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Office Market Report
Vienna | Spring 2016
EHL REAL ESTATE GROUP
2
Institutional investors‘ assessment of the Vienna office market is cur-rently positive: the transaction volume was at a record level in 2015 and reported several spectacular transactions. The buyers are more international than ever. Declining vacancy rates, slightly rising rent le-vels and, not least, the strong growth in population which, with some-what of a delay, will buoy the office market make Vienna an attractive investment target.
For developers, investors and tenants this market situation provides numerous options. With 25 years of experience in which EHL has be-come number 1 on the Vienna office market, we are pleased to advise you in making the best decisions for the long term.
EHL - the office specialist
For many years EHL Real Estate Group has been one of the leading providers of property services in Austria. EHL offers a complete ran-ge of real estate services throughout the entire property life-cycle, as well as a successful in-ternational network. Our retail and real estate specialists are pleased to assist you in reali-sing your real estate plans.
EHL is the exclusive Austrian partner of interna-tional property group Savills, providing its cus-tomers with property services across the globe.
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EHL market reports are updated regularly and offer a comprehensive overview of the most important developments, facts and figures in the property markets in Vienna.
EHL City Map
With the EHL City map you will find the most important office, retail and logistics properties at a glance, as well as detailed representa-tions of the most important office locarepresenta-tions in Vienna.
Stefan Wernhart MRICS
Head of Commercial Properties s.wernhart@ehl.at
Alexandra Ehrenberger MRICS
Head of Market Research a.ehrenberger@ehl.at
Preface
Michael Ehlmaier FRICS
Managing Partner
DENK DREI in VIERTEL ZWEI | 1020 Vienna
Average rents slightly rising
Average rents have shown a slight increase for the first time in years and reach EUR 14/sqm after EUR 13.50 in previous years.
Completions at a record low, reversal as of 2017
In 2016 completions will fall to a new record low of 60,000 sqm, 90 % of them owner-occu-pied. The trend will reverse in the subsequent year: in 2017 around 150,000 sqm will be completed. 3 Take-up | Deliveries 2016* Deliveries 60,000 sqm Take-up 230,000 sqm Market indicators
Deliveries strongly decreasing
Take-up slightly increasing
Vacancy rate slightly decreasing
Rental rates
Average rents slightly increasing
Prime rents slightly decreasing
Prime yields under pressure
Vienna Office Market | Key Figures
Total Office Space 10,925,000 sqm
Vacancy Rate 6.4 %
Prime Rents (in EUR / sqm per month) 25.5
Rents | First Occupancy** (in EUR / sqm per month)
Prime locations 16.0 – 26.0
Quality locations 12.5 –16.0
Standard locations 8.0 –12.0
Economic Data Austria 2015
Unemployment rate (Eurostat)
Austria 6.1 % EU (28) 9.5 % Eurozone (19) 11.0 % Nom GDP EUR bn 338.3 Economic growth 0.80% Inflation 0.90 %
State budget deficit -1.90%
OVERVIEW OFFICE MARkET VIEnnA
* Forecast
** EHL-average rent levels of 100 newly built or refurbished office buildings at various locations.
Executive Summary
Office Market Vienna 2008 – 2016
Favourable leasing opportunities for high-quality refurbished relets
High-quality refurbished office properties are very attractive and have favourable chances for relets due to the very low level of deliveries this year.
International investors increasingly active
Demand for office properties is still high. Financially strong investors from the Asian world are investing increasingly on the Aus-trian office market. Yields continue to remain under pressure.
Source Market Research | Q1 2016
Deliveries in sqm Take-up in sqm *Forecast 0 75,000 sqm 150,000 sqm 225,000 sqm 300,000 sqm 2015 2014 2013 2012 2011 2010 2009 2008 4 % 5 % 6 % 7 % 8 % 2016* 180,000 210,000 180,000 260,000 170,000 120,000 270,000 220,000 130,000 200,000 220,000 220,000 190,000 185,000 300,000 250,000 60,000 230,000 Vacancy Rate (%)
4
The Vienna office market will be more active in 2016. Several leasings of more than 1,000 sqm in the first quarter as well as several con-crete negotiations with major interested buy-ers have opened up favourable prospects for the Vienna office market. Another indication of an upturn is the slight rise in average rents for the first time in years. In 2016 these are EUR 14/sqm, after EUR 13.50/sqm in pre-vious years. A further increase in average rents is expected in the medium term, as the new high-quality space coming on the market as of 2017 will be offered for between EUR 15/sqm and EUR 20/sqm.
