MARKet Survey

Commercial | Office Letting Hamburg 2016/Q1-3

Q3

Grossmann & Berger’s promise: Market surveys.

Commercial | Office Letting hamburg 2016/Q1-3

Key Facts

| Office Letting

415,000 m² 25.00 €/m² 14.90 €/m² 5.0 % 13.43m m² Take-up of space

“There is strong demand for new developments on inner-city sites.” Andreas Rehberg | Managing director

Take-up of space Large lets boost third quarter In the 3rd quarter, take-up of office space in Hamburg developed a special dynamism. Whereas in the 1st half of the year barely any agreements for large properties were signed, the 3rd quarter result soared on the back of three contracts for more than 10,000 m² of space. As the KPMG lease for 12,000 square metres in the “Springer Quartier” development that Grossmann & Berger brokered at the end of the third quarter shows, the continuous fall in the supply of large areas of contiguous office space means that new developments, especially in inner city locations, are in huge demand. Hamburg posted a 17% rise in take-up of office space, growing from 355,000 m² in the same period of 2015 to 415,000 m² this year. The share of owner-occupiers dropped sharply to a mere 6%. In the 3rd quarter, 175,000 m² of office space was taken up in Hamburg.

Premium rent mth (net)

| +16.9 % year-on-year change | +4.2 % year-on-year change | +2.8 % year-on-year change | -0.4 pp year-on-year change | +1.0 % year-on-year change

Average rent mth (net)

Vacancy rate

Office stock

In the first nine months of the year, 495 rental and owner-occupier agreements were completed, a figure similar to that in 2015. At the close of the 3rd quarter, the largest size category, 5,000 m² upwards, accounted for a share of about 23% of total take-up. Of the nine contracts for more than 5,000 m² of space, five were signed in the 3rd quarter of the year. Olympus Deutschland’s temporary rental of over 23,800 m² in “Poseidon-Hause” (Amsinckstrasse 67-71, City South) was the biggest let of the year, followed by Nordex Energy, a developer and manufacturer of wind turbines, who expanded their office space by taking 13,000 m² in a new-build project on Langenhorner Chaussee.

Take-up of space 2012–2016/Q1-3 | in 000s m² | incl. owner-occupiers 10-year average (2006-2015): approx. 498,000 m²

Q3 175

430

440

525

2012

2013

2014

540

415

2015

2016/Q1-3

Source: Grossmann & Berger Research

www.grossmann-berger.com | page 2

Commercial | Office Letting hamburg 2016/Q1-3 SelecteD Top Contracts 2016/Q1-3  1. Olympus | Amsinckstraße 63-71d | ca. 23,800 m² 2. Nordex Energy | Langenhorner Chaussee | ca. 13,000 m² 3. KPMG | Caffamacherreihe/Kaiser-Wilhelm-Straße | ca. 11,800 m² 4. AXA | Heidenkampsweg 74+76 | ca. 9,700 m² 5. Ruby Hotels | Düsternstraße 1-3 | ca. 9,400 m² 6. University Hamburg | Gorch-Fock-Wall 5-7 | ca. 8,000 m² 7. Insurance Co. | Wandsbeker Zollstraße 91 | ca. 6,500 m² 8. TUI Cruises | Heidenkampsweg 58 | ca. 6,400 m² 9. Otto Group | Haldesdorfer Straße | ca. 6,000 m² 10. Job Centre | Stresemannstraße 161-163 | ca. 5,000 m²

Take-up of space 2016/Q1-3 | in m² | by size and no. of lettings

The third-biggest agreement was concluded by KPMG, a consultancy, to rent some 12,000 m² in the “Springer Quartier” (Caffamacherreihe, City). The remainder of turnover was evenly spread over the other size segments of the market. With the exception of the 1,001 to 2,000 m² size segment, which comprises about 16% of the total, each of the others accounted for around 20% of the market.

