A location with great potential! Hannover Region in focus.

A location with great potential! Hannover Region in focus. Property Market Report 2004 Hannover Region Promoting business and jobs

index 1* Hannover Region Profile page 6 Great condition! Good better Hannover! 1* 2* Office Property Market Hannover Region page 8 Offices with great prospects What s ready, what s in the pipeline? Market volume and structure 2* 3* Logistics Property Market Hannover Region page 12 Built-in competitive advantages! 3* 4* Retail Property Market Hannover Region page 14 Time to act! 4* 2 3

Hannover Region Property Market: Building on the future! This is the second report by Hannover Region presenting an objective economic overview of the region s property market. The prognoses presented a year ago in the first property market report have been confirmed: Within an overall weak market, Hannover Region has been a place of relative strength. Thanks to a stable environment with a limited volume of new areas, investors have enjoyed secure returns without major fluctuations. The market in Hannover Region has not collapsed, vacancies have continued at a very low level. Over the coming months, the market will continue along a sustainable path with attractive new buildings and many promising projects. In a nutshell: Hannover Region continues to offer a key factor for success: Stability! 4 5

1* Hannover Region Profile * Hannover Region Profile Great condition! * Hannover Region Profile Good better Hannover! Hannover s property market in a city-by-city comparison Hannover Region comprises Hannover, the state capital, and 20 communities in the surrounding area. Hannover Region has a population of approximately 1.1 million, of whom more than 500,000 live in the capital. It is the economic centre of the state of Lower Saxony, and one of the most vital business locations in Northern Germany. No less than two thirds of the region s approx. 426,000 employees paying compulsory national insurance contributions work in Hannover, approx. 70% of them in the tertiary sector. The headquarters of many large service organisations are located in Hannover; such as Tourism giant TUI AG, insurance companies like Talanx and Hannover Rückversicherung, AWD financial services etc. Industry is represented by big international players such as tyre manufacturer Continental AG, automotive suppliers WABCO and Varta AG, Volkswagen Commercial Vehicles, the Solvay Chemical Group, MTU Maintenance, Sennheiser and Bahlsen. Hannover is host to many international fairs, e.g. CeBIT and Hannover Industry Fair. The world s largest state-of-the-art fair and exhibition centre is located on the city s southern border and was an integral part of the World Exposition Expo 2000. Hannover city has a solid base in the tertiary sector: The clerical-employment rate of 51.3% is considerably higher than for cities of comparable size, e.g. Bremen, Dortmund, and Nuremberg. The city has a relatively large stock of office space, around 3.68 million sqm. Vacancies in the office sector at year-end 2003 totalled approximately 180,000 sqm. The vacancy rate of approx. 4.9% is much lower than that of Nuremberg and Stuttgart. Unlike other major office space locations within Germany, this rate has hardly changed. This development emphasises the careful stance adopted by project developers and investors within the office property market. A further positive aspect is Comparing Hannover city with other selected German cities Population 2002 Total clerical staff 2003* Total clerical staff rate 2003* Office stocks 2003 in sqm Space turnover 2003 in sqm Vacancies 2003 in sqm Vacancy rate 2003 Peak office rent, city 2003 Euro/sqm Average office rent, city 2003 Euro/sqm Peak retail rent, city 2003 Euro/sqm Purchasing power index 2004 Turnover index 2004 Centrality index 2004 Hannover 517.310 166.330 51,3% 3,68 Mio.** 60.000** 180.000** 4,9%** 13,5 10,0 150,0 105,8 149,0 140,8 Bremen 542.987 119.884 43,0% 2,28 Mio. 89.000 115.000 5,00% 10,0 9,0 97,0 100,0 123,3 123,3 Dortmund 590.831 101.307 45,5% 2,31 Mio. 65.000 110.000 4,80% 12,5 10,0 150,0 98,5 107,8 109,4 the continued stability of peak office rents in the city. Peak rents, of around 13.50 Euro/sqm, are some 3.50 Euro higher than in most comparable cities. The retail space trend in Hannover shares the same slightly downward curve as the rest of Germany. Hannover has a very high centrality index of 140.8 points, well above the value of comparable cities. Nürnberg 493.397 147.136 48,8% 3,13 Mio. 55.000 221.000 7,10% 10,0 8,0 115,5 107,8 146,6 136,0 Stuttgart 588.477 245.542 59,1% 5,26 Mio. 149.000 375.000 7,10% 16,0 14,0 177,0 118,0 136,1 115,3 * Estimated, because no new data available at time of printing ** Information based on overall market area incl. Langenhagen and Laatzen 6 At a glance: Hannover Region is an interesting location with a clear focus on the tertiary sector and a robust industrial base. At a glance: Hannover Region has been able to uphold its position better than its competitors in an overall difficult market situation. 7 Foto: Hartmut Schoel