Deliveries will fall to a new record low of 60,000 sqm in 2016, 90 % of which is
owner-TAkE-UP | DELIVERIES
occupied or let in advance. The vacancy rate has consequently fallen to 6.4 % and will pro-bably continue to decline. Vacancy increasin-gly applies to obsolete office properties with poor public transport connections in unfavo-urable locations, which are now very difficult to let. A significant portion of this space is not being modernised, but reused in the medium term as flats, student dormitories, hotels or serviced apartments.
A clear revival of the office market is expected in 2017. At that time around 150,000 sqm of office space will be completed and the broa-der supply will be utilised by a large number of companies to carry out location changes that have been planned for some time.
Slight upturn for the office market in 2016
messecarree | 1020 Vienna
EHL is exclusively commissioned with letting office space
Property Size Address
Smart Campus* 30,000 sqm 1110, Guglgasse
Hörbiger Headquarters* 10,000 sqm 1220, Seestadtstraße
Telegraf 7 5,600 sqm 1060, Lehargasse
Ak2 Arbeiterkammer* 4,000 sqm 1040, Plößlgasse
SQUARE PLUS 38,000 sqm 1190, Leopold-Ungar-Platz 2 und 3 ORBI Tower, TownTown 21,600 sqm 1030, Thomas-klestil-Platz 13 Austrian Post Headquarters* 23,000 sqm 1030, Rasumofskygasse DEnk 3, Viertel Zwei 23,000 sqm 1020, Vorgartenstraße/Trabrennbahnstraße QBC 4, Quartier Belvedere Central 17,000 sqm 1100, karl-Popper-Straße 4 Euro Plaza, Building Phase 6 12,700 sqm 1120, Wienerbergstraße 41-43 QBC 3, Quartier Belvedere Central 7,800 sqm 1100, Gertrude-Fröhlich-Sandner-Straße 3
messecarree 4,600 sqm 1020, Ausstellungsstraße 50
Completions 2016 | 2017
20 16 20 17* fully let | owner-occupied
Source Market Research | Q1 2016
The table only includes those properties for which construction has already begun. nu-merous projects for which construction will only commence when pre-let to a suitable degree are not included.
5 10 15 20 25 30 2015 2016* 2014 2013 2012 2011 2010 2009 2008 Prime rents Prime Locations Quality Locations Standard Locations 5 DEVELOPMEnT OF REnTS | LARGEST LETTInGS | PRIME REnTS | VACAnCY RATES
Development of rents 2008 – 2016
Source Market Research | Q1 2016
Prime rents (in EUR/sqm per month)
Paris
106.0London (West End) 66.0 Milan 40.5 Frankfurt 39.0 Vienna 30.5 Munich 26.5 Berlin 25.5 Madrid 21.5 Warsaw 24.0 Prague 18.0 Amsterdam 35.0 Budapest 19.0 Bucharest 18.0 Bratislava 15.0 Bratislava Amsterdam Prague
Vacancy rates (in %)
15.0 Budapest 15.0 14.8 14.0 Bucharest 12.3 Warsaw 13.0 Madrid 13.0 Milan 12.0 Munich 10.2 Frankfurt 4.5 Paris 6.4 Berlin 6.5 Vienna 3.6London (West End)
2.9 * Forecast
Value from - to in EUR/sqm
EHL Real Estate Group provides consulting services to tenants and/or lessors.
