Stuttgart dynamic & economically strong.

Transcription

1 PRIVATE BANK RESIDENTIAL Kapitelbeschreibung I 1 REAL ESTATE FUNDS & ASSETS Stuttgart dynamic & economically strong. The 2016/2017 Stuttgart office market report.

2 An overview of the Stuttgart office market. Year Volume in m 2 Representative prime rents per m 2 Average central business district rents per m 2 Vacancies in m 2 Vacancies in % Total space in million m 2 Completion volume in m 2 Pre-let volume in m , , , , , , ,000 80, , , ,000 93, , , ,500 51, , , * 52,500 20, , , ,600 23, , , , , , , ,000 22, , , ,400 22, , , ,900 41, , , ,000 36, , , ,200 62, , , ,500 91, , , ,900 62, , , , ,300 * Data from a survey by BulwienGesa AG + Baasner, Möller & Langwald GmbH Source: Research ELLWANGER & GEIGER Real Estate GmbH, Current as of:

3 3 I Kapitelbeschreibung A 1.5 Heilbronner Str., 15,000 m² Office + hotel, 0 % take-up Complection in Q EnBW Areal Kriegsbergstr., 25,000 m² Office, 0 % take-up Complection in Q Lautenschlager Areal Lautenschlagerstr., 6,800 m² Office + retail + residential 0 % take-up Complection in Q Theodor-Heuss-Str. Complete renovation, 3,400 m², Office + retail 0 % take-up Complection in Q2 2017

4 Kapitelbeschreibung I 4 EnBW Areal Kriegsbergstr., 25,000 m² Office, 0 % take-up Complection in Q Europe Plaza Stockholmer Platz, 18,000 m² Office, 100 % take-up Complection inq2/q A 1.5 Heilbronner Str., 15,000 m² Office + hotel, 0 % take-up Complection in Q Look 21 Heilbronner Str., 20,000 m² Office, 0 % take-up Complection in Q3/Q Dorotheen Quartier Dorotheenstr./Holzstr., 25,000 m 2 Office + retail 100 % take-up Complection in Q Rathausgarage Eichstr., 5,000 m² Office + retail 100 % take-up Complection in Q EberhardHöfe Eberhardstr., 3,700 m² Office + retail + residential 0 % take-up Complection in Q4 2017

5 Contents. Foreword...6 General economic data excellent...8 Attractive urban flair the Europaviertel district...9 Unexpected new record...10 Demand strongest from industrial companies...12 Numerous major transactions in Rekordwerte bei erzielten Mietpreisen...14 Vacancies at a historic low...16 Record figures for all of Germany...18 Stuttgart central business district a location in high demand...20 Northern Stuttgart becoming a service sector location...21 Eastern Stuttgart progress at Neckarpark and Löwentor...22 Southern Stuttgart a popular area...23 Overview of the Stuttgart office market...25 Prospects for 2017 mainly bright...27 Your contacts...28 ELLWANGER & GEIGER Real Estate...29

6 6 I Foreword Foreword. Stuttgart is a sought-after city. The state capital of Baden-Württemberg is enjoying record levels of real estate investment as well as continued demand for space. Both demonstrate Stuttgart s economic power and dynamic culture. The residents of this lively city are, however, not planning to rest on their laurels. On the contrary. The Rosensteinviertel district will form the centrepiece of the 2027 International Architecture Exhibition (IBA) and provide the state capital with yet another opportunity to demonstrate its innovative progress in many areas. A brief survey of the facts confirms Stuttgart s key role as an economic, training and residential centre. 50,000 people move to the state capital each year. Over 50 percent of them are aged between 18 and 30 years. One reason why they relocate is Stuttgart s increased significance as a place to train and study; student capacities have been expanded by 20,000 places in recent years. One of the other motivations is the attraction of the city s urban flair and lively districts for career starters. Its well-known economic power plus good work and earning opportunities are also key factors. The current 2016 cultural city ranking compiled by the Hamburg Institute of International Economics (HWWI) and the Berenberg merchant bank has ranked Stuttgart Germany s top city for the third consecutive time. It scores most highly in the fields of cultural production; reception of culture and number of workers employed in the cultural industry. This result is simultaneously a pleasure, a confirmation and a motivation, since culture is elementary to urban development. Culture is an important factor in attracting highly qualified, creative individuals in particular to cities. It is an important factor when deciding where to live and work, while the cultural industry is one of the city s major economic segments. Parallel to this, culture also functions as a motor for dynamic urban development. So, ladies and gentlemen, as you can see, your interest in the State Capital of Stuttgart is well-founded and your investment here falls on fertile ground. Fritz Kuhn Lord Mayor of the State Capital of Stuttgart Ines Aufrecht Director of Business Development of the State Capital of Stuttgart

7 Foreword I 7 Another record-breaking year for Stuttgart followed on two years which had already seen Stuttgart s office market achieve record-breaking take-up figures, and last year also exceeded all expectations. The vacancy rate is now at a record all-time low. These figures are accompanied by a high level of employment and, despite difficult general conditions, significantly increased economic performance. Stuttgart is continuing to present itself as a dynamic, attractive economic centre. The strongest motor for growth was, as is to be expected, industry in general. This was followed by the IT industry in second place, while the health care, education and service sectors also saw increasing take-up of space. Changes in the world of work and new forms of work organization are resulting in an increased need for space. Co-working spaces with flexible framework conditions and a creative atmosphere also play a role with regard to the attractiveness of working conditions a key factor in the so-called war for talents. Further motors are the continuing digitalization of work processes keyword 5G mobile network standard and the expansion of the broadband network, both of which have far-reaching consequences for the equipping of buildings. Current project completions and new projects have played a key role in the excellent take-up rate for A disadvantage for continued growth was, once again, the dramatic decrease in the amount of space available. The onus in this context is on far-sighted investors and project developers, as well as on the city with regard to infrastructure development. The following pages present detailed facts and figures. We hope that you will find the report interesting reading and will be pleased to respond to any questions which you may have; to provide more in-depth information or simply to hear your feedback. Mario Caroli Managing Director Björn Holzwarth Managing Director

