Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL

Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
Office Market Overview
Big 7 | 2nd quarter 2018
July 2018
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
Office space supply sinks further across the board

A historic debacle at the FIFA World Cup, a sprawling trade    The generally positive situation on the employment market
dispute, huge disagreements within the governing coalition     strengthens private consumption, which is increasingly
and the EU: these events dominated the headlines at the        becoming the mainstay of the German economy. This will
end of the second quarter of 2018 – a year that at the start   not change even after the loss in revenue expected in the
was still brimming with economic strength and promised         restaurant business following Germany’s elimination from
positive growth rates. All this has changed. Not only have     the World Cup.
companies in the recent ifo index and ZEW index, which
has fallen to its lowest level since November 2012, down-      Take-up volume has clearly stabilised again – flexible
graded their assessment of the current situation, but eco-     office space providers expand further
nomic research institutes have also adjusted downwards,        At the end of the first quarter, we asked whether we faced a
in some cases significantly, their economic expectations       turnaround or a forced hiatus in the lettings volume. Three
for Germany in the current year. According to Consensus        months later, it’s clear that the answer is a ‘forced hiatus’.
Economics, GDP should increase by 2.1% (down from 2.4%         Take-up in the seven office strongholds has clearly stabilised
in the previous quarter), while the institute is now expec-    again, reaching almost the same level as the previous year
ting growth of below 2% for 2019. The decline in export        with 1.83 million sqm. The fundamental employment market
activity has the most significant impact on the reduced        data remains intact, and despite the political turmoil and eco-
growth forecasts. Since an end to the trade dispute with the   nomic uncertainty companies are still desperately seeking
USA is currently not in sight, the uncertainty of companies    skilled workers. This search is not always successful. Some ex-
and the market turmoil will continue throughout the rest of    pansion plans therefore remain on hold and a potential move
the year. Nevertheless, the labour market continues to send    is deferred as a result. Even if a move is targeted and planned,
positive market signals. The unemployment rate fell further    it cannot always be realised in view of the continuing shortage
to 5.2% in May. Nothing has changed in principle in the gap    of suitable office space. Both factors explain why we continue
between the demand for labour and supply of skilled staff.     to characterise the current situation as a ‘forced hiatus’.

Completions and Vacancy Rate Big 7


                                                                                        -704,000 sqm
                                                                                    compared to last                        ar

Office Market Overview | 2nd quarter 2018                                                                                    2
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
case that larger spaces are rented than before. Another
                                                                 relevant aspect of the current rental market is the con-
                                                                 tinuing demand for space by flexible office space providers
                                                                 to support their ambitious expansion plans especially in
                                                                 the seven strongholds. We also observe here that owners
Munich was again responsible for the largest take-up volume      of office space are increasingly receptive to the expansion
in the first half of 2018 with around 468,000 sqm of rented      wishes of these operators. Thus, these new flexible work-
space and a 12% increase compared to the previous year,          place models compete with the ‘normal’ spaces to be
followed by Berlin with 391,000 sqm. The shortage of space       rented and users, faced with the current scarcity of space,
is particularly noticeable in the German capital, causing        are faced with the question of which concept opens up
take-up to decline by more than 8% in a year-on-year com-        which opportunities and advantages for them. In the Big 7
parison. However, Hamburg and Cologne suffered the               locations, there were around 430 established and almost
sharpest decrease of almost 23% and approx. 26% res-             60 planned flexible office space locations operated by a
pectively. The net absorption figure, which increased sig-       total of 240 providers at the end of June. Once all locations
nificantly in the period from April to end-June compared         have been opened, close to 77,000 workplaces on 764,000
to the previous quarter and amounts to a volume of               sqm of office space will then be available. In the current
232,000 sqm for the first half of the year, shows that nothing   year, the previous year’s volume is likely to be significantly
has changed in terms of the fundamental desire of many           exceeded with a total area of 120,000 sqm. This also in-
companies to expand. When they do move, it’s often the           creases the share of the overall volume. After around

Prime Rental Index and Take-up


                                                                                          Prime Rent Q2 2018
                                                                                          compared to last ar

                                                                                               +4.4 %

Office Market Overview | 2nd quarter 2018                                                                                     3
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
250,000 sqm was let to flexible office space operators in            office space can only be described as sufficient in Düsseldorf
2017, take-up in the first six months of 2018 already amounts       and in Frankfurt, with vacancy rates of over 7%. In all other
to almost 116,000 sqm. This corresponds to a 6% share of            strongholds the vacancy rates are between 4.6% in Ham-
the total take-up volume in the Big 7. The operators are            burg and 2.3% in Stuttgart. A turnaround would be realistic
particularly active in Frankfurt and Munich at present.             only with an increase in newly built space. However, this is
These two strongholds alone account for almost 70,000 sqm           not the case, because the full order books at construction
of the take-up volume. The biggest deals in this segment            companies leave little room for new orders. This means
were registered by Design Offices with 14,000 sqm in Munich         that a pick-up in investments is further delayed, combined
and a further 8,600 sqm in Hamburg, as well as by WeWork            with maximum uncertainty as to when construction work
in Munich with 11,600 sqm.                                          can start on planned projects. By the end of the year, we
For the second half of the year, we expect to see a continu-        expect to see a further drop in the vacancy rate to 4.2%. For
ation of the booming market for office space with sustained         users that want to move or expand, the choice of existing
strong demand and a high potential willingness of compa-            spaces continues to be limited. They have the option of
nies to relocate, as well as an increasingly precarious sup-        renting a space in a project development or a making a
ply side. We have slightly increased our take-up forecast for       temporary move into a co-working or business centre space.
the full year to just under 3.9 million sqm, but it is unlikely
that the previous year’s volume will be achieved.                   New construction volume of 1 million sqm in 2018
                                                                    only 5% above the five-year average
Vacancies continue to fall rapidly                                  In the first half of 2018, almost 329,000 sqm of office space
The vacancy rate for the Big 7 fell by a further 20 basis           was completed across all seven strongholds. That‘s almost
points to 4.3% within the last three months. If this pace is        20% less than a year ago. New building space only increased
maintained, all vacancies in the Big 7 would disappear in           in two cities: in Dusseldorf by almost 18% and in Munich by
around five years’ time. That’s certainly unrealistic. But          almost 57%. The example of the Bavarian property strong-
considering how long it takes to build new projects from            hold clearly indicates that the strong relative increase is
design to realisation, it is clear that we are still dealing with   deceptive and the imbalance between supply and demand
a significant lack of good space. The short-term supply of          continues to exist. Only 63,500 sqm of new space ultimately
                                                                    came onto the market, but the vacancy volume fell by 11%
                                                                    in the same period. In the second half of 2018, a further
                                                                    674,000 sqm of new building space is likely to be added in
                                                                    the Big 7. Compared to previous expectations, this would
                                                                    slightly reduce the annual volume to just over 1 million
                                                                    sqm. All in all, far too little, especially since around 38% of
                                                                    the space that will be completed in 2018 will be in Munich
                                                                    alone. Even more significant for the overall assessment is
                                                                    the fact that only 141,000 sqm (21%) is still available. As