Take-up of space No. of lettings

296

113

50

27

9

20 % 85,000

20% 83,000

16% 66,000

21% 86,000

23% 95,000

up to 500

up to 1,000

up to 2,000

up to 5,000

over 5,000

Source: Grossmann & Berger Research

Take-up of space 2016/Q1-3 | by industry

Services to business

17%

Other

40% 14%

Trade & restaurants

10% 9%

10%

KPMG | “Springer Quartier”, Caffamacherreihe | City | ca. 11,800 m²

Manufacturing industry

Tourism & transport Construction & property

Once again, the quarter closed with City district in the lead with a 28% share of take-up (116,500 m²); City noted two new contracts for large office suites in the 3rd quarter alone, one signed by KPMG for space in the “Springer Quartier” and one by the University of Hamburg for premises at Gorch-Fock-Wall 5-7. City South followed as the second-biggest sub-market, accounting for 22% (89,200 m²). Much of this was attributable to the 3rd-quarter “Poseidon-Haus” let to Olympus Deutschland mentioned earlier and to rental agreements completed in the 2nd quarter by the AXA insurance group for space in the “Fleet Office II” (Heidenkampsweg 74+76) and by TUI Cruises for the “Double XX” (Heidenkampsweg 58). So far, more than half of all office space turnover has been in the central sub markets of City and City South. Especially with its prestigious developments such as the “Springer Quartier”, “Alter Wall” and “Stadthöfe”, City is a very attractive district. The KPMG agreement ensured that consultancies placed first in the ranking of take-up by industries. With a 17% share of total office take-up (68,800 m²) consultancies represented the biggest single group of new tenants. Manufacturing placed second, partly due to the Olympus agreement, with a share of some 14% (58,100 m²). The third-biggest group of new users was the tourism and transport sector, accounting for a share of 10% of takeup (43,200 m²). Apart from the TUI Cruises rental agreement in the “Double XX” block, the contract signed by Ruby Hotel & Resorts for some 9,400 m² of space in the “Fleetbogen” (Düsternstrasse 1-3, City), made a significant contribution to the total.

Source: Grossmann & Berger Research

www.grossmann-berger.com | page 3

Commercial | Office Letting hamburg 2016/Q1-3 Rents Greater willingness to pay top rents Since the beginning of the year, numerous contracts in new-build developments in central locations have resulted in a higher average rent. Year on year the average rent, weighted by floor space, has risen by 40 cents. Compared with the previous quarter, the average rent has stabilized at €14.90/m²/month, which is high for Hamburg.

Premium and average rent 2012–2016/Q3 | in €/m²/mth (net) Premium rent 25.00

25.00

24.50 24.00

24.00

Average rent 14.00

14.00

2012

2013

14.50

14.50

2014

2015

14.90

2016/Q3

Source: Grossmann & Berger Research

Vacant space | Vacancy rate 2012–2016/Q3 | in 000s m² 7.4% 7.0% 6.0% 5.2%

5.0%

970

932

798

698

676

2012

2013

2014

2015

2016/Q3

Source: Grossmann & Berger Research

Completions | Pre-let rate 2013–2017 | in 000s m²

The premium rent (top price segment accounting for a market share of 3% of lets in the past twelve months) increased significantly, both year on year (+ €1.00) and in comparison with the previous quarter (+ 50 cents). In view of the good business environment, we have observed that customers are noticeably more willing to pay top rents for top properties, as long as the entire package is right for the user.

Availability and vacant Space Greater number of completions The amount of empty space continued to shrink in the 3rd quarter. At the end of the quarter the vacancy rate in Hamburg, including sub-let space, sank from 5.6 % in the same period a year before to its current 5.0%. Only 675,900 m² of space was available at short notice. The decline in available properties was especially obvious in the two busiest markets, City and City South. There was a 21% reduction in empty space in these two sub-markets. As far as quantity goes, both sub-markets appear to have adequate reserves of space. But a closer look shows that in particular there is a growing shortage of larger, contiguous areas available to rent. Companies are well advised to secure their desired location as soon as possible. By the end of 2016 the volume of completions in Hamburg is expected to reach 244,000 m² in 28 projects. Compared with the previous quarter, the pre-let rate is now even higher, at 86%. Therefore 2016 will see a mere 35,000 m² of speculative space coming onto the market. For 2017 the forecast completion volume totals 230,000 m² in 30 projects. With the pre-letting rate at 41%, the best estimate is that 135,000 m² will be available on the open market. The sub-markets City (119,000 m²), City South (62,000 m²) and HafenCity (54,000 m²) are where completions are concentrated in 2016/2017.