8 Developments in 2016/2017. With an unemployment rate of 3.8 % Stuttgart and the surrounding region were already achieving excellent performance in Good economic conditions have, in the meantime, resulted in the rate decreasing even further, to 3.5 %. This is an outstanding accomplishment which reflects the area s enormous economic power. General economic data excellent. Despite the discontinuation of the minimum exchange rate for the Swiss franc and the debt crisis in Greece Baden-Württemberg was again able to increase its gross domestic product over previous years, to a figure of 3.1 %. This success is primarily due to strong export demand. New forms of work Changes in the world of work, away from the largely hierarchically focused assignment of tasks to creative project work in teams, are continuing to progress rapidly. New business structures are resulting in new forms of collaboration. Projects are, for example, now often planned to run for a limited period of time, after which they are either continued or ended, depending on their success. As a consequence companies require more project space, among other things. The need for space for this new form of work is often met by means of so-called co-working spaces. In addition to their creative atmosphere for example thanks to their location in old warehouses they also have the advantage of short contract durations, which give project partners the flexibility they need. This new form of work can be summarized as brainstorming among kindred spirits in an unusual environment. The current number of co-working space providers in Stuttgart and the surrounding region is already at a two-digit figure. These new working worlds also present new challenges with regard to the equipping of office buildings. Fast data links are essential. Cloud services in particular, which make the operation of in-house data centres superfluous, are making corresponding data transfer capacities a requirement which is as basic as the need for electricity and water. In rare cases clients are even demanding multiple, stand-alone fibre optic cables to minimize the risk of outage. New technologies Two technical standards are essential for the continued economic prosperity of the Stuttgart region, which is particularly dependent on the automotive sector the new 5G mobile network standard and blanket broadband network coverage at a rate of 50 Mbit/second. This is necessary because ultra-high speed communications (also between vehicles) are a precondition for the self-driving vehicle, whose development is being massively promoted in the region. Such communications are, however, only possible within 5G networks. The topic of electro-mobility is also becoming increasingly important. This ranges from the expansion of charging station networks in the city and along motorways through new car sharing concepts and all-electric vehicle ranges to the setting up of a fleet of electric delivery vehicles at Deutsche Post AG. Requirements on the city and the region The sheer number of new developments not only shows the kind of projects which local industry has been working on in the past, but the tasks and opportunities which still lie before them. In light of these trends the coming years will be decisive for the long-term competitive positioning of the region s automotive companies. All efforts should thus be focused on offering companies a base from which they can assert their position as world leaders in the long term. Basic essentials include good universities and educational institutions as well as sufficient skilled workers, affordable housing and the necessary venture capital all things which are available in Stuttgart, a fertile breeding ground with excellent prospects.

9 Developments in 2016/2017 I 9 Attractive urban flair the Europaviertel district. In recent years the opening of the municipal library and the Milaneo building has resulted in significantly improved frequency rates and acceptance for the Europaviertel district. The urban flair which was initially lacking has now become increasingly prominent, in particular thanks to the many and varied restaurants and bars in the area, especially in the summer months. Far more going on in the district Celesio AG s decision to occupy 10,500 m² (or some 65%) of space in the Europe Plaza building will contribute to further development of the district s potential. The remaining vacant space has, in the meantime, been let to various service providers. The office space in the Milaneo building has now also been almost completely let. Construction company Strabag is currently awaiting the starting signal to begin work on the last high-rise building plot, which could potentially be home to a further approx. 15,000 m² of office or hotel space. Directly opposite the vacant plot the local employers association has recently commenced its Look 21 project, which is scheduled for completion in the 4th quarter of In total some 40,000 m² of office space plus a residential section with a day-care nursery will be constructed in two phases. The association will be occupying the majority of the office space. Following this, a further attractive office building can be constructed on the last vacant plot located just a few minutes walk from the new train station, in direct proximity to Stuttgart s city centre ring road, which will be extended to Wolframstrasse. Up to 60,000 m² of office space could be created on Plot A1.4, which is the penultimate free plot in addition to the Strabag project. approx. 450 beds will be constructed in 2017/2018. The residential sections of the Pariser Höfe complex and Milaneo building, with over 650 units, were also successfully marketed in a very short space of time. The district s positive development is also being encouraged by the establishment of further hotels. Three more hotels with a total capacity of approx. 450 beds will be constructed in 2017/2018. The residential sections of the Pariser Höfe complex and Milaneo building, with over 650 units, were also successfully marketed in a very short space of time. The Cloud No. 7 hotel and apartment high-rise with the Steigenberger Jaz in the City concept will Per capita purchasing power in 2016, in : Large cities of 500,000 or more residents Munich Düsseldorf Frankfurt Stuttgart Hamburg Cologne Berlin be opening in the first half of Dismantling of scaffolding, which began in early January, has allowed viewers to gain a first impression of the building s unusual facade. Over 80 % of the apartments have now been sold. Completion of the Budapester Platz light rail transit station is currently expected at the end of 2017, following which the area will be served by a total of 5 light rail transit system lines. This will also increase frequency rates in the district. The number of visitors to the library alone, which has been increasingly steadily since it opened in 2012, is now already approx. 1.4 million (2015). 20,390 26,400 25,532 24,864 24,330 24,041 30,136 Source: GfK GeoMarketing, current as of: January 2017 Infrastructure development The district s positive development is also being encouraged by the establishment of further hotels. Three more hotels with a total capacity of