Office Market Overview | 2nd quarter 2018                                                                                        4
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
things stand at present, the postponement of projects             2001. In a one-year comparison, this represents an increase
has the effect that the number of completions should rise         of 4.4%. By the end of the year, we expect to see a further
significantly next year. Currently, more than 1.9 million sqm     increase in the index to 201.7 points, corresponding to a
is in the pipeline for 2019. That would be the largest volume     rise of 3.7% over the year. In addition to the top locations,
in the past 10 years. Whether these spaces will actually be       there is also corresponding demand in other sub-markets
realised next year remains to be seen, and depends not            within the strongholds that leads to higher rental prices.
least on the resources and capacities of the construction         In some instances, the higher rents in city centres and
companies.                                                        CBDs are forcing office users to turn to peripheral locations,
                                                                  particularly as space availability is also greater there. For
Rental price growth is broadening to more areas                   the office markets, a broader distribution of demand is
The imbalance between supply and demand provides the              undoubtedly beneficial, even if such a move is not an
ideal breeding ground for further rental price growth in          option for all user groups.
almost all office strongholds. The growth is strongest in the
two cities with the fewest vacancies: the prime rent in Berlin
increased by almost 13% in a 12-month comparison, ahead
of Stuttgart with an increase of almost 7%. The JLL prime
rental price index for the Big 7 reached 197.9 points at the
end of June 2018, its highest level since the third quarter of

Office Space Take-up incl. Owner Occupier (sqm)
                                      2017                  H1 2017                      H1 2018             Trend prognosis 8
Berlin 1                             944,800                 426,700                      391,300                    è
Düsseldorf 2                         390,600                 229,300                      216,600                    
Frankfurt/M     3
                                     711,300                 237,900                      259,200                    è
Hamburg 4                            640,000                 323,400                      250,000                    è
Cologne 5                            306,900                 166,300                      123,800                    â
Munich Region 6                      995,000                 418,000                      468,000                    è
Stuttgart   7
                                     254,700                 110,900                      118,300                    è
Total                               4,243,300               1,912,500                    1,827,200

Office Market Overview | 2nd quarter 2018                                                                                     5
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
Vacancy incl. Space for subletting
                                                Q4 2017                                     Q2 2017                                     Q2 2018
                                                                                                                                                                     Trend prognosis 8
                                         sqm                Rate (%)                 sqm                Rate (%)                sqm                 Rate (%)
Berlin 1                             701,300                    3.5              822,500                   4.1               638,200                   3.2                       è
Düsseldorf 2                         720,200                    7.9              715,900                   7.9               705,200                   7.7                       è
Frankfurt/M               3
                                     886,600                    7.6            1,001,700                   8.5               848,000                   7.3                       è
Hamburg 4                            712,800                    4.8              757,300                   5.1               689,900                   4.6                       è
Cologne 5                            315,000                    4.1              347,000                   4.5               281,200                   3.7                       è
Munich Region 6                      731,300                    3.6              813,400                   4.0               649,800                   3.2                       è
Stuttgart     7
                                     236,300                    2.7              262,100                   3.1               203,300                   2.3                       è

Prime Office Rents (€/sqm/month)
                                                Q4 2017                                     Q2 2017                                     Q2 2018                      Trend prognosis 8
Berlin 1                                           30.00                                       28.00                                       31.50                                 
Düsseldorf            2
                                                   27.00                                       26.50                                       27.00                                 
Frankfurt/M 3                                      38.00                                       37.00                                       38.50                                 
Hamburg           4
                                                   26.50                                       26.00                                       26.50                                 
Cologne 5                                          22.00                                       22.00                                       22.00                                 
Munich Region                 6
                                                   37.00                                       36.00                                       37.50                                 
Stuttgart 7                                        22.50                                       22.00                                       23.50                                 

Completions (in sqm)
                                                   2017                                     H1 2017                                     H1 2018                      Trend prognosis 8
Berlin 1                                          109,000                                     92,600                                      70,500                                 
Düsseldorf 2                                      112,000                                     46,700                                      54,900                                 è
Frankfurt/M               3
                                                   89,800                                     42,700                                      38,400                                 
Hamburg 4                                         181,600                                     119,300                                     80,000                                 è
Cologne       5
                                                   68,700                                     31,500                                      21,400                                 
Munich Region 6                                   195,200                                     40,500                                      63,500                                 
Stuttgart     7
                                                  103,400                                     32,900                                         0                                   è

Office Space Stock (in Mill. sqm)
                                                   2017                                     Q2 2017                                     Q2 2018
Berlin    1
                                                   20.23                                       20.27                                       20.22
Düsseldorf            2
                                                    9.13                                        9.10                                       9.15
Frankfurt/M 3                                      11.70                                       11.74                                       11.59
Hamburg 4                                          14.90                                       14.86                                       14.95
Cologne 5                                           7.69                                        7.67                                       7.68
Munich Region                 6
                                                   20.24                                       20.12                                       20.23
Stuttgart 7                                         8.65                                        8.58                                       8.65
    City Area; 2 City Area incl. Ratingen, Neuss, Erkrath and Hilden; 3 City Area incl. Eschborn and Kaiserlei; 4 City Area; 5 City Area; 6 City Area incl. surrounding areas;
    City Area incl. Leinfelden-Echterdingen; 8 2018 compared to prior year.

