Office Space Market Cologne October 2017

Transcription

1 Office Space Market Cologne Coeur Cologne Greif & Contzen 2017 Greif & Contzen Beratungsgesellschaft mbh 2017,

2 High take-up of office space, new buildings in great demand Dear Sir or Madam Nine take-ups ranging between 5,500 and 18,500 square metres were realised during the first three quarters of the year. A total of around 260,000 square metres of office space was let during the period under review. The average rent per square metre is about five percent higher than at the beginning of the year, standing currently at EUR In view of the ever decreasing vacancy rate, completion of new buildings has become a crucial factor in particular with regard to large office units. Four of the nine take-ups mentioned above took place in property development projects and STRABAG AG are building their new headquarters with more than 17,000 square metres. For a number of years now, office locations with good traffic links on the right bank of the Rhine have been becoming increasingly important for the office space market, due to a better availability of commercial building land and consolidation areas. Many reputable potential tenants have been convinced by these areas. Various new office buildings are going to be built over the next few years, as part of large-scale urban development projects in Deutz and Mülheim. In the short to medium term, further property development projects are scheduled to be realised in the districts on the right bank of the Rhine but also in other areas such as the Kölner Ringe, Braunsfeld and Ossendorf. The focus topic of this report are the intended building activities over the next three years. There is potential to create up to about 730,000 square metres of new office space in Cologne in the period until 2020 alone. Owing to pre-letting ratios and other decisive factors, figures for 2019 and 2020 are, of course, of a theoretical nature. However, if potential for completion is differentiated by location, there are already some specific and interesting indications for possible market developments. Please do not hesitate to get in touch with us, if you have any specific questions regarding Cologne's office space market. Yours faithfully Florian Schmidt Head of Office Properties Greif & Contzen Immobilienmakler GmbH Greif & Contzen Beratungsgesellschaft mbh 2017, Page 2 of 15

3 Office space market Cologne key figures development and forecast Year Develop -ment Take-up (000's m²) Forecast 2017 Existing space (million m²) Completions (000's m²) Vacancies (000's m²) Vacancy rate in % Highest rent ( /m²) Prime rent (according to gif) in /m² Average rent (initial letting*) in /m² Average rent (weighted according to unit size*) in /m² Average rent (mean value*) in /m² Employees contributing to social insurance (000 s)** Unemployment rate in %** * for new buildings and revitalised properties in good and very good city centre locations ** as of 30 June, forecast regarding employees contributing to social insurance Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2017, Page 3 of 15

4 Significant lettings Three of the biggest take-ups of the year so far took place in the submarket of Deutz. The Federal Office for Family Affairs and Civic Duties concluded a contract for around 19,000 square metres of office space that were available due to the relocation of Deutsche Lufthansa AG. STRABAG AG took up construction activities for their new headquarters with around 17,000 square metres, in direct vicinity of the development area Deutzer Hafen. Landschaftsverband Rheinland took up around 8,000 square metres in a new construction project nearby. Furthermore, the office space provider Design Offices GmbH rented around 9,000 square metres in the prestigious building Dominium in the Bankenviertel. Selection of significant lettings up to September 2017 Tenant (location) office space (m²) Federal Office for Family Affairs and Civic Duties (Deutz) approx. 18,800 STRABAG AG (new building for owner-occupation, Deutz) approx. 17,100 Design Offices GmbH (Bankenviertel) approx. 9,000 Landschaftsverband Rheinland (Deutz) approx. 8,000 Deutsche Bahn AG (Köln Ost) approx. 7,300 OBI GmbH & Co. Deutschland KG (Mülheim) approx. 6,700 Deutsche Lufthansa AG (Braunsfeld) approx. 6,500 Federal Office for Family Affairs and Civic Duties (Kalk) approx. 5,600 Federal Office of Administration (Ossendorf) approx. 5,500 Deutsche Lufthansa AG (Innere Kanalstraße) approx. 4,600 Greif & Contzen Research, Cologne, Take-up of office space (m²) development and forecast 2007 to , , , , , , , , ,000 50, Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2017, Page 4 of 15