Selected Lettings | Q1 2016
Tenant Size Property
Ernst&Young 12,000 sqm 1220, IZD Tower
AustroControl 10,000 sqm 1220, IZD Tower
Austrian Academy of Sciences 8,500 sqm 1020, Hollandstraße 11-13
IHS 5,700 sqm 1080, Palais Strozzi
Global Blue 4,700 sqm 1200, Rivergate
Workyourway Holding Gesellschaft mbH 4,500 sqm 1030, ORBI Tower
Vaillant 3,800 sqm 1100, BPV
Voest 3,700 sqm 1220, DC Tower
Wiener Stadtwerkeholding 3,500 sqm 1030, ORBI Tower
Ruby Hotels 3,000 sqm 1010, Laurenzerberg 2
Wirtschaftsagentur Wien 3,000 sqm 1060, Mariahilfer Straße 20
Allianz 2,500 sqm 1140, Workstation Wien West
Beiersdorf 2,300 sqm 1120, Euro Plaza BT5
knötzl, Haugeneder, netal & Rechtsanwälte 1,200 sqm 1010, Palais Herberstein
Source Market Research | Q1 2016 Source Market Research | Q1 2016
6 VIEnnA OFFICE REGIOnS
Western Region
Rents EUR 10.0 -14.5 Rents tendency stable Demand stable Supply slightly decreasing
Top properties 1070, Zieglergasse 6 1120, Forum Schönbrunn 1120, Arcade Meidling 1140, Bergmillergasse 5 1140, Scheringasse 2 1150, Pfeiffergasse 2
northern Region
Rents EUR 11.0 -15.5 Rents tendency stable Demand slightly increasing Supply increasing Top properties 1190, Skyline 1190, kay 29 1190, Square Plus* 1190, space2move 1200, Rivergate 1200, Millennium Tower 1210, Florido Tower WESTERn REGIOn Top properties 1010, Rathausstraße 1* 1010, Goldenes Quartier Office 1010, Fleischmarkt 1 1010, Laurenzerberg 2 1010, Palais Herberstein 1010, Renngasse 5 1010, Schwarzenbergplatz 3 1040, Bureau am BelvedereInner city and directly adjacent locations
Rents EUR 15.0 -26.0 Rents tendency stable Demand stable Supply slightly decreasing
© ARGE Rathausstraße 1
Top properties
1030, 7 Senses 1100, QBC*
1100, THE ICOn VIEnnA* 1100, Laxenburger Straße 36 1100, HBF 1*
1100, Favio
Central Station | Quartier Belvedere
Rents EUR 15.0 -20.0 Rents tendency increasing Demand increasing Supply increasing WIEnERBERG SOUTHERn REGIOn nORTHERn REGIOn
InnER CITY AnD DIRECTLY ADjACEnT LOCATIOnS LASSALLESTRASSE MESSE PRATER CEnTRAL STATIOn QUARTIER BELVEDERE © RPHI © SIGnA
* Project
7 VIEnnA OFFICE REGIOnS
Vienna DC | Surrounding Area
Rents EUR 12.5 -22.0 Rents tendency stable Demand slightly increasing Supply slightly decreasing
Top properties
1220, Ares Tower 1220, DC Tower 1220, Andromeda Tower 1220, Tech Gate Vienna 1220, IZD Tower © niko kazakov Top properties 1030, Marxbox 1030, Doppio Offices 1030, ZRS 1030, ORBI Tower* 1030, MGC Office Park 1030, Media Quarter Marx
neu Marx | Erdberg
Rents EUR 11.5 -18.5 Rents tendency stable Demand slightly increasing Supply slightly increasing
Lassallestraße | Messe | Prater
Top properties1020, Green Worx 1020, Austria Campus* 1020, messecarree Wien* 1020, DEnk DREI*, Viertel Zwei 1020, Rund Vier, Viertel Zwei 1020, e-zone
Rents EUR 12.0 -17.0 Rents tendency slightly increasing Demand slightly increasing Supply increasing
© ZOOM VP.AT
Wienerberg | Southern Region
Rents EUR 11.5 -18.0 Rents tendency stable Demand slightly increasing Supply slightly increasing
Top properties
1100, Business Park Vienna 1100, Vienna Twin Tower 1120, Euro Plaza 1120, Arcade Meidling
VIEnnA DC SURROUnDInG AREA
InnER CITY AnD DIRECTLY ADjACEnT LOCATIOnS nEU MARx ERDBERG LASSALLESTRASSE MESSE PRATER CEnTRAL STATIOn QUARTIER BELVEDERE © IWS TownTown AG © IMMOFInAnZ AG
8 RELETS AS MAjOR WInnERS
according to specific tenant wishes and stand out with their modern fixtures and fittings, central location in the established office clus-ters of Vienna and frequently low operating costs due to ecologically sustainable const-ruction methods.