Office Market Overview | 2nd quarter 2018                                                                                                                                            6
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
                                                                                                                                                                                   Development of Main Indicators

No new take-up records due to lack of available space
The Berlin office letting market is suffering badly from the lack
of available space. This has resulted in 391,300 sqm or 8%
less space being taken-up compared to the same period the
previous year. Nonetheless, there is still strong demand. The
last few years have been characterised by the expansion of
Berlin-based companies, but these are now joined by large
international companies and organisations also looking for
space in the German capital. Demand is faced with extremely
short supply. The vacancy rate across the whole of Berlin is                                                                                                                       currently under construction. This emphasises the fact that
now just 3.2%, and is practically non-existent in a number                                                                                                                         Berlin’s office submarkets are now expected to expand
of submarkets around the S-Bahn urban railway ring. As a                                                                                                                           spatially over the medium-term.
result, there has been a further rise in prime and average                                                                                                                         It is expected that the total full-year take-up will be in the
rents to their current levels of €31.50/sqm/month and                                                                                                                              order of 850,000 sqm and that rents will continue to rise. The
€18.57/sqm/month respectively. The city fringe locations                                                                                                                           vacancy rate will fall to under 3%. The current high level of
are also becoming increasingly attractive, such as the                                                                                                                             new-build activity provides some hope for an increase in
Südkreuz district, where Vattenfall has just leased 27,000                                                                                                                         available supply from 2020 and a continued high level of
sqm for its new German headquarters in a development                                                                                                                               take-up, assuming the economy remains stable.

Berlin: Office Space Market Areas with Rental Bands (€/sqm/month)

                                                                                                                                                                                                                                                     Wedding           Wedding              Gesundbrunnen
                                                                                                                                                                                                                                                     Klar aho eh
                                                                     Tiergarten                                                                                                              A114                                                          Area Main Station-Europacity
                                                                                                                                                                                                                                                                  € 21.00 - 30.00                                    A10 Berg

                                                                       Kon rad sh                              A111                                                                                                                                                   Moabit
                                                                                         Tegeler See                                                                                                             Malcho w(H oh en sch
                           Charlottenburg                                                                      Reinickendorf                    Northern Suburb
                                                                                                                                                 € 8.00 - 14.00
                  Charlottenburg 1A                                                                                                                                                        Pankow                                                                                                    Mitte
                    € 17.50 - 31.00                                      Schöneberg                                            A105

                                                                                                                                                                                                                                                                                                    Mitte 1A
                                                                                                                                                                                                                                                                                                 € 19.00 - 31.50
Falken see
                                                                                                                                                                                  Prenzlauer                                       Lichtenberg
                                                                                                                                                                                                                                                                  Area Potsdamer-Leipziger Platz
                                                                                                                                                                                                                                                                          € 21.00 - 30.00
                                                                                                                                                                                € 16.00 - 25.00                                                                                                              Kreuzberg
                                                                                                                                      Ber lin               Mitte
                                      Spandau                                                                                                                                                                                                                              Marzahn-Hellersdorf

                                                     Western Suburb                                                   Charlottenburg-Tiergarten                              Mitte
                                                      € 9.50 - 14.00                                                        € 12.50 - 21.00                             € 16.00 - 25.00      Friedrichshain-Kreuzberg

                                                                                                                                                                                                 Mediaspree                                                Eastern Suburb
                                                                                                               Charlottenburg-Wilmersdorf                                                                                                                   € 9.00 - 13.50
                                                                                                                                                                                                € 19.00 - 28.00

                                             Havel                                                                             Wilmersdorf-Schöneberg
 Großziethen                                                                                                                       € 12.00 - 20.00
                                                                            Bohnsdorf                                                                                          € 13.00 - 23.00
                              Gato w
                       Berlin-Schönefeld                      Kienberg
            Waßmannsdorf                                                                                                                             A103

                                                                       Waltersdorf                                                                          Tempelhof-Schöneberg
                              Area Airport Berlin-                                                                                                                                           A100
                           Brandenburg € 8.50 - 18.50                                                                  Southern Suburb
                                                                            A115                                         € 8.00 - 15.50                                                                                                                                 Treptow-Köpenick
   Glasow                                                             Kiekebusch
                                                                Karlshof                                                                                                                             Neukölln
   Klad ow                        Tollkrug
Blankenfelde                                                                            Steglitz-Zehlendorf
                                                                     A113                                                                                                                                                                                                                                            Großer
            Groß Kienitz
                                                                                                                                                                                                                                                Adlershof                                                           Müggelsee
                                                                        E55    A10
Dahlewitz                                                                                                                                                                                                                                    € 10.00 - 15.50
                               Klein Kienitz

 Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                               Berlin
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
                                                                                                                                                                                  Development of Main Indicators

Above-average second quarter and significant
potential for the second half year
The weak first quarter in the Düsseldorf office letting market
was followed by an above-average second quarter. Total
take-up in the first half of the year was around 217,000 sqm,
of which 193,000 sqm was in the Düsseldorf city area. This
is a 6% decrease compared to the same period the pre-
vious year, but there are a number of large-scale deals in
the >10,000 sqm size category underway for the second half
of the year, which is likely to drive the total full-year take-up                                                                                                                 Just under 55,000 sqm office space was completed over
to around 500,000 sqm. The largest deal of the year to date                                                                                                                       the first half of the year, significantly above the 5-year
is the letting of 35,500 sqm to the accountancy firm Deloitte                                                                                                                     average, with the majority of it already let. The prime rent
in a project in the North submarket. This large-scale letting                                                                                                                     is achieved in the CBD and remained stable at €27.00/
means that the business services sector is the most active                                                                                                                        sqm/month over the first six months. It is likely that this
in the market, accounting for around 45% of total take-up                                                                                                                         will rise by €0.50/sqm/month over the coming months.
volume. The vacancy rate (including space available for                                                                                                                           The weighted average rent has risen from €14.64 to
subletting) has fallen from 8.0% to 7.7% over the last three                                                                                                                      €16.14/sqm/month over the past year due to the large-
months, and the vacancy rate in the city area is just 6.7%.                                                                                                                       scale lettings in development projects.