5 MediaPark Greif & Contzen 2017 Take-up of office space from a wide range of industries Up to this point, public institutions account for the biggest share of the take-up of office space this year. This is in particular due to two large-scale lettings to federal authorities. Runner up is the transport industry with 14 percent, owing to rental contracts concluded by Deutsche Lufthansa AG, followed closely by the media industry. Construction and retail companies account for ten percent each. On the whole it can be said that once again, a large share of the demand has been spread across a wide range of industries. Take-up of office space according to industries in 2017 Consulting 3% Real Estate 3% Insurance 2% Software, IT 2% Finance 1% Education 1% Authorities, associations 26% Healthcare 3% Services 4% Industrial, technology 8% Retail 10% Construction 10% Greif & Contzen Research, Cologne, Media 13% Transport 14% Greif & Contzen Beratungsgesellschaft mbh 2017, Page 5 of 15

6 Development of rental prices The average rent has increased by about five percent to around EUR per square metre since the beginning of the year. The weighted average rent based on unit size is currently EUR per square metre. A decrease was to be expected, after the key figure had soared to EUR per square metre in 2016, owing to the large unit taken up by Zurich Versicherung. However, this still corresponds to an increase by around 11 percent compared to The prime rent remains unchanged at EUR per square metre that were reached in A number of contracts was concluded for rents above this figure, however, these lettings do not account for the required minimum share of take-up according to the Society of Property Researchers, Germany. With regard to current property development projects in particular, it is to be expected that the prime rent is going to increase at least in the medium term. Top rents of up to EUR per square metre are already being achieved in the premium segment of outstanding properties in excellent locations. The pricing structure summarised in the table below is the result of an analysis of office space leases for the most expensive units in around 60 high-quality office buildings, concluded since Maximum rent price structure according to property types and quality of location New buildings Revitalised buildings Up-to-date older buildings Top quality location 1 Good quality location² Average quality location³ Listed as monthly base rent per square metre 1 city centre locations with very good traffic links, high visibility and an established business environment, such as Bankenviertel, Mediapark, Rheinauhafen, Rheinufer ² city centre locations with certain drawbacks regarding factors such as visibility or neighbours ³ locations outside of the city centre including business parks such as Airport Business Park, Braunsfeld, Ehrenfeld, Kalk, Ossendorf Greif & Contzen Beratungsgesellschaft mbh 2017, Page 6 of 15

7 Vacancy rate continues to decrease Vacant office space has been decreasing continuously, for the past eight years. Since 2014, vacancies have been decreasing by at least 50,000 square metres per year. At the end of the third quarter of 2017, there are around 310,000 square metres of vacant office space. This figure is expected to drop to around 300,000 square metres during the fourth quarter, reaching a vacancy rate of 3.8 percent. The decrease is particularly noticeable in the areas of Rheinauhafen, Kölner Ringe, Ehrenfeld and Deutz. Vacancy rate development and forecast 2007 to % 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 7.6% 8.1% 8.0% 7.7% 7.6% 7.4% 6.6% 5.7% 4.6% 3.8% Greif & Contzen Research, Cologne, Dynamic office locations Deutz made it to first place among the submarkets, once again, with around 48,000 square metres being taken up this year so far. The district came first in 2016 too, due to the major lease concluded in MesseCity with Zurich Versicherung. Runner up so far is Mülheim with more than 22,000 square metres. The five-year average has already been surpassed by around 29 percent. Among the new tenants are the retail chains OBI and REWE who rented large office units on Schanzenstrasse. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 7 of 15

