Average rent
INVESTORS AND VENDORS                                                                                                                                                                                                                                                               20.50
                                                                                                                                                                                                                                         19.50                          20.30
Stock-exchange-listed property investment AGs/real                                                                                                                                                                              18.50             18.00     18.00
estate investment trusts comprised the biggest group of
                                                                                                                              Q1-2                                                                          Q1-2
buyers, taking almost a third of the total volume. Devel-            3.4         5.2         5.7       6.5         6.7         3.3                 448       368         389         561         729        259
opers, specialist and closed funds each sold between 15 %
                                                                     2013       2014        2015      2016        2017     2018/Q1-2              2013       2014        2015       2016        2017     2018/Q1-2              2013     2014      2015      2016        2017      2018/Q2
and 17 % of the volume traded, whereby developers ac-
counted for more sales than the other two groups. Foreign                                           Source: German Property Partners (GPP)                                        Source: German Property Partners (GPP)                                  Source: German Property Partners (GPP)

20                                                                                                                                                                                                                                                                                           21

LOCAL EXPERTISE – ACROSS GERMANY                                                                                                                                                                              MARKET SURVEY INVESTMENT/OFFICE LETTING 2018/Q1-2

                                                                                                                                           OFFICE LETTING
                                                                                                                                           Take-up of some 120,000 m² pushed the result for the                          no significant increase in available space due to the lack
                                                                                                                                           first half of 2018 a modest 4 % higher than the prior                         of new build developments. The volume of completions in
                                                                                                                                           year’s figure. Four owner-occupier agreements totalling                       2018 is 98,070 m², but 54 % of this space has been let in
                                                                                                                                           65,800 m² and comprising 55 % of overall take-up made a                       advance. The projected figure for 2019 is 117,300 m², of
                                                                                                                                           crucial contribution to the result.                                           which a massive 68 % has already been pre-let.

                                                                                                                                           TAKE-UP OF SPACE                                                              OUTLOOK
                                                                                                                                           50,000 m² of this amount related to the 1st quarter de-                       Despite the current shortage of available premises,
                                                                                                                                           cision of Robert Bosch to construct a new build in Stuttgart                  several good-sized agreements will probably be com-
                                                                                                                                           Feuerbach. The state government of Baden-Württemberg                          pleted by the end of the year, including some in new builds
                                                                                                                                           purchased a building offering 10,800 m² of space in                           at the planning stage. Take-up of 250,000 m² for the year
                                                                                                                                           Stuttgart city centre. Due to these two owner-occupier                        therefore seems within reach..
                                                                                                                                           contracts Stuttgart Feuerbach (about 51,500 m² of
                                                                                                                                           take-up) and Stuttgart city centre (around 19,500 m²) were
INVESTMENT                                                                                                                                 the busiest sub-markets. A further consequence was that
                                                                                                                                           45 % of total take-up was attributable to industrial firms,
STUTTGART                                                                                                                                  followed by the public purse with 16 %. The biggest rental
                                                                                                                                           agreement, in Stuttgart Bad Cannstatt, covered only about
Some €860m were invested in Stuttgart real estate              open-end and specialist funds with 20 % of the market.                      4,700 m² and it too was signed by the state government of
during the 1st half of 2018. This figure was well below the    Foreign investors were slightly less prominent, their                       Baden-Württemberg.                                                              TOP 3 SUB-MARKETS (take-up of space / average rent)
half-year result in 2017 of €589m. The 1st quarter of 2018     market share falling from 54 % to 50 % in the first half of
started with an excellent €535m but momentum slowed            2018.                                                                       RENTS                                                                          FEUERBACH / 51,100 m² / €11.30/m²/month
somewhat in the 2nd quarter to €325m.                                                                                                      As considerably less new build space has been let in the                       CITY CENTRE / 19,500 m² / €13.10/m²/month
                                                               OUTLOOK                                                                     city due to short supply, the premium rent has slipped 2 %                     CITY / 17,000 m² / €18.60/m²/month
INVESTMENT PROPERTIES                                          More large transactions are expected to take place in the                   year on year to €23.50/m²/month. The average rent across
Among the reasons for the good first half year are three       second half of 2018, so that the final annual result could                  the entire city was €14.60/m²/month. This represents a                         TOP 3 CONTRACTS
sales which totalled some €330m; that of the former            be €1.7bn.                                                                  year-on-year rise of 3.5 %.
railway company headquarters (Heilbronner Strasse 7/9,                                                                                                                                                                     1. ROBERT BOSCH GMBH (OWNER-OCCUPIER)
Jägerstrasse 15/17), of the Kodak site in Stuttgart-Wangen                                                                                 AVAILABLE AND VACANT SPACE                                                      Bludenzer-/Steiermärker Strasse / ca. 50,000 m²
(Hedelfinger Strasse 50-80) and the sale of the SI Centre in                                                                               With the vacancy rate persisting at 2.2 %, extremely little                     2. BADEN-WÜRTTEMBERG STATE GOV. (OWNER-OCCUPIER)
Möhringen (Plieninger Strasse 100). Altogether, 30 trans-                                                                                  office space is available for rent in the short term. In re-                    Kriegsbergstrasse 32 / ca. 10,800 m²
actions were completed in the first six months, over 70 %                                                                                  lation to a total stock of some 7.9 m², this means that only                    3. VECTOR INFORMATIK GMBH
of which had 8-figure price tags. Partly as a result of the                                                                                172,000 m² of office space is empty. Once again, there was                      Ingersheimer Strasse 24 / ca. 5,000 m²
two big-ticket sales just named, some 35 % of invest-
ments were made in mixed-use properties, just ahead
of office assets which accounted for around 34 % of the           Stuttgart | Transaction volume                                              Stuttgart | Take-up of space                                                  Stuttgart | Premium and average rent
total traded. Portfolio trades accounted for some 12 % (by        2013-2018/Q1-2 | in € bn                                                    2013-2018/Q1-2 | in 000s m² | incl. owner-occupiers                           2013-2018/Q2 | in €/m²/mth (net)
value) of properties sold.
                                                                                                                                                                                                                                                                      Premium rent
                                                                                                                          Forecast                                                                                                                                    24.30
The prime net yield on office assets remained at 3.50 %.                                                                     1.7                                                                                                                22.80     23.00
                                                                    5-year average (2013-2017):
In the case of commercial buildings in the city centre, the         ca. € 1.3bn                                                                                                                                                        21.50
                                                                                                                                                  5-year average (2013-2017):
prime yield fell below 3.00 % for the first time, down to                                                                                         ca. 305,600 m²                                                              20.00
2.80 %. The premium return on logistics properties has                                                                                                                                                  Forecast
fallen year on year by 0.6 percentage points to 4.50 %.                                                                                                                                                                                                                Average rent
INVESTORS AND VENDORS                                                                                                                                                                                                                                     12.90
                                                                                                                                                                                                                                       12.50    12.50
Open-end specialist funds were the most active group of                                                                                                                                                                       12.00

buyers, accounting for about 18 % of total investments,
                                                                                                                            Q1-2                                                                          Q1-2
closely followed by fund managers with a share of 17 %.             0.9        1.0         1.7       1.8         1.2         0.9                258         278         290        432         270        120
On the selling side of the market, listed property AGs and         2013       2014        2015      2016        2017     2018/Q1-2              2013       2014        2015       2016        2017     2018/Q1-2              2013     2014     2015       2016        2017      2018/Q2
developers were the dominant players, accounting for
26 % and 25 % of total trading respectively, followed by                                          Source: German Property Partners (GPP)                                        Source: German Property Partners (GPP)                                  Source: German Property Partners (GPP)

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