Düsseldorf: Office Space Market Areas with Rental Bands (€/sqm/month)
                                   Lank-L atu m                              Lang stkierst
                                                                                                                                                               Kalkum                                                                                                                                             Pempelfort
Fischeln                                                                                                                  Kalkum
                                                                                                Kaiserswerth                                                                                                                                                                      Altstadt
                                                                                                                                                                                                   Ratin gen                                                  Oberkassel
                            Stru em p
                                                                                                                          € 11.00 - 16.50                                                             Ratingen
                                                                                                                                                                                                                                                                        Carlstadt                           Stadtmitte
                                                                                                                                                                                                                                                                                             CBD Düsseldorf Nied erschwar zbach
                                                                                                               Lohausen                                                                             € 8.00 - 15.50
                                                                                                                        Düsseldorf                                                                                                                                                            € 17.50-27.00
                                                                                                                                                                                                                                                                                                               € 9.00 - 26.00

                                                                                                                                                                                                                                                        Hafen       Government District
                                                                                                                                                                                                                                                                      € 11.50 - 19.50
                                                                                               Stockum                                   North                                                              Rath
                                                                                                                                                                                                                                                         Unterbilk                           Metzkau sen
                                                                                       Rhein                                         € 8.00 - 16.50                                                                                                                                                             Friedrichstadt
                                                                                                                                                                                                                                                                         City-South                                              Oberbilk
                                                                                                                                          Derendorf                                                                 Lu den berg
                                                                                                                                                              Mörsenbroich                                                                                              € 8.00 - 11.00
                                                                                         Lörick                                                                                                              Ludenberg                               Hubbelrath
                                                            Meerb usch                € 9.50 - 13.50
                                                                                                                      € 13.50 - 22.00                                                                                                                                                                      Mettm ann
           A52                                                                                             Niederkassel
                 A57                                                                                                                                                                Grafenberg
                                                                                       Linksrheinisch                                                                Düsseltal
                                                                           Heerdt       € 7.00 - 18.50                                    Pempelfort                                Grafenberg-East                                                            A3
                                                                                                                                                                                     € 9.00 - 13.50
   Kaar st                                                                                                                     Altstadt                                    Flingern Nord                   Gerresheim
                                                                                                Hafen                                                              Flingern Süd
                                                                                             € 14.00 - 23.00
                                                                                                                        Unterbilk Friedrichstadt                                                                                                                                                                                 Gr uiten

                                                                                                          Hamm                                                                         City-East
                                                                                                                            Düsseldo rf Bilk                                                                Vennhausen
                                                                                                                                                             Oberbilk                € 9.50 - 12.50
                                                              Neuss                                                                                                                                                                                                                             Erkr ath
                                                           € 7.00 - 9.50                                                                                                                                                           Unterb ach
                                                                                                                                                                                                                                                             Unterfeld h au s
                                                                                                                                                                            € 8.00 - 11.50                                                                                 A46

                                                                                                                                                      Himmelgeist                                                                                                       Hild en
   Gr efr ath                                                                                                                                                                                            Reisholz                 A59
                                                                                                                                                   Himmelg eist                     Holthausen
                                                  Neu ss                                                                                                        Itter
                       Holzh eim                                                                                                                                                                                                   Benrath                                                     Kalstert

 Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                          Düeldorf
Office Market Overview - Big 7 | 2nd quarter 2018 July 2018 - JLL
                                                                                                                                                                                Development of Main Indicators

Strong first half year on the office market
Despite the weaker second quarter, the total take-up volume
was 259,200 sqm over the first six months, an increase of
9% compared to the same period the previous year. The
most active sector was again flexible office space providers.
There was a particularly high number of deals: the 350 new
leases concluded in the period from January to the end of
June was the highest for at least 10 years. The total full-year
take-up in 2018 is expected to be in the order of 575,000 sqm,
in line with our forecast from the early part of the year.                                                                                                                      260,000 sqm); over one third of this is already prelet. Al-
Once again, a high volume of office space was removed                                                                                                                           though there is an urgent need for available space, little
from the market, which resulted in a further fall in the short-                                                                                                                 came onto the market in the second quarter of 2018. The
term availability of space. Worthy of particular note is the                                                                                                                    less than 10,000 sqm of space expected to be completed by
significant decrease in space in the Banking District, where                                                                                                                    the end of the year and still available is a significant short-
the vacancy rate has fallen to just 2.5%. Developers have                                                                                                                       fall. The prime rent rose slightly to €38.50/sqm/month, and
had the good sense to push ahead with speculative new-                                                                                                                          rents also increased in a number of major submarkets.
build projects in this submarket where the majority of                                                                                                                          Rising building costs and the available capacity amongst
space currently under construction is located (approx.                                                                                                                          construction companies remain the hot topics.

Frankfurt: Office Space Market Areas with Rental Bands (€/sqm/month)
                                                            Ob er ho echstad t/Ts.                       Ob eru rsel                                                  Bonames
                                                                                                                                                           Kalbach                           Harheim
                   Kön igstein                 Kro nb erg
                                                                                                                                                                              Frankfurter                    Berkersheim          Bad Vilb el
                                                                                       Stein bach                                         Merton-Viertel                         Berg
                                                                                                                                           € 8.50-12.00
                                                                                                                                                                                                                                                                                                                                         Wachen buch en

                                                                                                                                                                 Eschersheim                                                                                    Bergen-
  Alten hain                                                                                                                                 Heddernheim
                                                                                                                                                                                                         Preungesheim                                           Enkheim
                                                                              € 7.50-16.50                                                                                              Eckenheim                                                                                                                            Maintal
                                                                                                                       Praunheim                                                                                                Seckbach
                       Bad So den                                                                                                                                           Dornbusch
                                                                            Esch b or n                                               Fr an kfu rt   Ginnheim                                                                                                                                 Bisch ofsheim
                                                                                                                                      am Main                                                                              Seckb ach