10 10 I Developments in 2016/2017 Unexpected new record. Stuttgart s office market was in an excellent position at the end of 2016, having once again achieved record results. The take-up rate has been increasing continuously in recent years, with 2015 already considered a record-breaking year. However, with an office space take-up of approx. 432,000 m² to an increase of approx. 49 % was again achieved over the previous year ( : some 290,000 m²). High percentage of owner-occupiers Some 132,000 m² of take-up was accounted for by five owner-occupier contracts, whereby some 75,000 m² of this space relates to the project decision taken by Daimler AG in the third quarter of 2016 to establish its own campus on the former KNV site in Stuttgart-Vaihingen. Seen overall this was the largest single take-up on Stuttgart s office market. It was supplemented by Robert Bosch GmbH in-house projects at its sites in Feuerbach (approx. 20,000 m²) and Leinfelden-Echterdingen (approx. 9,000 m²) in the fourth quarter. In addition to this, GFT AG expanded its site in Fasanenhof to include a further two buildings with some 10,000 m² of space. The largest letting contract, also concluded with Robert Bosch GmbH, was for approx. 23,000 m² in a new building already under construction in Stuttgart-Feuerbach. Stuttgart-Vaihingen is the strongest submarket The strongest submarket with approx. 130,000 m² of office space take-up was Stuttgart-Vaihingen. In addition to the planned Daimler campus, take-up of large spaces at Stuttgart Engineering Park (STEP) was a major contributing factor, with new contracts for some 31,000 m² of letting space being signed. In second place was the Stuttgart-Feuerbach submarket, with approx. 64,700 m², thanks to the take-up by Robert Bosch GmbH. At some 52,800 m² the third-strongest submarket was Stuttgart s central business district. In addition to a letting contract signed by the State of Baden-Württemberg for some 5,800 m², a number of larger letting contracts for space in the new CityGate, Europe Plaza and Milaneo buildings contributed to the overall figure. The last vacant spaces were also let in the Dorotheen Quartier complex.

11 Developments in 2016/2017 I 11 The three largest contracts concluded to Tenant Submarket Total area Daimler AG (owner-occupier) Stuttgart-Vaihingen ca. 75,000 m 2 Robert Bosch Stuttgart-Feuerbach ca. 23,000 m 2 Robert Bosch (owner-occupier) Stuttgart-Zuffenhausen ca. 20,000 m 2 Letting performance for office space in Stuttgart from 2006 to 2016 in m² 432,000 Ø letting performance: 215, , , , , , , , , , , Letting performance in Stuttgart and its submarkets in m² Central business district 43,000 61,500 44,400 38,200 32,800 63,000 61,500 34,600 53,100 65,700 52,800 City centre 31,300 46,600 41,700 83,800 66,600 97,500 58,400 51,000 44,200 53,500 32,200 Vaihingen/Möhringen 32,600 13,700 18,500 20,200 26,200 56,300 18,200 62,200 34,700 56, ,200 Fasanenhof 3,500 2,300 10,600 2,700 5,300 12,500 7,400 5,700 9,100 10,300 19,600 Feuerbach/Zuffenhausen 2,000 6,800 12,300 3,300 28,500 24,800 18,700 27,200 34,700 37,400 64,700 Degerloch 4,500 7,200 9,200 4,900 2,100 4,000 4,800 1,900 1,500 1,300 7,100 Weilimdorf 6,000 5,100 12,800 5,900 11,400 5,500 5,300 7,700 30,900 42,900 33,100 Bad Cannstatt/Wangen 13,500 15,400 12,500 8,100 8,300 13,400 12,000 19,800 54,900 15,100 45,500 Leinfelden-Echterdingen 3,600 10,400 18,000 3,900 12,800 8,000 5,200 47,900 14,900 7,500 35,800 Total 140, , , , , , , , , , ,000 Source for all diagrams: Research ELLWANGER & GEIGER Real Estate GmbH, current as of:

12 12 I Developments in 2016/2017 Demand strongest from industrial companies. In 2016 industrial companies again played the most important role in demand for office space. Including owner-occupier deals this sector accounted for approx. 199,000 m² of total take-up. Demand from IT companies is also growing Approximately 199,000 m² or some 43 % of take-up was accounted for by industrial companies. The largest letting contracts in 2016 were also concluded by this sector. The planned Daimler AG campus in the Stuttgart-Vaihingen industrial park alone represents some 75,000 m² of office space. Robert Bosch GmbH also played a key role, both with its own new building project (approx. 20,000 m²) and its rental of approx. 23,000 m², each located in Stuttgart-Feuerbach. The increasing digitalization of the working world and consequent developments resulted in increased demand from IT and telecommunications companies. Some 46,000 m² and thus approx % of take-up was accounted for by this sector. Educational institutions also expressing high demand The third largest sector was public organizations, with demand accounting for some 32,000 m². This was primarily due to a number of letting contracts concluded by the State of Baden-Württemberg for a total of approx. 19,000 m². Stuttgart also experienced continued demand in the education and health care segment, which amounted to a total of some 31,000 m². Demand in the health care segment included the take-up of some large spaces by a number of health insurance companies. Take-up by education institutions was principally due to the increased space needs of language schools, which are expanding their offerings to facilitate integration of migrants. The structural requirements for teaching facilities are, however, not always easy to realize and there is already a shortage of space. In addition to this, demand from the Consultants and Financial services sectors increased significantly. Financial services companies concluded letting contracts for some 22,500 m², representing approx % more take-up than in the previous year. Consultants, i.e. companies in the consulting sector, accounted for almost the same volume of take-up at approx. 22,000 m². In 2016 companies in the Media and communication segment concluded letting contracts for some 13,000 m² more space than in the previous year. Take-up by Other office users, which includes various service providers; architects, engineers and trading companies, accounted for some 66,500 m² of space. Take-up by sector in % Public sector Media/ Communication Financial services Consultants 5.09 % 5.21 % 7.41 % 3.01 % IT/ Telekommunications % % Energy/ Industry Education/ Health care 7.18% Others % Source: Research ELLWANGER & GEIGER Real Estate GmbH, current as of:

13 Entwicklungen 2015/2016 I 13 Numerous major transactions in Daimler AG s planned new building project on the former KNV site in Stuttgart-Vaihingen accounted for a total area of some 75,000 m² and was the largest owner-occupier deal and single transaction in Strong fourth quarter Overall 369 letting contracts were concluded to , with the fourth quarter significantly exceeding performance in the previous quarter, which was already strong. In the last three months of the year alone there were 169 transactions for a total rental volume of some 169,000 m². The strongest growth in 2016 was in the larger space segments. Transactions in the segment 2,001 to 5,000 m² increased by some 90 %, while the total area let increased by approx. 86 %. While only four contracts more were concluded for the segment above 5,000 m² than in the previous year this segment accounted for some 52 % or approx. 224,900 m² of total take-up. The space segment 501 to 1,000 m² also experienced significant growth. The highest number of transactions in 2016 was again achieved in the small area segment up to 500 m², with 226 contracts concluded. The total rental volume was, however, slightly lower than in the previous year. There were fewer transactions for a smaller total area in the segment from 1,001 to 2,000 m². Comparison of contracts by size Comparison of contracts by number Total figure in 2015: 290,000 m² Total figure 2016: 432,000 m² Total figure 2015: 309 Total figure 2016: ,200 55,600 42,200 58,500 40,300 33, ,300 29,600 56, ,600 < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m² >5,000 m² < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m² >5,000 m² Source of both diagrams: Research ELLWANGER & GEIGER Real Estate GmbH, current as of:

14 14 I Developments in 2016/2017 Record levels for rents. At 23.00/m² the prime rent in Stuttgart in 2016 increased slightly over the previous year. Therew was also an increase in the average rent in all submarkets. As of the average rent for the entire Stuttgart urban area including Leinfelden-Echterdingen was /m². Take-up by price segment In contracts were signed in the price segment up to 10.00/m², primarily in outlying districts and older buildings. There were significantly fewer transactions in this price segment in the city centre in comparison to the previous year, which can certainly be attributed to the improvement in quality of space which has accompanied increasing rental prices. Overall 121 contracts were concluded in the segment to 13.00/m². They were distributed almost equally across peripheral and city centre locations, accounting for approx. 49 % of take-up. The segment to 15.00/m² saw more than twice as many contracts signed as in Only 17 letting contracts were concluded in the segment to 17.00/m². 26 transactions were achieved in the segment over 17.00/m², somewhat lower than the previous year. With the exception of one contract at Stuttgart Airport, all the contracts in this segment were for premises in the central business district and the city centre. Record levels in the central business district and city centre Further lettings in the new Dorotheen Quartier, Milaneo, CityGate, Gerber and Europe Plaza buildings have resulted in prime rents for the CBD again breaking the record figure set in the previous year. As of this figure was 23.00/m² and thus slightly above the previous year ( : 22.80/m²). In addition to this, there has also been an increase in rents for new lettings in existing buildings undoubtedly an initial effect of the growing scarcity of space. The average rent in Stuttgart s CBD has correspondingly risen by 0.30/m² over the previous year, to 16.20/m². The average rent achieved for the city centre was 12.80/m², also some 0.30/m² above the figure for At 18.00/m² the prime rent in the city centre remains at a high level.

15 Developments in 2016/2017 I 15 Strong increase in rents in outlying districts The outlying districts in the south of Stuttgart achieved a record figure of 16.50/m². This can be attributed primarily to a number of lettings for new-build projects in the Airport City area. Numerous transactions at Stuttgart Engineering Park (STEP) and the completely renovated DO.T building in Stuttgart s Fasanenhof district also resulted in a further increase in the average rent over the previous year. In the northern fringe areas with the submarkets of Feuerbach, Zuffenhausen and Weilimdorf the prime rent increased by 0.70/m². Average rents even increased by 1.00/m². This was largely on account of a number of lettings for new-build projects in Feuerbach. The highest prime rent increase was achieved in Stuttgart s eastern districts /m². A key factor in this was the letting contract concluded by Telekom for a new building at Löwentor in Stuttgart-Bad Cannstatt. The average rent increased from 9.90/m² in the previous year to 10.60/m² in Central business district prime and average rents, 2006 to 2016 in /m² Prime rents Average rents Prime and average rents in 2016 in /m² Ø for the entire city: Prime rents Average rents Central business district City centre Outlying districts to the north Outlying districts to the east Outlying districts to the south Source for both diagrams: Research ELLWANGER & GEIGER Real Estate GmbH, current as of:

16 16 I Developments in 2016/2017 Vacancies at a historic low. On only around 220,000 m² of office space was available at short notice. Above-average take-up of vacant space and the lack of new construction projects coming on stream resulted in a further reduction in vacant space. In consequence the vacancy rate was only approx. 2.8 %. Central business district sees the largest decline in space available Vacancy rates continued to fall in almost all submarkets. Only Stuttgart s city centre saw the supply of space remain at a similar level to the previous year. The amount of vacant space available declined most significantly in the central business district, decreasing by approx % over 2015 from some 55,000 m² to around 31,500 m². With the exception of a few remaining areas, almost all the space created by the new construction projects begun in the last one to two years has been let. There was also significant change in the southern submarket of Stuttgart-Vaihingen, where vacant space decreased by approx %. A number of contracts concluded for areas between 500 and 1,000 m² in existing properties in this district resulted in a further reduction in the supply of space available. Project space in locations such as Stuttgart Engineering Park (STEP) were, in some cases, already let prior to completion, meaning that comparatively little vacant space will come onto the market in the coming year. The DO.T renovation project in the Fasanenhof commercial district has now been fully let. The supply of vacant space has also declined significantly in the eastern areas of Stuttgart. Larger spaces with modern facilities becoming vacant at the Cannstatter Carré complex have thus been re-let in an extremely short space of time. The supply of rental space in the northern submarket of Weilimdorf has remained by and large the same. Vacant space in Feuerbach has, in contrast, decreased slightly. In the latter case space planned to become available in new buildings has already been let to Robert Bosch GmbH. A good time for investors and developers The current shortage of supply is again offering investors and project developers increasing incentives to build even without high pre-letting rates. Stuttgart s central business district and city centre in particular are experiencing a lack of newly built space. Large development projects will not be coming onto the market until after The outlying districts will also become increasingly interesting for clients searching for large spaces.

