Investment Market Cologne September 2016

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1 Dear Sir or Madam On the occasion of Expo Real 2016, we would like to provide you with the latest information about Cologne s property market. The following two pages are dedicated to a summary of the most relevant news for each market segment. Demand for real estate products continues to be extremely strong, due to a lack of alternative investment options resulting from a continued low-interest-rate policy as well as from the fact that Cologne is a very dynamic business location. The total transaction volume for commercial properties amounted to around 1.1 billion euros, by the end of the third quarter. The biggest share of turnover was once more generated by office buildings. Warburg-HIH Invest Real Estate paid EUR 350 million for three construction plots of the MesseCity project, in which Zurich Versicherung rented 60,000 square metres of office space during the second quarter. Furthermore, Swedish investors bought seven properties in TechnologiePark in the district of Braunsfeld for EUR 188 million. More than 30 percent of total investments were made by foreign buyers, whose strategy frequently involved buying bigger property packages via portfolio transactions. Transactions for development sites also generated a particularly high turnover. Large development areas were sold in the centrally located area of Deutz harbour and in the northern part of the city centre. In the near future, these sites will contribute to improving the city s appearance. Property owners in the area of apartment buildings meanwhile tend to hold on to their real estate products, despite the very tempting option of realising attractive sales prices. There has been a further increase of sales prices for office and retail buildings during the course of year. Prime yields continue to decrease and the trend is unlikely to be reversed in the foreseeable future, due to the fact that it is impossible to tell when the situation of the capital markets might change. Owing to the fact that various sales processes are about to be concluded, some of which in the triple digit million euro range, the year-end result for 2016 is likely to be very strong, once again. It remains to be seen, whether the record figure of 1.9 billion euro set in 2015 can be matched. Please do not hesitate to get in touch with us, if you have any specific questions regarding Cologne's real estate market Yours faithfully Theodor J. Greif Managing Director / Owner Greif & Contzen Immobilien GmbH Greif & Contzen Beratungsgesellschaft mbh 2016, Page 1 of 5

2 Selection of major transactions in 2016 Property (location) Type Buyer MesseCity, 3 construction plots (Deutz) office property development Warburg-HIH Invest 7 properties in TechnologiePark (Braunsfeld) office portfolio EQT real estate Ellmühle (Deutz) development site moderne stadt DuMont headquarters (Niehl) office Blue Rock Pohligstraße 3 / Hönninger Weg 100 office Blue Colibri 2 properties in Mülheim office portfolio Apollo Global Holiday-Inn-Express hotel (Altstadt Süd) hotel property development Dekabank for a fund Zurich Quartier (Neustadt Nord) development site Corpus Sireo Project 10 -portfolio property (unknown) office portfolio Catalyst Capital Source: Greif & Contzen Research, Cologne Office buildings Around 310,000 square metres of office space were let during the first three quarters of It is expected that a total of around 380,000 square metres will have been let by the end of the year. This would be an all-time high for Cologne s office space market. The biggest contract was concluded when Zurich Versicherung rented 60,000 square metres in the new construction project MesseCity. Furthermore, four office units of more than 12,000 square metres each were taken up by various public authorities. There is a rising trend of rental levels of both the market average and the premium segment. The prime rent has increased slightly to EUR per square metre. Vacancies continued to decrease and stood at 5.1 percent in the third quarter of the year. Cologne s office properties are in strong demand among investors with the prime yield dropping from 4.4 to 4.0 percent over the course of the year. The biggest transaction took place in the submarket of Deutz, on the right bank of the river Rhine. STRABAG Real Estate GmbH (SRE) and ECE Projektmanagement GmbH sold the parts of the MesseCity property development that are let to Zurich Versicherung to Warburg-HIH Invest Real Estate for EUR 350 million. Retail industry Retail properties in Cologne are highly sought after assets. However, transaction activity has been very limited in 2016 so far, owing to a significant lack of properties available for sale. There has been a slight further decrease of the prime yield for retail buildings in the prime locations of Schildergasse and Hohe Strasse to currently 3.6 percent. The prime rent currently stands at around EUR 270 per square metre. Both new construction projects and elaborate redesigns of existing retail space are currently being realised and initiated on centrally located shopping streets. Greif & Contzen Beratungsgesellschaft mbh 2016, Page 2 of 5

3 Industrial, storage and logistics In 2016, around 65,000 square metres of warehouse space were let within Cologne s city limits to date. Around 100,000 square metre were let in the entire logistics region, including the surrounding area. It is to be expected that a total of around 90,000 square metres will be taken up in Cologne by the end of the year, or around 155,000 square metres including the surrounding region. A significant increase of take-up, by up to 20 percent compared to 2015, is becoming apparent. The prime yield for top quality logistics properties is currently at 5.25 percent. Despite great demand from investors, there has only been a very limited number of large-scale transactions in the logistics region of Cologne so far. The availability of high-quality end products comprising major tenants and buildings in mint condition is scarce, and transaction activities are severely limited as a result. Hotels 2.7 million overnight stays were registered in Cologne during the first six months of This figure corresponds to a decrease by around 4 percent compared to the same period of the previous year, however, 2015 had been characterised by extraordinarily strong growth. The hospitality industry continues to be in good shape and is subject to busy investment activities. There has been a number of major hotel transactions in Cologne s city centre. The property development company GBI sold the Holiday Inn Express Hotel on Perlengraben to a fund by Dekabank. The hotel has more than 300 rooms and is currently under construction. Furthermore, HR Group bought the four star Mecure Hotel Köln City Friesenstraße with 100 rooms as part of a portfolio transaction. Apartment buildings The basic characteristics of Cologne s housing market remain unchanged. Demand for residential space continues to increase in the city of Cologne with its more than one million inhabitants and it is not going to be met in the foreseeable future. Various surveys have found rents to be on the rise. Apartment buildings for investment purposes are highly sought after among private investors, who tend to pursue a hold strategy for their real estate assets. On the other hand, there are some players who are taking advantage of this phase of high sales prices and are parting with old holdings or resolving complex ownership structures. In 2016 goodquality apartment buildings in favoured residential areas have mostly confirmed sales prices in the range of 20 to 28-fold the property s annual net rent. Condominiums Prices for condominiums both in new and in existing buildings have increased once more in In some areas this development has, however, been less pronounced than in previous years. Demand remains unbroken in the markets of the districts on the left bank of the river Rhine. An ongoing rising trend can also be observed in the districts to the right of the river, in particular in the southern part of Mülheim and in Deutz. In addition to the well-known residential areas in southern and western Cologne, the city centre and the districts of Nippes and Niehl are also in great demand. Greif & Contzen Beratungsgesellschaft mbh 2016, Page 3 of 5

4 Should you have any questions, please contact: Thorsten Neugebauer, MRICS Head of Investment Division Immobilienmakler GmbH Tel: Frank Pönisch Managing Director Beratungsgesellschaft mbh Tel: Bettina Braun Investment Division Immobilienmakler GmbH Tel: Dr. Jan Schubert Consulting, Research Beratungsgesellschaft mbh Tel: Address: Pferdmengesstraße 42, Köln Greif & Contzen Beratungsgesellschaft mbh 2016, Page 4 of 5

5 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 2016, Page 5 of 5