                                                                                                                                      Hausen                               North                                Bornheim
                                                                                                                                                                       € 10.00-12.50
Kelkh eim                                                                                 A648               Rödelheim                                                   Westend-
                                                                                                                                                                                                                                                                                                                               Doern igh eim
                                                                                                             € 9.00-12.00
                                                                                                                 Rödelheim                                                Nord                            Nordend-
                                                                                                                                                                                                            Ost                      Riederwald
                                                                                     Sossenheim                                                                                                                                   East
                                                              A66                                                                                                                        West
                                                                                                                                                               Westend-Süd                                                    € 8.00-18.00
                                                                                                                                                                                    Innenstadt                                                                                                                                     Mü hlh eim
                                                                                                                                                                                                                              Ostend                            Fechenheim
                                          Unterliederbach                                                                     West                                    Bahnhofsviertel
                                                                                                                          € 9.50 - 19.50
                                                                                                                                                      Gallusviertel                                                                      Kaiserlei
                                                                                            Nied                                                                                        Sachsenhausen-
                                                                                                                                                                                             Nord                                      € 8.00-13.00
                      Zeilsheim                              Höchst                                                                                        Gutleutviertel
                     Zeilsheim                                                                             Griesheim                                                                                                    Ob err adOberrad                        Offenb ach
                                                                                                                                                                                                                                                                 am Main                                                              Nordend-West
                                                                                                                                                                                                                                            A661                                                                    Westend-Nord        Laemm er spiel
                                                                                                                                                                                              € 11.50-17.00                                                                                                                                   City
 Kriftel                                                                                                                                                                                                                                                               Bockenheim                                                        € 12.00-29.00
                                                                                                                             Niederrad                                                                                                                                                                         Westend                            Nordend-Ost
                                                                                                                                                                                                                                                              € 12.00-18.00
                                                                                                                            € 9.00-16.00                                                                                                                                                                     € 15.00-32.00
                                                                                                                                                                                                 Süd                                                                                                                                 Innenstadt
            Hattersheim                                                                                                                                                                                                                                                             Westend-                      Banking District     Ob ertshau sen
                                                                                                                                                                                                                                                                                                                  € 19.00-38.50             Altstadt

                                          Kelsterb ach                                                                                                                                                                                                                                            Central Station Bahnhofsviertel
                   Okr iftel                                                                                                                                                                                                                 Gr aven br uch                                      Area € 10.00-22.00
                                                                                                                                                                                                                                                                                    Heu senstam m                            Sachsenhausen-
                                                                                                   € 15.00-25.00                                                                    Neu -Isen bu rg                                                                                                                               Nord
                                                                                                                                                                                                                                                                                                                                    Rem br uecken
Edd ersh eim
                                                                                                                                                                                                                                                                                                      Main                                   Süd

Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                                              Frankfurt
                                                                                                                                                                                    Development of Main Indicators

Letting market at around the 5-year average
Total take-up was in the order of 250,000 sqm in the Ham-
burg office letting market in the first half of 2018. However,
the level of occupier demand is actually higher than this
performance might suggest. We still expect the total full-
year take-up in 2018 will be up to 550,000 sqm. The take-
up statistics by submarket are headed up by the City Centre
(58,000 sqm) and City South (Core Area) (46,000 sqm).
The most active sector is business services providers
(45,000 sqm), ahead of transport/distribution (30,000 sqm).                                                                                                                         is hardly any relief expected from development projects.
Flexible office space providers were more active in the                                                                                                                             Just under 170,000 sqm office space is due to be com-
second quarter than earlier in the year. The volume taken-                                                                                                                          pleted throughout 2018, of which almost one quarter
up by this group was driven by the 8,600 sqm letting to                                                                                                                             remains currently unlet. It is expected that the level of
Design Offices in the Olympus new-build in the City South                                                                                                                           completions will fall significantly over the coming years
(Core Area) submarket, pushing their total take-up volume                                                                                                                           and then pick up again from 2021. The prime rent re-
to 15,000 sqm over the first half year. There was a further                                                                                                                         mained stable compared to the previous quarter at
marginal fall in the supply of office space and the vacancy                                                                                                                         €26.50/sqm/month, whilst the average rent rose to an
rate of 4.6% is the lowest level since 2002. Currently, there                                                                                                                       all-time high of €15.90/sqm/month.