2* Office Property Market Hannover Region * Office Property Market Hannover Region Offices with great prospects * Office Property Market Hannover Region What s ready, what s in the pipeline? During 2003 some 184,800 persons in Hannover Region had clerical jobs, of these approx. 133,800 worked in Hannover city. This high share, 48.8%, emphasise the state capital s role as a central administration and authority location. The total number of office jobs in the region can be extracted from the overall employment figures. During 2003 a total of approx. 228,500 persons had gainful employment in the region in office jobs, of which approx. 166,300 were employed in Hannover city (72.8%). Hannover's office space market includes the city itself and the two adjacent municipalities of Laatzen to the south and Langenhagen to the north. Hannover range of top office locations include: 1. The centre of the historical city of Hannover, bordered by the roads making up the inner city ring. It is an area dominated by public administrations and corporations, financial service providers and insurance organisations. Key current developments focus around the railway station/central bus station (Kaufland, Niki-de-Saint-Phalle-Promenade and the planned ECE shopping centre.) 2. High quality office centres in areas to the north-east and south-east, such as the Pelikan-Quarter, Geha-Areal/Riethorst, Hans-Böckler-Allee, Business Park North and the Timon Carré. The largest distinctively structured office centre has developed to the east of Hannover at Roderbruch/Karl-Wiechert- Allee. Concentrated here are the large Hannover Medical College with adjacent Medical Park, flanked by the headquarters and administrative centres of major groups in finance, insurance and tourism. One location offering excellent road connections, to the A2 motorway in Hannover s north, is Bürostadt Lahe office centre. This has attracted many companies active in the IT sector, security and corporate services. The most important development location on Hannover s southern margin is the former site of World Exposition Expo 2000 (Expo Plaza/TUI Plaza and Expo-Park Hannover), offering a broad range of high quality office properties oriented towards IT, design and media. In the immediate vicinity, on Kronsberg hill, FinanzIT and LBS have both constructed attractive new office facilities. In Laatzen, directly adjacent to the international fair and exhibition grounds, most office developments have concentrated in the city centre. Langenhagen, Hannover s neighbour to the north, has profited from its excellent traffic infrastructure and the international airport. Office properties are concentrated mainly in the city centre and in the area of the suburban train station at Langenhagen Zentrum. Office space turnover and vacancies in Hannover 1994 to 2004 200 160 120 80 40 Office property completions in Hannover 1994 to 2004 (in ksqm) 100 90 80 70 60 50 40 30 20 10 94 95 96 97 98 99 00 01 02 03 04* Office space turnover (in 1000 sqm) * Turnover estimated Vacancies (in 1000 sqm) During the last decade, the office space volumes completed in Hannover have been clearly below an annual volume of 50,000 sqm. 2003 was an outstanding year in terms of completions, with a volume of around 60,000 sqm. In contrast, 2004 is expected to reach only the 25,000 sqm mark, while a return to figures approaching 50,000 sqm are again confidently anticipated in 2005 and 2006. 0 94 95 96 97 98 99 00 01 02 03 04 Completions Forecast 8 At a glance: Office space focuses above all in Hannover city and in attractive office locations along the main traffic arteries in the north, east and south. In recent years, very interesting objects have been realised here. At a glance: In the near future, a number of high quality office and business areas will be reaching completion. Following a year in which building activities were down, the market in Hannover is again picking up pace. 9