Advantages for tenants and lessors
Rents are lower compared to the new space that will come on the market in 2017. More-over, tenants are frequently granted incentives to accelerate their decision, for as soon as the large number of office projects currently in construction come on the market, it will be much more difficult to lease relets.
One of the big trends on the office market is the strongly increasing interest in high-quality refurbished, existing properties. This trend is caused, on the one hand, by the scarcity of space due to the strong decline in deliveries and, on the other, by the fact that there are particularly attractive relets on the market at present.
These are relatively modern properties com-pleted in the boom years since 2005 such as Green Worx, space2move and Euro Plaza. Following expiration of the first leases, there are now large, interconnected spaces avai-lable in these properties again. The properties are a few years old and are being refurbished
Good prospects for relets in 2016
Vienna DC neu Marx|Erdberg
Inner City & directly adjacent locations Lassallestraße|Messe|Prater
Wienerberg northern Region Western Region Central Station
Take-up by location
Take-up by sector
28% 21% 17% 10% 7% 6% 6% 5% 35% 22% 16% 8% 6% 6% 5% 2%
Management & business consulting Infrastructure & transport technology Educational & training institutions Construction & planning offices
Banking & insurance sector Social services institutions Serviced office
Pharma & medical technology
Source Market Research | Q1 2016
Euro Plaza | 1120 Vienna
Investment Market
9 Buc har es t At hens 8.00 8.25 7.25 7.00 6.00 6.00 5.50 4.90 4.50 4.40 4.10 4.10 4.00 3.75 3.25 Br atisla va Budapes t W ar sa w Milan Pr ague Ams ter dam V ienna Ber lin Madr id Fr ankfur t Par is Munic h London (W es t End) InVESTMEnT MARkETPrime office yields across Europe
Prime yields in %
Source Market Research | Q1 2016
Strong demand for office properties
In 2015 a new record result was achieved on the Austrian real estate investment market. The transaction volume rose by around 15 % from EUR 3 billion to EUR 3.45 billion. Office was the strongest segment with approx. 41 % of the transaction volume; the retail segment was considerably behind at 24 %. The most important office transaction was the sale of the mixed-use Wien Mitte property to Morgan Stanley, with a total transaction volume of more than a half billion EUR the biggest trans-action of last year. Other notable transtrans-actions included the sale of the properties Green Worx and space2move to the German investment company Union Investment as well as the ac-quisition of Rivergate by a joint venture com-prising the Canadian Dream Global Group and an Asian sovereign fund.
Share of international investors increases
Austrian investors were responsible for approx. 50 % of the transaction volume, investors from Germany for 24 %. What is remarkable is that the share of investors from other non-German-speaking countries is steadily growing and in 2015 already comprised more than 25 %.
Financially strong investors from north America and the Asian world who have not been active on the Austrian real estate market yet are en-tering the market and driving prices up further. This highly liquid group of investors is primarily interested in high-volume trans actions and will continue to revive the market. Prime yields for office properties remain under pressure and are lower than ever. They are currently 4.5 %.
Increasingly limited supply of top properties
Demand for top properties on the Vienna of-fice market considerably exceeds supply. Due to the limited level of completions, the focus of investors is currently shifting to existing pro-perties. Strong investor interest is expected in any case for the attractive office properties that will be completed as of 2017.
The conditions for 2016 to be a similarly strong investment year as 2015 are certainly quite favourable: the continued low interest rates as well as strong interest of international in-vestors are positively influencing the market. Thus the EUR 3 billion benchmark will likely be surpassed again.
InVESTMEnT MARkET
10
Selected investment transactions 2015 | Q1 2016
Source Market Research | Q1 2016 EHL Real Estate Group provides consulting services to buyers and/or sellers
QBC4 | 1100 Vienna
EHL advised on the sale of QBC 4.