Hamburg: Office Space Market Areas with Rental Bands (€/sqm/month)
                                                                                                                                                                                                                Hummelsbüttel                                                                            Sasel                    Volksdorf
                                 A23                                        Schnelsen
                                             Puetjen                                                                                                                        Hamburg
                                                                                                                                                                    Airport /                                              Ohlsdorf
                                                                                                                                                                  Groß Borstel                                                                                                                  Hamburg North-East
                             Halstenb ek
                                                                                                                                                                  € 7.00-11.50                                                                                                                     € 8.00-11.50
                                                                                                                                                                                                                                                                          Bramfeld             Farmsen-Berne
                                                               Eidelstedt                                                                          Groß Borstel                     Alsterdorf                                           Steilshoop
         Schen efeld                                                                                                                                                                              City Nord
                                                                                                                                                                                                 € 8.50-14.50
                                                                                                                                                                                                                               Barmbek /
                                     Lurup                                                                                                                                Winterhude /                                          Bramfeld
                                                                                                                                                                          Uhlenhorst             Winterhude                   € 10.00-14.00
                                                                                                                                                     Eppendorf            € 9.00-14.00
 Iserbrook                                                                              Stellingen                                                                                                                             Barmbek-Nord
                                                    Hamburg-West                                                   Eimsbüttel
                                                     € 8.00-11.50                                                  € 9.00-13.50
                                                                                                                                           Hoheluft-Ost                             Ham bu rg                                                     Dulsberg              Wandsbek
                                                                                                                                   West                                                                          Barmbek-Süd                                            Wandsbek
                                                                            A7                                                                             Harvestehude
              Osdorf                                     Bahrenfeld                                                                                                                                                                                                    € 8.00-13.50
                                                                                                                                                                  Eppendorf /                                                                                                                                          Jenfeld
                                                                                                                                                                Harvestehude /               Uhlenhorst
                                                                                                                                                                                                                                                                                                                                         Bar sbü ttel
                                                                                                                                                                 € 12.50-20.00                                                  Eilbek                                 Marienthal
                                         Groß Flottbek                                                                                                                                            East of Alster /
                                                                  Altona-Ottensen-Bahrenfeld                                                                                   Außenalster
                                                                                                                          Sternschanze                                                              St. Georg                                                                                                                                  A24
                                                                         € 11.00-16.50
                                                                                                                         St. Pauli                                                                € 12.00-20.50
                                                                                                                      € 10.00-20.50                                                   St. Georg
        Nienstedten                                                                                                                 St. Pauli                                                                  Borgfelde
                                                                                                                                                              City Centre                                                             Hamm
                                               Othmarschen                                                                                        Neustadt                                                                                                                Horn
                                                                                    Ottensen             Altona-                                             € 14.50-26.50
                                                                                                                                                                                                         City Süd (Outer Zone)                                                        Billbrook /
                                                                                                         Altstadt                                               Hamburg-
                                                                                                                                                                                                              € 8.00-12.50                                                           Billwerder /                                  A1
                              Elbe                                                                                                                               Altstadt           City Süd Hammerbrook
                                                                                                                                                                                             (Core Area)
                                                                                         Harbour fringe                                                                                                                                                                                Billstedt               Billstedt
                                                                                                                                              Norderelbe                                € 8.50-15.00
                                                                                         € 12.50-22.50                                                                                                                                                                               € 6.00-12.00
                                             Köhlfleet                                                                                                                                HafenCity
                  Finkenwerder                                                                                       Steinwerder
                                                                      Waltershof                                                                                                    € 16.00-22.50                           Rothenburgsort
                       Harburg - south of the river Elbe
                                 € 8.00-14.00                                                                                                                          Kleiner                                                                                               Billbrook
                                                                                                                                                                      Grasbrook                                                                                                                                                  € 8.00-12.00
                                                                                                                                                                                                      Veddel                   Billwerder Bucht

Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                                                  Hamburg
                                                                                                                                                                                           Development of Main Indicators

Scarcity of available space reflected in the
take-up statistics
Total take-up was in the order of around 124,000 sqm in the
first half year, a decrease of 26% compared to the same pe-
riod the previous year. There are three main reasons for this
development: firstly, small to medium-sized businesses are
currently behaving very cautiously and tending to be hesitant
in making long-term decisions relating to the take-up of new
office space, given the current economic and political situa-
tion. Secondly, there is very little attractive space available in                                                                                                                         5,600 sqm. The vacancy rate has fallen to 3.7% over the year
central locations. And thirdly, asking rents are often above the                                                                                                                           to date, and this is expected to decrease further. The situa-
rather more conservative expectations of many occupiers. A                                                                                                                                 tion has not been relieved by office new-build completions
number of large-scale deals are expected in the second half                                                                                                                                as just 21,400 sqm was completed during the first half year,
of the year, including lettings to the public sector, pushing                                                                                                                              none of which remains available. The prime rent remained
the anticipated full-year take-up to around 300,000 sqm. The                                                                                                                               stable at €22.00/sqm/month and is achieved in the West Bank
two largest lettings took place in new-build projects: DSD                                                                                                                                 of the Rhein submarket. This is expected to increase to €22.50
(Duales System Deutschland) leased around 6,000 sqm and                                                                                                                                    by the end of the year. The weighted average rent has already
the flexible office provider Design Offices leased approx.                                                                                                                                  increased from €12.65 to €13.87 over the past 12 months.

Cologne: Office Space Market Areas with Rental Bands (€/sqm/month)
                                                             Auweiler                           Heimersdorf                                                                                                                                                            Har dt
                           Pulh eim                                              Pesch      E31                                                                                               Flittard
                                                                                                                      Longerich                                                                                                                      Dünnwald
                                                                                                                  Ossendorf/                                                                  Stammheim
                                                                                                                                                                                                                                                                                                           Ber gisch
                                                                                                                     Nippes                Weidenpesch                                                                              Höhenhaus                                                              Glad bach
                                                                                           Ossendorf              € 6.50-11.50                                             Niehl
                                                                                                                                                                                                                                                     Other Locations
                                                                                                                                                                                                                                                       € 6.00-11.50
                                   Wid der sd or f                                                                           Bilderstöckchen Mauenheim
 Brauweiler                                                                                                                                             Nippes                                                                                Holweide
                                                                               Vogelsang      Bickendorf                                                                            Riehl
                                                                                                                                                                                                                           Buchheim                                                                                    Ben sber g
                                        Lövenich                                                           Ehrenfeld/                          Neustadt-Nord
                                                                                                           Ehrenfeld                                                                                       Buchforst
                                                                                                          Braunsfeld                                                                                                     Mülheim
                                                                       Müngersdorf                        € 6.50-15.50                          Rhinebank-West € 13.00-22.00
                                                                                                                                                                                                                       € 7.00-14.50
                                                                                             Braunsfeld                                                                                                                     Höhenberg                                                                 A4
                                          Weiden                                                                                                       Altstadt-Nord                                          Kalk
                                                      Peripherie West                                                                      City Centre
                                                       € 7.00-10.50                                                                        € 9.50-22.00                       Deutz/                                                                      Neubrück
              Buschb ell                                                                                                                             Altstadt-Süd                                                          Vingst
                                                                                                  Lindenthal                                                                  Messe                      Humboldt-
                                                                                                                                                                           € 9.50-19.00                                                    Ostheim
                                                      Marsd or f                     Lindenthal/                                                                                                              A559                                                                      Rath/Heumar
                                                              Junkersdorf                Sülz                                                         Neustadt-Süd
                                                                                     € 8.00-13.50                                                                                                                                                                                Rath
                                                                                                               Sülz                                                                             Poll
                                                                                                                                                                                                                                                                                                                                    Fo rsbach
                       Fr ech en
                                                                                                                                                               Bayenthal                                                                   Gremberghoven
                                                     A1                                                          Klettenberg             Zollstock
                                                                                                                                  Bayenthal/                                                                                                                      Gremberghoven
                                                                                                                                  Marienburg                           Marienburg                                                                                   € 8.50-11.50
                                                                                                                                                                                                                                     Ensen                                                Eil
                                                                                                                                  € 9.00-15.00Raderthal                                                                                                                         A59
                                       Gleu el                                                                                                                                                                                                                                                                                      Rösrath