8 Overview of submarkets Location Available space 1 (m²) Vacant space (m²) Ø annual take-up² (m²) Benchmark rent³ ( /m²) Innenstadt (City Centre) Bankenviertel 15,000 7,000 6, MediaPark 4,000 4,000 10, Rheinauhafen 19,000 19,000 9, Kölner Ringe 42,000 16,000 23, Deutz 63,000 14,000 26, Innenstadt Nord 52,000 37,000 31, Innenstadt Süd 21,000 8,000 11, Rheinufer Nord 2,000 2,000 8, Rheinufer Süd 12,000 12,000 8, Subtotal 230, , ,000 Districts on the left bank of the Rhine Innere Kanalstrasse 12,000 2,000 8, Ehrenfeld 19,000 14,000 21, Braunsfeld 114,000 46,000 12, Ossendorf 77,000 14,000 22, Köln Nord 50,000 14,000 12, Köln West 26,000 21,000 16, Köln Süd 30,000 26,000 22, Subtotal 328, , ,000 Districts on the right bank of the Rhine Gremberghoven 35,000 18,000 14, Mülheim 78,000 5,000 17, Kalk 7,000 1,000 15, Köln Ost 80,000 30,000 13, Subtotal 200,000 54,000 59,000 Total 758, , ,000 ¹ The supply of available space consists of vacancies, space under construction and a certain amount of space that is still in planning stages. 2 Specified as average value of the past five years 3 The listed figures are base rent prices. Considerably higher or lower rents are occasionally agreed upon in individual cases. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 8 of 15

9 FOCUS TOPIC: Potential for development 2018 to 2020 Due for completion in 2019: the building CLOUTH 104 with its historic brick façade Clouth 104/HH Vision An annual average of about 75,000 square metres of office space were completed between 2012 and Around 95,000 square metres are due for completion in 2017 and 90,000 square metres are expected to be completed in Among the biggest projects to be completed in 2019 is the building CLOUTH 104, providing a historical reference and the gateway to the mixed-use development area Clouth-Quartier. While a moderate increase of construction activities can be observed, compared to the previous years, new office space that is available in the market at short notice remains scarce, considering the great demand and the high pre-letting rates. Companies that would like to move can choose between only a small number of buildings in mint condition. If there are preferences for particular locations, there may be little or no availability. Completed office space (m²) development and forecast 2009 to , , , , ,000 50, Greif & Contzen Research, Cologne, Greif & Contzen Beratungsgesellschaft mbh 2017, Page 9 of 15

10 In order to be able to estimate the development potential of 2019 and 2020, large construction measures that are currently being built and that have a number of construction phases, must be considered. Furthermore, there are projects for which planning permission has been granted or is likely to be granted shortly. Construction periods of 12 to 24 months must be considered, in addition to the pre-letting rate that is usually required. These criteria currently apply to a selection of around 40 property projects. Current construction measures (selection) Property / location Office space (sqm)* Completion MesseCity (Deutz) around 120, / 2021** STRABAG headquarters (Deutz) around 17, Federal Employment Agency (Ossendorf) around 19, b3 campus köln (Kalk) around 19, / 2018** ONE Cologne (Innere Kanalstrasse) around 15, CLOUTH 104 (Köln Nord) around 13, GAG headquarters (Kalk) around 12, Kaiser Hof (Innenstadt Nord) around 12, KÖLNCUBUS süd (Kalk) around 12, Haus Friesenplatz (Ringe) around 9, / 2020** * rental area of all construction phases, where applicable **according to construction phases Greif & Contzen Research, Cologne, Owing to the fact that approval procedures, marketing and construction processes cannot be accurately predicted, an indication of future construction volumes for the time beyond 2018 is subject to certain imponderable aspects. It is possible, however, to estimate the potential, assuming that administrative proceedings are going to be favourable and that tenants can be attracted successfully. When the selected property projects are assessed based on these optimistic assumptions, a theoretical potential of around 320,000 square metres each could be developed in 2019 and However, construction activities on this scale are not going to take place. Considering even the fact that the average take-up of the past five years was 308,000 square metres, it is apparent that actual completion figures are most likely going to be much lower. An oversupply with new buildings is prevented by the fact that the vast majority of projects is not commenced unless there is an anchor tenant. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 10 of 15