Property Location Type of Use Size Buyer Seller
Wien Mitte 1030 Vienna Office | Retail 95,000 sqm Morgan Stanley BAI
julius-Tandler-Platz 3 1090 Vienna Office 69,400 sqm 6B47 Wölbern
Rivergate 1200 Vienna Office 53,600 sqm Dream Global Signa
space2move 1190 Vienna Office 46,000 sqm Union Investment Raiffeisen Property International
Pier 50 1200 Vienna Office 22,300 sqm FLE kGAL
Green Worx 1-4 1020 Vienna Office 16,800 sqm Union Investment S+B Plan Bau
QBC 4 1100 Vienna Office 16,700 sqm BDO Strauss & Partner
nordbahnstraße 50 1020 Vienna Office 15,700 sqm Corpus Sireo Bank Austria Real Invest Cyta Shopping Welt Völs Retail 56,000 sqm Rutter Immobilien Group Hypo Tirol
Fischapark 50% Wr. neustadt Retail 42,800 sqm Allianz SES
Hornbach Bad Fischau Bad Fischau Retail 24,900 sqm WP Carey Barclays
M4 Wörgl Wörgl Retail 19,200 sqm Rutter Immobilien Group Bank Austria Real Invest Retail park Alt Erlaa 1230 Vienna Retail 18,900 sqm Semper Constantia Warburg Henderson
Citygate 1210 Vienna Retail 17,800 sqm Warburg HIH Stumpf AG
Galleria Danubia Hainburg Retail 9,100 sqm kGAL Privatinvestor
Retail park Bruck an der Leitha Bruck/Leitha Retail 7,800 sqm kGAL Immofinanz Triester Straße 282-284 Vienna Retail 3,700 sqm int. private Investor Immofinanz Residential portfolio (8 objects) Vienna Residential 13,800 sqm Wr. Städtische Immofinanz Logistics Center Vienna north Hagenbrunn Logistics | Industry 83,700 sqm Aberdeen karimpol Group Tec Center Lebring Lebring Logistics | Industry 28,600 sqm Palmira Capital Partners Wegraz
Otto-Probst-Straße 1100 Vienna mixed use 55,600 sqm Erste Fonds BAI
Brünner Straße 1210 Vienna mixed use 22,300 sqm Erste Fonds BAI
Siebenbrunnengasse 19-21 1050 Vienna mixed use 19,700 sqm S Immo conwert
11 REFEREnCES
References
Investment
Sale of Pier 50
EHL was exclusively commissioned with the structuring of the sales process for the office property on Brigittenauer Lände and brokered it to buyer FLE GmbH, which belongs to French private equity group LFPI.
Green Worx | Lassallestraße 7a
EHL advised buyer Union Investment on the acquisition of Green Worx, Austria‘s first LEED platinum-certified office building.
Galleria Danubia
EHL brokered the sale of the newly built and fully let retail park in Hainburg to kGAL and supported the entire due diligence process.
Leasing
Leasing BBRZ
EHL brokered 6,500 sqm office space in Green Worx, Vienna’s first office building with a LEED platinum certificate, to BBRZ and continues to advise the company.
Total space 8,500 sqm Client Austrian Academy
of Sciences Total space 2,200 sqm Client Allianz Total space 6,500 sqm Client BBRZ Total space 16,800 sqm Client Union Investment
Total space 9,100 sqm Client Private investor Total space 22,300 sqm Client kGAL
Leasing Austrian Academy of Sciences
EHL leased around 8,500 sqm of office space in a high-quality existing property on Hollandstraße to the Austrian Academy of Sciences, which integrates several so far existing office locations.
Leasing Allianz
EHL supported insurance group Allianz in leasing 2,200 sqm of office space at Workstation Wien West. EHL has already success-fully cooperated with Allianz for many years.
© EHL
© Michael nagl für S+B Gruppe AG © Michael nagl für S+B Gruppe AG
This report is a translation. In the event of doubt the German-language report is to be used. The information and forecasts in this report are made without guarantee, warranty or liability. Photos: Cover: SIGnA, p.2 © IC Projektentwicklung/OLn, p.4 and 10 © ZOOM VP, p.8 © Union Investment Real Estate GmbH
The digital version of the report can be downloaded under www.ehl.at/research.
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