17 Developments in 2016/2017 I 17 Completion volume in m² Completion of building Pre-let 40,000 22,000 42,000 23,200 45,900 41,200 37,000 36,300 81,200 62,700 72,500 33,600 81,900 69, , , ,300* 110,500* 144,500* 80,500* * foreseeable completions Vacant office space as of and percentage change over 2015 Weilimdorf 20,000 m² Degerloch 11,300 m² Leinfelden-Echterdingen 35,700 m² % % Stuttgart Innenstadt 38,800 m² Möhringen 24,900 m² Feuerbach, Zuffenhausen 11,600 m² % % % % % Stuttgart City 31,500 m² Fasanenhof 17,000 m² % % Bad Cannstatt, Wangen etc. 13,900 m² % Vaihingen 15,300 m² Source for both diagrams: Research ELLWANGER & GEIGER Real Estate GmbH, current as of:

18 Record figures for all of Germany. In 2016 office space take-up in Germany s Top 7 locations (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart) totalled approx. 3.9 million m². This record-breaking figure represents an increase of over 10 % in comparison to the previous year ( : approx. 3.5 million m²). Major corporations such as Daimler, Deutsche Bahn, Axel Springer, BMW and Robert Bosch played a key role in this development. As in 2015 the owner-occupier share accounted for some 9 %, whereby Stuttgart had the highest percentage of owner-occupiers at approx. 30 %. Berlin and Stuttgart lead Berlin was the front runner, with take-up of some 820,000 m². The highest gains over the previous year were achieved by Stuttgart with an increase of approx. 49 %. Cologne followed with figures which were some 41 % up over 2015, with the amalgamation of insurance company Zurich Versicherung s offices in Bonn and Cologne (around 60,000 m²) playing a major role in this. The next-highest ranked city was Frankfurt, with a plus of approx. 36 %. The largest letting contract, concluded with Deutsche Bahn, was for some 45,000 m². Hamburg and Munich improved their performance by 1 % respectively 2 %. Due to a lower number of major transactions Düsseldorf, in contrast, was not able to match its performance of the previous year. As was the case for Stuttgart the fourth quarter proved to the strongest nationwide. 38,50 /m 2 in Frankfurt The highest prime rents were achieved in Frankfurt ( 38.50/m²) and Munich ( 35.25/m²). Berlin saw its prime rent increase to 27.50/m²; Düsseldorf achieved a figure of 26.50/ m²; Hamburg 25.00/m² and Berlin 23.50/m². The highest growth in prime rent was achieved by Hamburg (4 %). Prime rents in Stuttgart and Cologne were 23.00/m² respectively 21.50/m². Almost all cities experienced increases in their average rents. The best figures were achieved by Frankfurt ( 18.50/m²) and Berlin ( 16.10/m²), followed by Hamburg and Munich, each at 15.50/m². The figures for Düsseldorf and Cologne were similar at 14.40/m² and 14.30/m². At 12.90/m² the lowest average rent was in Stuttgart. Supply scarce in southern Germany At the close of 2016 the total volume of vacant space was approx. 4.9 million m² and thus 7 % lower than in the previous year. In terms of total existing office space this equates to a vacancy rate of 5.4 %. The highest declines in vacant space were experienced in Stuttgart (19 %) and Berlin (12 %). The lowest vacancy rate was in Stuttgart at approx. 2.8 %, followed by Munich at 3.7 %. In both cities vacant office space was particularly scarce in the city centre. The expected completion of projects in 2017 and 2018 will do very little to relieve the lack of vacant space since large amounts of the total volume of 2.3 million m² of newly constructed space have already been pre-let. The highest completion figures were achieved in Berlin (approx. 464,000 m²), Hamburg (some 418,000 m²) and Frankfurt (around 410,400 m²).

19 Developments in 2016/2017 I 19 Comparison of vacancy rates in Germany in % Frankfurt Düsseldorf Cologne Munich Berlin Hamburg Stuttgart Big Seven take-up, 2006 to 2016 in m² 620, , ,000 Berlin Munich Frankfurt Hamburg Stuttgart Cologne Düsseldorf 140, , , , , , , , , , , , , , , , , , , Stuttgart in comparison to other German cities Take-up in m² Prime rent in /m 2 Average rent in /m 2 Vacancy rate in % Berlin 810, , Düsseldorf 420, , Frankfurt 389, , Hamburg 540, , Cologne 290, , Munich 755, , Stuttgart 290, , Source for all diagrams: GPP German Property Partners, current as of:

20 20 I Kapitelbeschreibung Stuttgart Central. Record take-up of space in Stuttgart all districts of this economic centre are benefitting from development projects and optimization of buildings. The Rathausgarage new building, Stuttgart central business district, source: City of Stuttgart Stuttgart s central business district/city centre a location in high demand. The office market report for 2015/2016 already repeatedly alluded to lack of space, and this problem has intensified in the meantime. It is the result of a combination of factors: Demand for office space in Stuttgart s central business district and city centre has been continuously high for years now. Explanations for this include the desire to work in an urban environment and also proximity to public transport hubs, which reduces commuting times to and from work. In addition to this, many employers have discovered that their success in filling job vacancies central business district is currently highly dependent on the overall benefits they offer. Workplace location and thus also the local infrastructure are significant factors in this regard. In 2016 total take-up in the central business district/city centre area was 85,000 m², whereby the 10-year average is somewhat above 110,000 m². The low vacancy rate, presently only 70,000 m², will see supply remain very scarce in the near future. Completions in the CBD/city centre in 2017 will amount to approx. 55,000 m², of which, however, < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 34 % 19 % 24 % 11 % 12 % m 2 17,932 9,978 12,894 5,797 6,199 Ø rental price /m 2 Prime rent /m 2 to date only some 12,000 m² has not yet been pre-let. This relates in particular to space at the Lautenschlager-Areal complex and the EberhardHöfen. At present demand for premises over 3,000 m² can only be met by one or two projects/properties, with the second construction phase of the LBBW Lautenschlager-Areal project and the newly-built areas of the Look21 project forecast to come onto the market in Major developments can be expected in coming years, when rebuilding of the area around the main train station including the S21 rapid transport system line has been completed. There is also potential in the area around Jägerstrasse. Opportunities for development in the direct CBD environment are scarcer since many buildings have already been renovated. Planning of smaller development projects rela-

21 Stuttgart Central I 21 City centre < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 56 % 24 % 4 % 16 % 0 % m 2 17,985 7,834 1,162 5,245 0 Ø rental price /m 2 Prime rent /m 2 ting to individual inner city buildings with lower square footages has currently also recommenced. These include, on the one hand, classic renovation of existing buildings and, on the other, demolishment and rebuilding on the same footprint. Stuttgart s central business district area behind the town hall is also experiencing change, with a former office building being converted into a boutique hotel. This project as well as construction of a new building on the site of the Rathausgarage multi-storey car park could signal the beginning of development in the area. The city centre/central business district once again demonstrate that the need for newly-built space in particular for new workplace concepts is of great relevance. A bottleneck situation, as can be expected in the coming twelve months, will, in all probability, have further consequences for rents in this area. Demand for modern spaces in the segment from 100 to 150 m² has, in the past, been particularly strong in the city centre; could not, however, be met as these spaces are virtually non-existent. Northern Stuttgart becoming a service sector location. Feuerbach Feuerbach/ Zuffenhausen < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 Feuerbach and Zuffenhausen are among the Stuttgart districts characterized by the automotive industry, as also demonstrated by their take-up of 64,700 m², an increase of approx. 73 % over the previous year. The Skyline project, a new office building with 11,000 m² of space, will be completed in the second quarter of 2017 and has been fully let to the Daimler Bank. Completion of the property s residential tower with 146 units is scheduled for the end of This new complex is the initial phase of the City Prag development project. A further speculative office project with approx. 8,500 m² of office space is being constructed in the direct vicinity of Maybachstrasse. Parallel to this, various residential construction projects are being realized in the area and will give the City Prag development an urban character. Visà-vis, in Leitzstrasse, a developer is building an office/hotel project with a total floor area of 11,000 m². The Novum hotel group has signed a letting contract for the hotel; approx. 4,000 m² of newly built space will be available for office use. A project comprising approx. 23,000 m² % share of space 3 % 2 % 0 % 11 % 84 % m 2 1,682 1, ,138 54,723 Ø rental price /m 2 Prime rent /m 2 of space in Borsigstrasse, which was originally of a speculative nature, has, in the meantime, been let to Robert Bosch GmbH. In addition to this, last year Robert Bosch GmbH commenced two new construction projects on company-owned sites which comprise total office space of some 40,000 m² and were completed or will be completed at the end of 2016 respectively the end of Feuerbach is increasingly becoming a service sector location. This is also apparent from the continuing progress being achieved at the Leitz complex, a project to develop all the existing buildings on the former site of a factory. The concept is designed to meet the requirements of the modern working world and, in addition to co-working spaces, includes a hotel and gym as well as a micro fab the return of micro-manufacturers to the inner city to provide a home for artists, inventors and creative individuals. Completion of the areas currently undergoing total renovation is planned for Zuffenhausen The Zuffenhausen district has also undergone significant change in the last three years. Porsche AG, the area s principle user, has, for example, reacted to imminent changes in automotive construction with great farsightedness, expanding its company premises to cover a total area of approx. 600,000 m². One of the main motors of change is the on-going development of Porsche s electric sports car, the Mission E, whose launch is scheduled for This development alone will result in an additional approx. 1,000 new jobs. There are also plans to further expand the site to include a battery factory, which is another element of the overall concept.

22 22 I Stuttgart Central Weilimdorf Weilimdorf < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 8 % 12 % 3 % 0 % 77 % m 2 2,531 3,905 1, ,596 Ø rental price /m 2 Prime rent /m 2 In 2016 the final 20 % of the space formerly occupied by Ernst & Young was taken up by a health insurance company, meaning that the district s vacancy rate (currently approx. 20,000 m²) has remained stable at the level prior to Ernst & Young s relocation. The WEILIMPARK initiative, launched in 2012, has thus demonstrated a positive effect, preventing a long-term, dramatic increase in vacant space in the area. Completion of the 21,000 m² expansion of Vector s company premises also demonstrates how another area of the industrial park is being transformed into a service sector site. The complete re-letting of the M+W building at Lotterbergstrasse, comprising 15,000 m² of office space and a further 10,000 m² of manufacturing space, is a development which was not registered by the market. Weilimdorf is also starting to see developers once again begin to purchase plots with a view to constructing new buildings on them. In the last two years in particular Weilimdorf has shown itself to be a popular location for the office space needs of industrial companies. Eastern Stuttgart progress at Neckarpark and Löwentor. Bad Cannstatt The starting signal has been given for the Neckarpark project. After the city has realized the central park, DIBAG s first commercial buildings are scheduled from early 2018 onwards. Over the coming years DIBAG will construct approx. 43,000 m² of office space on the site. Some 50 % of this space is under negotiation or has already been sold to an owner-occupier. In 2016 a further approx. 5,000 m² of office space at the Cannstatter Carré Bad Canstatt/ Wangen/Hedelfingen < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 8 % 11 % 3 % 12 % 66 % m 2 3,441 4,859 1,464 5,330 30,406 Ø rental price /m 2 Prime rent /m 2 complex was let to a variety of users. The majority of contracts concluded were for spaces from 501 to 1,000 m². Tenants were from the health care sector or were public institutions. In 2016 a number of larger transactions were also completed in the Löwentor area, which, while it is an administrative subdistrict of Bad Cannstatt, is actually located directly adjacent to the Pragsattel area. A The Neckarpark project in eastern Stuttgart; source: DIBAG