11 Office Space Market Cologne Completion volume or potential in m² per time period, according to city districts 250, , , ,000 50,000 0 Innenstadt Kalk EhrenfeldLindenthal Porz Nippes Rodenk. MülheimChorweiler Greif & Contzen Research, Cologne, The spatial distribution of construction measures shows that the city centre is likely to remain very significant over the next three years. There is theoretical potential for completing around 170,000 square metres of office space, despite the scarce availability in the construction land market. There is significantly less development potential in Kalk, where the development of Deutzer Feld is almost complete. The districts Ehrenfeld, Mülheim and to a lesser extend also Porz feature potential for property projects that may distinctly increase their significance for Cologne s office space market. Whether this is actually going to occur, depends largely on whether companies looking for office space are willing to accept space available in these locations. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 11 of 15

12 EMPLOYMENT MARKET AND OUTLOOK Palais Langen Greif & Contzen 2017 Employment continues to increase The high demand for office space over the past few years is based mostly on the growth of Cologne-based companies. This is illustrated by the development of the employment market. The number of employees increased by around 73,000 individuals or by around 16 percent, between June 2010 and June A further increase is expected to occur in Employees contributing to social insurance in Cologne, 2008 to , , , , , , , Source: Landesdatenbank NRW, as of 30 June respectively Greif & Contzen Beratungsgesellschaft mbh 2017, Page 12 of 15

13 Im Zollhafen 2-4 Greif & Contzen 2017 Outlook: Good year-end results expected The economic upswing continues. According to a number of research institutes, economic performance is expected to increase by around 1.9 percent in Prognoses range between 1.6 and 2.2 percent for Strong domestic consumption is an important driver of the economy - both by the state and by private enterprises and households. Meanwhile companies have also increased their investment activities. This is noticeably in particular in the area of construction. While the ifo business climate index has fallen below the longterm high achieved in summer, business sentiment is still very positive. The sentiment indicator by the Chamber of Industry and Commerce showed in summer that small and medium sized companies in the Cologne region tend to have an optimistic outlook. There are generally favourable conditions that are likely to allow for an above average take-up of space in the order of around 330,000 square metres to be realised by the end of the year. This assessment is supported by a number of sustainable requests for large office units. Jointly with 2011, this would be the second best year-end result for Cologne s office space market in the past decade. Furthermore, there is still potential for rents to increase. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 13 of 15

14 If you have any questions, please contact: Theodor J. Greif Managing Director and Owner GREIF & CONTZEN Immobilien GmbH Tel: Florian Schmidt Head of Office Properties GREIF & CONTZEN Immobilienmakler GmbH Tel: Frank Pönisch Managing Director GREIF & CONTZEN Beratungsgesellschaft mbh Tel: Dr. Jan Schubert Consulting, Research GREIF & CONTZEN Beratungsgesellschaft mbh Tel: Address: Pferdmengesstraße 42, Köln Greif & Contzen Beratungsgesellschaft mbh 2017, Page 14 of 15

15 The information contained in this report is in part based on public sources, information provided by third parties and our own calculations. We have compiled this information with the greatest care and attention and are providing the information to the best of our knowledge. However, any liability for the completeness and correctness of any of the information, contents or citations contained shall be excluded. The information compiled and provided in this report shall not establish any kind of consulting relationship with the recipient. Greif & Contzen Beratungsgesellschaft mbh, All rights reserved. These documents are our intellectual property and subject to our copyright. They are intended solely for the recipient. Any form of reproduction, amendments or distribution to third parties, in whole or in part, shall require our prior explicit agreement in writing. Where we do not hold the copyright on grounds of third-party-copyright, we refer to the copyright of the third party. Greif & Contzen Beratungsgesellschaft mbh 2017, Page 15 of 15