41 %

86 % 173

116

120

2013

2014

2015

244

230

2016

2017

Source: Grossmann & Berger Research

www.grossmann-berger.com | page 4

Commercial | Office Letting hamburg 2016/Q1-3 Overview of Office Sub-markets Hamburg 2016/Q1-3

Sub-market 1 City 2 HafenCIty 3 Port rim

Take-up of space in m² incl. owner-occupiers

Vacant space in m²

116,500

150,300

Vacancy rate in %

Rents paid longer-term in €/m²/mth (net)

Average rent in €/m²/mth (net)

Completions 2016/2017 in m²

5.1

12.00 – 25.00

19.30

119,000

19,900

37,800

7.3

13.00 – 22.50

16.50

54,000

9,100

12,000

5.6

16.00 – 21.50

17.80

1,000

4 Alster West

12,500

14,200

2.6

12.00 – 22.50

17.80

27,000

5 Alster East

7,900

13,900

4.6

8.00 – 17.50

15.00

16,000

7,900

15,200

3.4

8.00 – 15.50

14.70

0

89,200

108,500

7.0

6.00 – 16.50

12.30

62,000

5,800

8,500

1.9

6.50 – 23.50

14.70

6,000

19,900

10,300

1.5

10.00 – 14.00

13.00

30,000

6 St. Georg 7 City South 8 St. Pauli 9 Altona 10 Bahrenfeld

6,200

38,800

9.0

8.50 – 16.00

14.50

11,000

11 Eimsbüttel

1,700

15,200

7.4

10.00 – 13.00

10.30

16,000

7,900

10,300

3.2

10.00 – 18.00

14.50

0

13 Airport

17,800

24,000

2.9

8.00 – 13.50

12.80

19,000

14 City North

18,300

59,000

10.9

8.00 – 14.50

13.40

51,000

9,100

38,200

6.4

8.50 – 16.00

11.20

28,000

16 Wandsbek

15,800

50,400

8.6

6.00 – 13.00

11.20

9,000

17 Harburg

21,200

28,200

3.0

6.00 – 13.00

10.50

6,000

18 Hamburg east

23,700

22,400

5.2

7.00 – 14.00

9.10

20,000

19 Hamburg West

4,600

18,700

2.0

6.50 – 12.50

8.50

0

415,000

675,900

5.0

6.00 – 25.00

14.90

475,000

12 Eppendorf

15 Barmbek

Total

www.grossmann-berger.com | page 5

Commercial | Office Letting hamburg 2016/Q1-3 Outlook Hamburg’s office market is benefiting from the growth of the German economy More than three months since British voters opted to leave the European Union, the business community is still uncertain about what Brexit means in the medium to long term. Despite that, the market for Hamburg office space remains in good shape and is profiting from the German economy’s expansionary course. Good domestic demand, the ongoing expansion of public spending and positive developments in the field of foreign trade combined to keep the German economy growing strongly in the first three quarters of the year and it seems highly probable that growth will continue over the next few months. The state of the job market remains good. However, it is expected that immigration will cause the number of jobless people to rise in the coming year. In view of the positive economic data the World Economy Institute (HWWI) forecasts 1.9% growth for the year 2016. The Institute’s forecast growth rate for 2017 is slightly lower, at 1.4%. One of the reasons is the anticipated fall in state and private consumer spending. A survey of the services industry in September likewise painted a positive picture. German companies rated their current and future business situation as appreciably better than in the previous month. In September the ifo index of business confidence within the service industry rose 2.4 points above the figure in the prior month to 32.2. In view of this, the majority of companies have