Office projects 2* * Office Property Market Hannover Region Market volume and structure Hannover is definitely an area of robust demand for rented office space. Although turnover of office space in Hannover during 2003 had a volume of approx. 60,000 sqm, slightly down on the previous year s level, unlike similar markets turnover did not break away completely. During 2004 the forecast, based on preliminary contracts, is that new rentals will be of the order of 60,000 70,000 sqm. Vacancy development and structure During 2004 the vacancies of marketable office space for the entire Hannover market area had a value of approx. 185,000 sqm, or 4.9% of stocks. These figures put Hannover in a position well below major class A locations in terms of vacancy rates. This is mainly thanks to building projects in Hannover only generally starting after the conclusion of a high percentage of pre-tenancy agreements. Stable rents, stable returns Following a drop in rental levels in the wake of the reunification boom, the market in Hannover has been typified since the mid-90s by low volatility. This refers both to peak as well as average rents for office space. Since 1997 top rental rates have fluctuated at around 12.50 Euro/sqm and above. At the present time top quality areas in the city can reach 13.50 Euro/sqm, with average rates slightly down at just over 10 Euro/sqm. Office rents in Hannover 1994 to 2004 (in Euro/sqm) 15 14 13 12 11 10 Office rents in Hannover - similar to those in other cities of comparable size - are frequently dependent not so much on the location but on the premises themselves. This being the case, generalised statements as to office rental rates can never be more than broad-brush pictures. Longterm, the rate of return in Hannover is between 6% and 8%. In recent years, Hannover has seen major investments in office properties by big name investment funds. Past developments amply demonstrate that Hannover has evolved into an interesting investment location for institutional investors. 10 9 8 7 6 94 95 96 97 98 99 00 01 02 03 04 Peak rent Ø-rent business centres Ø-rent periphery Ø-rent city Ø-rent city outskirts At a glance: A city offering stable conditions. While low volatility on the rent side means spectacular value gains are unlikely, a constant level of demand for office space and the transparency of the market means levels of risk are also correspondingly low. 1 AOK HQ, Hildesheimer Straße 2 bauwo business center Vahrenwalder Straße 3 Office complex, 1-2-fly 4 Office block, Ricklinger Kreisel 5 Kontorhaus am Erst-August-Platz 6 Solvay Pharma Office Center (SPOC) 7 Kaufland shopping centre, Raschplatz 8 Bayer-Haus Marienstraße 9 EDG office block, Bischofsholer Damm 10 Office/retail building, Hildesheimer-/Wilkenburger Straße 11 Media Centre, Stiftstraße 12 Office building, Hamburger Allee 13 Laveskontor 14 bauwo business center Hans-Böckler-Allee 15 Torhaus am Aegi 16 Walter-Gieseking-Karree 17 Business Park Hannover Nord, phase 2 18 Office building, Ikarusallee 19 Podbielskistraße 344 20 Office building, Hildesheimer Straße 98 21 Med Cube 22 Office Hannover 23 bauwo business center Podbielskistraße, phase 1 24 NILEG Office Project, Hildesheimer Straße 89 25 Office building, ZOOBIZ, Braunschweiger Platz 26 Business Terrace, Karl-Wiechert-Allee Completed Under construction Advanced planning Tram City boundary City Map data: ATKIS-data the LGN City outskirts and arterial roads Office centres Peripheral locations Fair Grounds Airport 11