23 Stuttgart Central I 23 total of six contracts were concluded for 12,200 m² of office space. 50 % of these contracts were for premises in the segment under 500 m², the other 50 % was in the segment from 2,000 to 6,000 m². One of the users originates from the plant engineering sector. Some 24,000 m² of office space is being constructed on the corner of Pragstrasse/Löwentorstrasse in three phases. 80 % of the space being created in the first phase has been let to Deutsche Telekom. Wangen/Hedelfingen Take-up in the district of Wangen was again positive in A total of ten contracts were concluded in the segments 300 to 500 m² and 2,000 to 3,000 m². The majority of contracts in this market are, however, also in the small space segment. Take-up for all of eastern Stuttgart increased by an impressive 301 % to 45,500 m² in total. Existing buildings in Wangen/Hedelfingen are in the main of a basic quality. Larger contiguous spaces are currently only available in one building. This market also presents opportunities for project developers. Southern Stuttgart a popular area. Refurbishment worthwhile. Degerloch Demand in Degerloch was again high in 2016, however supply was low. Despite this, total take-up (7,100 m²) was significantly above the 10-year average of 4,100 m². Three users from the creative segment concluded letting contracts for a total of 5,300 m² of space; one each in the segments under 1,000 m², 1,001 to 2,000 m² and above 2,000 m². Demand was primarily focused on the area around Albplatz, the most popular location in Degerloch. Only two smaller transactions were achieved for the Tränke area. Development in Löffelstrasse, which has been frequently mentioned in recent years, is making steady progress and a more detailed schedule should be available during the course of Leinfelden-Echterdingen Degerloch < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 14 % 14 % 29 % 43 % 0 % m ,024 2,055 3,035 0 Ø rental price /m 2 Prime rent /m 2 Leinfelden- Echterdingen < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 10 % 8 % 9 % 30 % 43 % m 2 3,461 2,823 3,331 10,650 15,535 Ø rental price /m 2 Prime rent /m 2 Fasanenhof < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 % share of space 2 % 10 % 15 % 20 % 53 % m ,917 2,904 3,896 10,529 Ø rental price /m 2 Prime rent /m 2 With total take-up of approx. 35,000 m², equivalent to a remarkable increase of 477 % and thus the highest growth in the region which is the subject of this report, the market in Leinfelden-Echterdingen developed exceptionally well. The take-up rate was also due to a large transaction made by an owner-occupier who will be constructing a new office building with 9,000 m² of space on their own premises. A further 13,000 m² were let to users in the IT sector, in the automotive industry and to a church organization. In the segment under 500 m² ten contracts were concluded, as were ten in the segment over 2,500 m². This also includes lettings in the new Skyloop and Skyport buildings at Stuttgart Airport, which accounted for approx. 5,700 m². The market in Leinfelden-Echterdingen is a good illustration of the fact that, in the final instance, a scarcity of supply results in a decline in vacant space even in premises which have been empty for many years. The vacancy rate saw a corresponding decrease of 7.2 %. Owners should take advantage of current market conditions and the letting contracts achieved to have any renovation work which is required carried out now, either to relieve pressure on the tight market by making renovated properties available or to retain the likelihood of letting should the vacancy rate situation ease or there be more vacant space on the market.

24 24 I Stuttgart Central The TSS Innovation Center project in Stuttgart Vaihingen; source: Bülow AG Fasanenhof An upturn was already being forecast for Fasanenhof s industrial park some years ago and has now occurred. In 2016 over 19,000 m² of space was thus let; exceptional performance seen in terms of the 10-year average of 6,900 m². The majority of take-up was in one completely renovated property, namely the DO.T building (Design Office Tower). In 2015 Design Offices moved into this building to commence operation of the first co-working centre at a location outside of Stuttgart s central business district, where it also operates a centre. The clear success of the Fasenhof centre led the company to rent additional space in the building in Public amenities, including a gym, restaurants and bars and local shops, have also improved significantly thanks to the substantial increase in office user numbers. Two further hotels in the 2- to 3-star segment, whose construction is planned in the next 24 months, will ensure the required supply of accommodation facilities. In 2016 GFT, an IT sector company, completed its new building for startup companies. The obvious need for more office space for start-up companies has resulted in GFT further expanding the space it offers by an additional 10,000 m². The Campus Fasanenhof development project with approx. 14,000 m² of office space has now achieved a stage of maturity which will enable construction to begin in Vaihingen/Möhringen und STEP Changes at the Vaihingen/Möhringen industrial park are now very apparent. The extended light rail transit system went into operation in 2016 and modernization of public areas was also completed. Book wholesaler KNV moved into its newly built headquarter building in August 2016 and all the old buildings on the former KNV site have now been demolished. The new owner, Daimler AG, will begin construction of a new office campus in The project volume is expected to be in the range of approx. 75,000 m². Parallel to Daimler AG s decision another user also decided to locate in Vaihingen Allianz AG will be building a 120,000 m² office complex on a site which it formerly used as a sports Vaihingen/ Möhringen/STEP ground, with completion scheduled for In all it is expected that some 9,000 to 10,000 new jobs will be created at the Synergie Park site. In order to address the related transportation challenges in good time, extensive studies and discussions were conducted in In addition to short-term measures in the area itself, the widening of Nord-Süd-Strasse is planned as the main access road to the site. In total some 111,000 m² of space was let or occupied by owner-occupiers in the Vaihingen/Möhringen district in A further new building is currently under construction at Stuttgart Engineering Park (STEP), STEP Building 8.3. As already repeatedly the case at STEP in the past, more than 50 % of the new building s space had already been let before construction commenced. Completion is scheduled for early In 2016 new contracts for a total of approx. 31,000 m² of space were concluded at STEP, the majority of which related to re-letting of the former Debitel Tower, STEP Building 6. < 500 m ,000 m 2 1,001-2,000 m 2 2,001-5,000 m 2 > 5,001 m 2 Ø rental price 4 % 14 % 6 % 12 % 64 % m 2 5,661 20,172 7,841 16,671 90,855 Ø Mietpreis Vaihingen: /m 2, Möhringen: /m 2 Prime rent Vaihingen: /m 2, Möhringen: /m 2