plans to expand their payrolls. The ifo index of business confidence among managers in German trade and industry also rose, climbing from 106.3 points in August to 109.5 in September. Take-up of space. The surprisingly high turnover of office space in Hamburg during the first three quarters is a hopeful sign that the year will end with a strong rally. Depending on how many of the rental agreements still in the pipeline are signed this year, the annual total take-up for 2016 could equal the prior year’s final result of 540,000 m². Rents. The growing volume of new-build completions has resulted in more rental agreements being signed for net rates excluding services of over €20.00/m²/month. It is therefore to be expected that both the average and the premium rent will rise slightly. Available space. In view of brisk activity on the market, the vacancy rate has fallen to a low of 5%. The amount of available space dropped by a quarter, above all in the City and City South sub-markets. Owing to the growing number of completions due in the next few months, the amount of space standing empty is likely to remain low.

G&B’s promise: Office offers as new. “BALLIN.DREI” | Ballindamm 3 | City | ca. 3,136 m² | From 1.Q.2017 www.grossmann-berger.com | page 6

Commercial | Office Letting hamburg 2016/Q1-3 Skilled consultancy Services and contacts

From left to right: Sonja Ebert | Anna Martens | Tatjana Merger

What can we do for you? An analysis of the property markets is an important part of the wide-ranging consultancy services offered by Grossmann & Berger. We would be pleased to be of assistance in your decision-making process and can draft an offer that is tailored to your specific requirements.

GlossarY Definitions, office market Take-up of space: Take-up of space is the total of all space newly let plus that sold to or built by an owner-occupier during the period under review. The operative date for inclusion in the statistics is the date on which the lease or purchase agreement was signed. Lease renewals are not counted as take-up. Areas are stated on the basis of the guide for calculating the rental area in commercial leases (MF/G). Premium rent: The premium rent is that paid for the most expensive 3% of the market for new lets (not counting owner-occupiers) during the 12 months just ended and is stated as the average of such rents. Average rent: The average rent paid is calculated by taking the individual rents agreed in all leases signed over the past 12 months, weighting them by the amount of space rented and computing the mean value. Figures refer to nominal net rents ex services.

Sonja Ebert | MBA Real Estate Management | Research Phone: +49 (0)40 / 350 80 2 - 641 Mail: [email protected] Anna Martens | Diplom-Ingenieur Master of Urban Planning | Research Phone: +49 (0)40 / 350 80 2 - 615 Mail: [email protected] Tatjana Merger | Master of Science Urban Planning | Research Phone: +49 (0)40 / 350 80 2 - 231 Mail: [email protected]

Photo credits: Cover: “Dockland” Van-der-Smissen-Straße 9, page 2: Ericusspitze © Carsten Leuzinger, page 3: “Springer Quartier” Caffamacherreihe © Jenner Egberts Fotografie, page 6: Architectural visualization “BALLIN.DREI” Ballindamm 3 © MEAG Real Estate Hamburg GmbH We draw your attention to the fact that all statements made here are non-binding. Most of the information is based on third-party reports. The sole intention of this market survey is to provide general infomation for our clients. Grossmann & Berger GmbH • Bleichenbrücke 9 (Bleichenhof) • D - 20354 Hamburg Tel.: +49 (0)40 / 350 80 2 - 0 • Fax: +49 (0)40 / 350 80 2 - 36 [email protected] • www.grossmann-berger.de Managing directors: Andreas Rehberg, Holger Michaelis, Lars Seidel, Axel Steinbrinker Chairman of the supervisory board: Dr. Jörg Wildgruber Registered office Hamburg • Registered at Hamburg no. B 25866

Vacancies: Vacancies include all office space that is available to new tenants within three months. Sub-let space is counted as vacancy.

www.grossmann-berger.com | page 7