                                                                               Hür th
                    Ber ren rath                                                                                                                                                                                                                           Porz
                                                                                                                                     Rondorf                                                  Rodenkirchen                          Weiß
                                                                                                       Kon rad er ho ehe                                                                       € 7.00-10.50
                                                                                                                                                                             Hahnwald                                                        Zündorf
                                                                                                                                                                                                              Sürth                                                       Elsdorf
                                                                                                                          Meschenich Immendorf Immendorf                             Godorf                                                                                             Wahnheide      Köln/Bonn

Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                                              Colog†
                                                                                                                                                            Development of Main Indicators

High demand is driving new-build activity
Total take-up was around 470,000 sqm in the Munich
office market over the first half of 2018, the highest level
for 10 years. Due to the continued high level of demand
for space, we have revised our full-year take-up forecast
up to 875,000 sqm. The most active submarket was the
City Centre (88,000 sqm) ahead of the East submarket
(76,000 sqm), whilst the sector statistics were dominated
by industrial companies (89,000 sqm) ahead of business
services providers (78,000 sqm). Vacancy has been falling                                                                                                   over the full-year 2018, of which just under one fifth remains
since 2011 and is now down to 3.2%. Seven submarkets                                                                                                        unlet. The prime rent has risen to €37.50/sqm/month with
have a vacancy rate of under 2%. As a result, there has been                                                                                                potential for a further rise by year-end. The average rent in
an upswing in new-build activity with 285,000 sqm more                                                                                                      the market area is €18.00/sqm/month and €19.40/sqm/
office space under construction than in the same quarter                                                                                                    month in the city area alone. Asking rents continue to rise,
the previous year. However, compared to the period of sig-                                                                                                  even in the case of large-scale lettings. There were six lettings
nificantly higher new-build volumes from 2001 – 2002, the                                                                                                   in the >2,500 sqm size category completed at rental prices
proportion of new-build space being prelet is now much                                                                                                      in excess of €25.00/sqm/month in the second quarter alone,
higher. Just over 300,000 sqm is expected to be completed                                                                                                   of which three were at rents above €30.00/sqm/month.

Munich: Office Space Market Areas with Rental Bands (€/sqm/month)
                                                                         Rothsch waig e
                                                                                      Kar lsfeld                                                                                                                     Ism an in g
                                                                                                                                                            Ob erschleiß heim
Neu -Esting                                                                                                                                                                                   E45
                                                                                                                                                                                                               € 8.50-14.00
  Olch ing
                                                                                                                         Bezirk Nord                                                 A9
                                                                                                                                            € 12.00-18.50
                         Gr öb enzell

                                                          A8                                                         Olympiapark
                                                                                                                     € 12.50-18.50                                                                                                                                  Kirchh eim
                                                                                                                                                                                                                                                                   b. M ün ch en
Eichen au                                                                                                                                                                                                                                                                                          Poin g
             Puch heim                                                                                                                                 North-Schwabing                                                                                                                   Gr ub
                                                           Bezirk West                                                                                   € 14.50-23.00
                                                                             West                                                                                                                                                                                      Heim stetten
                                                                         € 13.00-20.00
                                                                                                                             Bezirk Mitte            City Centre                € 15.00-21.00
                                                                                                                                                    € 19.50-37.50
                                                                                                                                                                                                                                                                                   A94      Parsdo rf
                                                                                                                                                                        Bogenhausen                                                Riem                 Periphery-East
                                                                                                                                                    Mü nch en
                                                                                                                                                                        € 18.50-28.00                                                     Moosfeld/      € 8.50-13.00
                                                                                                                                                                                                                                             Riem       Ottend ich l
                                                                                                         € 14.00-22.00
                                                                                                                                                                                                                                         € 9.50-16.00
                   Ger merin g                                                                                                                                                                  East
                                                           Gr äfelfing               A96                                                                                                                     Bezirk Ost
                                                                                                                                                                                           € 13.00-23.00

                    € 8.50-13.50                                     Martin sr ied
                                                      Planeg g
                                                                                                                                 South                                                             Neuperlach
                                                                                                                Bezirk Süd
                                                                                                                             € 11.00-18.50                                                        € 10.00-15.00
                                         Stockdo rf


                                                                                                                                                                                                                  Neu b ib erg
                             Gau tin g                                                                                                                   € 8.00-12.00
                                                                                                                                                                                                                   Ottob ru n n
Unterb ru nn                                                                                                                                                                    Unterh ach in g
                                                                                                                                       Gr ün wald

 Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                  Munich
                                                                                                                                                                             Development of Main Indicators

Take-up performance driven by large-scale
owner-occupier projects
In the second quarter, total take-up was around 29,000 sqm
in the Stuttgart office market, the lowest second quarter
take-up of the last 10 years. Total take-up in the first half
year was around 118,000 sqm, thanks to two large-scale
owner-occupier deals in the first quarter with an aggregate
volume of around 61,000 sqm of office space. However the
increasing scarcity of supply resulted in far fewer deals
compared to the same period the previous year (-14%)                                                                                                                         onto the market in 2018, just 11% is still available. As a
and compared to the 5-year average (-33%). Full-year take-                                                                                                                   result of the lack of completions in the first half of 2018,
up in 2018 is expected to be below-average at around                                                                                                                         the vacancy rate fell by 0.1% compared to the previous
220,000 sqm. The large-scale project by Bosch in the                                                                                                                         quarter, to 2.3%. A further fall to 2.2% is expected by
Feuerbach submarket contributed around 51,500 sqm,                                                                                                                           year-end 2018. The scarcity of supply has also resulted
which equates to a share of 44%. The second most active                                                                                                                      in a further increase in prime rent which has risen by
submarket was the City Centre, where almost half of all                                                                                                                      €0.50/sqm/month compared to the previous quarter to
letting transactions took place in the first six months. Of                                                                                                                  €23.50/sqm/month. The prime rent is expected to reach
the approx. 84,300 sqm in the pipeline and due to come                                                                                                                       €24.00/sqm/month by the end of the year.