25 Stuttgart Central I 25 Overview of the Stuttgart office market. Take-up < 10, mm² 2 10, mbis 2 to ,000 m² m 2 20, mbis 2 to ,000 m² m 2 30, mbis 2 to ,000 m² m 2 A 81 Direction Heilbronn above ,000 m² m 2 Industrial/office Gewerbe-/ loctions Bürostandorte Stammheim Mühlhausen Zuffenhausen A 81 Direction Singen Münster Weilimdorf Feuerbach Bad Cannstatt Botnang Stuttgart West Stuttgart North Stuttgart City Stuttgart East Wangen Untertürkheim Obertürkheim Stuttgart South Hedelfingen Vaihingen Degerloch Sillenbuch A 8 Direction Karlsruhe Interchange Stuttgart A 81 Möhringen Birkach Plieningen Fasanenhof Leinfelden- Echterdingen Fair Stuttgart A 8 Direction München

26 Prospects for The continuing dynamism of this economic centre is reflected in consistent demand for new space and extensive investment in real estate, as well as by a gratifying influx of new residents. The city and its business community will not, however, rest on their laurels.

27 2017 forecast I 27 Prospects for 2017 mainly bright. In recent years Stuttgart s attractiveness has again increased. All the signs point to prosperity; the task will be to maintain, shape and develop it. New forms of work and the rapidly accelerating digitalization of the working world present much greater challenges as regards the standard of building facilities and furnishing. The rapid pace of technological developments has already resulted in significant additional demand for space in the past, and this should remain the case in the near future. The pressure of global competition is forcing companies to make decisions more quickly than they have previously been used to doing. In order to be able to do this within the scope of an economically justifiable framework the project is becoming an ever more important form of organization. This is clearly demonstrated by increased demand for flexible space concepts such as co-working spaces. It is, however, also visible in terms of the changing requirements made on modern office space. The need for open-plan areas with quiet zones, which in turn require soundproofing measures, but also comfortable and inviting communication zones is reflected in the modern working environments which are currently being created all over the world. Continuing digitalization of business also entails new requirements on buildings which must be implemented quickly. They range from blanket coverage of fast data links to demand for redundant fibre optic cable connections, which are equally as important and are increasingly being requested by tenants. One of the drivers of this development is the extensive range of cloud solutions offered by the industry, which will make in-house server capacities or even data centres obsolete in future. Policy makers and also building owners must respond to such needs. Another task of politicians will continue to be the provision of clear support to local companies when the latter are making decisions about where to base themselves, with the aim of allowing them to remain in the city/ region. In response to the present scarcity of space on the city s office market, in spring 2017 Stuttgart s Business Development Agency will be presenting the outcome of the Development Concepts for Business Space discussions. In the next two years the current pressure on the market and the high pre-letting rate for forthcoming new construction projects are expected to result, at the least, in average rents remaining at today s level if not even slightly exceeding it. Strong demand for office space will continue in the coming year, primarily due to the automotive industry s ongoing high need for space. Our team of experts forecasts that the total volume of office space take-up in 2017 will be at least 300,000 m².

28 28 I Your contacts. Your contacts. ELLWANGER & GEIGER Real Estate is your competent partner for the marketing of office real estate. Every property has its own specific demands and thus requires a tailored solution. Thanks to our detailed market and local knowledge as well as our consultants many years of experience, we are able to identify exactly the correct strategy for your property. Our team in Stuttgart would be pleased to help you. You can contact us on: Tel.: / Fax: / Informationen on the Internet: Ulrich Nestel Head of Office Letting and Retail Stuttgart Telephone: / Ulrich.Nestel@ellwanger-geiger.de Sebastian Degen Office letting consultant Telephone: / Sebastian.Degen@ellwanger-geiger.de Helga Schöner Research and Office Letting Consultant Telephone: / Helga.Schoener@ellwanger-geiger.de Matthias Hägele Office letting consultant Telephone / Matthias.Haegele@ellwanger-geiger.de Jessica Naschke Office letting consultant Telephone / Jessica.Naschke@ellwanger-geiger.de Katharina Barwind Commercial property assistant Telefon / Katharina.Barwind@ellwanger-geiger.de Disclaimer: The compilation of this study was conducted with the greatest of care. We cannot accept any liability for the correctness of estimates. Your understanding in this matter is appreciated.

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30 Kapitelbeschreibung I 30 ELLWANGER & GEIGER Real Estate GmbH Unternehmensgruppe ELLWANGER & GEIGER Privatbankiers corporate group Börsenplatz 1, Stuttgart Tel.: / , Fax: / District Court of Stuttgart, Commercial Register No , Managing directors: Mario Caroli, Björn