3* Logistics Property Market Hannover Region * Logistics Property Market Hannover Region Built-in competitive advantages! Logistics-Locations Hannover offers excellent location advantages for logistics service providers. Hannover is located at the intersection of Germany s main north-south and east-west traffic arteries (A7 Hamburg - Southern Germany and A2 Rhine- Ruhr-Berlin). Roads have excellent interfaces to all other transport modes. Hannover airport is the start pad for links to the international airways networks and complies with the highest international standards thanks to a high performance parallel runway system and round-the-clock operational options. Further key logistics interfaces include Northern Germany s largest shunting railway yard in Seelze, a transhipment yard for combined freight at Lindener Hafen and four inland shipping ports on the Mittelland canal (Nordhafen, Lindener Hafen, Brinker Hafen, Misburger Hafen). Hannover Region also offers a broad spectrum of areas for business development (see logistics locations map). All these arguments come together to predestine Hannover Region as a dynamic turntable within Northern Germany. Rental and return stability The average and peak rents for marketable logistics areas have been characterised by great stability over recent years. During 2003 rents averaged 3.75 and 4.25 Euro per sqm depending upon location and property facilities. Peak values are in the region of 5.5 and 6.5 Euro/sqm in the case of well equipped new facilities with direct access to motorways. Average returns for logistics space are between 7.5 and 9%. These values have also been very stable during the past decade. Compared with previous years, 2004 was marked by a downturn in rental prices for hall space as a result of the general economic situation. The average rental price is now between approx. 3.40 to 4.00 Euro/sqm, in surrounding areas slightly lower, at between 3.00 and 3.50 Euro/sqm. From a property standpoint, Hannover Region is an expanding market with increasing stature in the flourishing logistics segment. 12 At a glance: Its location at the intersection of Germany s main north-south and east-west transportation axes and the high quality standards of all traffic systems in Hannover make it a prime site for logistics operations with a vast potential for future development. 13

4* Retail Property Market Hannover Region * Retail Property Market Hannover Region Time to act! As a location for the retail trade, Hannover Region is dominated above all by Hannover attractive entree to the city centre. The remodelling of the old Kontorhaus on Main retail locations in the region are to be found in the adjacent municipalities of City centre retail areas city - with its above average level of retail Ernst-August-Platz (4,000 sqm, main tenant Garbsen, Isernhagen (Altwarmbüchen), outlet centralisation, a broad spectrum of home electronics market SATURN) and Laatzen and Langenhagen. offers and a supra-regional catchment area. building of the Kaufland shopping centre at The great appeal of Hannover as a retail Hannover city centre features approx. Raschplatz have both added to the attrac- outlet location is emphasised by ECE plans 226,200 sqm retail outlet space (state capital tions of the area around the main station. to open the Ernst-August-Galerie, a shop- Hannover total approx. 825,000 sqm) and is Peak rents for smaller retail outlets in ping mall with 30,000 sqm retail space on the outstanding retail trade centre of the the city centre are presently approx. the central Ernst-August-Platz, and a region, offering an excellent network of 150 Euro/sqm, with average rents around second IKEA store coming soon to the interconnecting pedestrian precincts. The 80 Euro/sqm. former Expo site. absolute 1a locations with the highest pedestrian frequency and highest rents are Große Packhofstraße and the northern Georgstraße. Highlights within Hannover's 200 Retail rents Hannover city (in Euro/sqm) full spectrum of shopping opportunities are the major department stores of KARSTADT and GALERIA KAUFHOF together with clothing retailers C&A, PEEK & CLOPPEN- BURG and SINN LEFFERS. Galerie Luise and Kröpcke passage, Theaterstraße and 160 120 80 76% Rent level as percentage of peak value (150 Euro/sqm) 1a areas 1b areas Georgstraße present premium range products. The modernisation of Hannover main station by ECE (shopping centre with 50 shops on 23,000 sqm) and the revamp of the Niki-de-Saint-Phalle-Promenade along the Bahnhofstraße have created an 40 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Average rent Peak rent Major stores Arcades Planned projects 14 At a glance: Retail trade focuses above all in the city centre. The remodelling of the area around the main station offers excellent opportunities for steady growth. 15

Hannover Region Business Enterprise Office Guidance and broking Location information Real estate and property consulting Investment and subsidy advice Crisis contact point The Business Enterprise Office is open Monday through Friday, 09.00 to 17.00. Appointments can also be arranged outside normal office hours, please call. Haus der Wirtschaftsförderung Prinzenstraße 12 30159 Hannover Tel. (0800) 616 0 616 Fax (0511) 616-23453 www.unternehmerbuero-hannover.de www.hms69.de