Stuttgart: Office Space Market Areas with Rental Bands (€/sqm/month)
                                            Hirschland en                                             Neu wirtshau s                                                                Mühlhausen                                                                                                           Kor b
                                                                                                                Neuwirtshaus                                                              Hofen
                                                                                                                                                      ZuffenhausenRot          Freiberg               Neugereut
                                                                                               Kor ntal-M ün chin gen
                                                                                                                                                       € 8.00-11.00                                       Steinhaldenfeld                                          Waibling en
                                                                                                                                                                                                                                                                                                        Klein hep pach
                                                              Ditzin gen

                        Hoefing en                                                                                                                                                                                                                                                       Bein stein
                                                                             Hausen                                                                                Burgholzhof
                                                                                                                                     Feuerbach                                                                     Sommerrain
 Geb ersheim                                                                                 Weilimdorf                                                          Stuttg art                                                             Fellbach
                                                                                            Weilimdorf                              € 10.50-16.00                                         Bad Cannstatt
                                                                                                                               Feuerbach                                                  € 10.00-16.50                                                                                                          Weinstad t   Rem shald en
                                                                                           € 10.00-13.00
                                                                                Giebel                                                                                                                                                                                   Ker nen
                                                                                             Wolfbusch                                                  Stuttgart-North                                                                                                im Remstal
                                                                                 Bergheim                                                                                                 Bad Cannstatt
                                                            Ger ling en                                                                                  € 12.00-17.50
                        Leon b er g
                                                                                                                                                        Europaviertel                                                           Luginsland                                          im Remstal                                    Schn ait
                                                                                                                                          Universität                     Stuttgart-Ost                             Untertürkheim
                                                                                                          Botnang                                   Hauptbahnhof
                                                                                                                                                  Oberer Schlossgarten                                                                                                                           Stru em pfelbach
                                                                                                                                              Neue Vorstadt Diemershalde
                                                                                             Stuttgart-   Stuttgart-West                      City-Centre           Stuttgart-East                                                                       Uhlbach
                                                                                               West        € 11.00-16.50                          Heusteigviertel
                                                                                                                                             € 13.50-23.50           € 10.00-15.00                        Wangen
    Warm bro nn                                                                                                                                                                                      Wangen-Hedelfingen
                                                                                                                                                     Stuttgart-South           Frauenkopf
                                                                                                                                    Stuttgart-Süd                                                        € 9.00-15.50
                                                                                                                                                      € 10.00-16.50                               Rohracker
                                                                                                                                                                                                                     Hedelfingen        Obertürkheim
                                      A81                           Büsnau
                                                                                                                                                Degerloch                        Sillenbuch
Mag stadt                                                                                                   Kaltental                                  Degerloch
                                                                               Vaihingen                                                              € 9.50-16.50Schönberg
                                                                                                                                                                                                                                                                       Esslin gen
                                                                                                                                                         Hoffeld                                                                                                       am Neckar
                                                             A831                          € 9.50-17.50                                                                                                                   Ostfild ern
                                                                                                                        Möhringen                                   Asemwald
                                                                                      Rohr                                                                                                     Kem nat
                                                                                                                                                                                                                                                                                                                              Ploch ing en
                                                                                                                               Fasanenhof                                             Hohenheim
            Sind elfin g en                                                                                                                           Plieningen
                                                                                                                                                     € 9.00-10.50
                                                                                                                                       € 11.00-15.50         Plieningen

                                                                                 Leinfelden -E chterd ing en            Leinfelden-Echterdingen                                                                                         A8
                                                                                                                                                                                                                                                                    Den kend or f
                 Böb ling en                                                                                                  € 9.50-18.50                                                                                          Neu h au sen                                                                           Wern au
                                                                                                                                                                                                                                     au f d en                                                               Wend ling en (Neckar )
                                                                                                                                                                                                                                      Filder n                                                               am Neckar

Office Market Overview | 2nd quarter 2018                                                                                                                                                                                                                                                                StuŠgart
                                                                                                                                                      Contact Berlin
Stephan Leimbach                                                           Helge Scheunemann                                                          Stephan Leimbach
Head of Office Leasing Germany                                             Head of Research Germany                                                   Head of Office Leasing Germany
Frankfurt                                                                  Hamburg                                                                    Frankfurt
+49 (0) 69 2003 1245                                                       +49 (0) 40 350011 225                                                      +49 (0) 69 2003 1245                                                                           

Contact Düsseldorf                                                         Contact Frankfurt                                                          Contact Hamburg
Martin Becker                                                              Markus Kullmann                                                            Tobias Scharf
Team Leader Office Leasing                                                 Team Leader Office Leasing                                                 Team Leader Office Leasing
Düsseldorf                                                                 Frankfurt                                                                  Hamburg
+49 (0) 211 13006 600                                                      +49 (0) 69 2003 1062                                                       +49 (0) 40 350011 242                                                                                

Contact Cologne                                                            Contact Munich                                                             Contact Stuttgart
Andreas Reul                                                               Petra Bolthausen                                                           Sebastian Treier
Team Leader Office Leasing                                                 Team Leader Office Leasing                                                 Team Leader Office Leasing
Cologne                                                                    Munich                                                                     Stuttgart
+49 (0) 221 2775 45                                                        +49 (0) 89 290088 169                                                      +49 (0) 711 900370 36                                                                                 Information regarding JLL and our services All research reports on current market figures and special topics Commercial real estate properties for sale or to let througout Germany

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