Office Market Report Vienna | Autumn 2022

We stand for Office

We stand for real estate.

Introduction

The Vienna office market has once again proven its legendary stability in economically challenging times. The influence of ESG guidelines is also visible through a further strengthening of the trend towards sustainability and quality. Innovation, flexibility and sustainability have become key focal points for location decisions, not only by investors and project developers but also for renters and tenants. Uncertainty has been fuelled by the developments surrounding the war in Ukraine combined with rising construction costs and continuing high

inflation. These factors, in turn, have led many companies to place planned real estate decisions on hold – at least for the time being. However, we are optimistic that the situation will generally stabilise by the end of the year and postponed orders will be reactivated. In this turbulent market environment, decisions that prove successful over the long-term are particularly important. Our EHL office specialists are committed to helping you develop a sustainable and individual real estate strategy.

Franz Pöltl FRICS Managing Partner EHL Investment Consulting GmbH

Michael Ehlmaier FRICS Managing Partner EHL Immobilien GmbH

Stefan Wernhart MRICS Managing Director EHL Gewerbeimmobilien GmbH

Alexandra Bauer MRICS Head of Office Agency EHL Gewerbeimmobilien GmbH

Andrea Dissauer MRICS Managing Director EHL Immobilien Management GmbH

Overview of the office market in Vienna

Executive Summary

A renters’ market at prime locations Demand is currently outpacing the supply at loca- tions with optimal infrastructure (inner city, main railway station). This trend has been reflected in a slight increase in rental prices and an incentive rate that is now on the decline. Vacancies holding constant at record lows The limited production of new space in recent years has led to a steady decline in vacancy rates. The current 4.1 % marks an extremely low level in international comparison. New space production still reserved With completions amounting to roughly 126,000 sqm,

Rents I First-time occupancy****(in EUR/sqm per month) Prime location 18.0 - 26.0 Quality location 14.0 - 18.0 Standard location 10.0 - 14.0 Prime rents 26.0 Investors‘ demands on a “modern, energy efficient“ office building have changed significantly, while ESG and the EU Taxonomy have become constant companions that will be even more important in the future. This will create opportunities for property owners and value-added investors to make older buildings fit for the future and marketable through revitalisation. the production of space in 2022 substantially excee- ded the 2021 level (approx. 66,700 sqm). The coming year, in contrast, is expected to bring a new decline to only 42,300 sqm. Investment

Demand* | Supply 2022 Production of new space

126,000 sqm 180,000 sqm

Take-up*

Market indicators (cf. 2021/2022) Production of new space

increasing

Economic data for Austria 2022*

Take-up

stable

Vacancies

slight downward trend

Austria 4.5 % EU 6.2 % Eurozone 6.8 %

Unemployment rate (Eurostat)

Prime yields

3.3

Rental prices (cf. 2021/2022) Average rents

Nom. GDP EUR billion*

441

slightly increasing slightly increasing

Economic growth

4.3 %

Prime rents

Inflation rate September 2022

10.5 %

* Forecast ** All indicators are based on the total market (old and new buildings), unless indicated otherwise *** According to the Vienna Research Forum,www.viennaresearchforum.at **** EHL Rent Index of 100 existing and/or refurbished office buildings at various locations

Office supply

Total market**

VRF***

Office space in sqm

11,512,850 5,943,893

Vacancy rate

4.1 %

Source: EHL Market Research | Q3 2022

Office Market Vienna 2018 - 2022

300,000 sqm

8 %

270,000

260,000

220,000

210,000

225,000 sqm

7 %

170,000

180,000*

150,000 sqm

6 %

126,000

125,000

66,700

75,000 sqm

5 %

45,000

4 % Vacancy rate

2018

2019

2020

2021

2022

Deliveries in sqm

Take-up in sqm

*Forecast, Source: EHL Market Research | Q3 2022

Location searches increasingly focused on innovation and sustainability

The traditional office concepts with assigned workstations and little room for internal communication that defined most companies in earlier decades are currently being replaced by new working worlds in many companies. These innovative concepts are often aligned with ESG guidelines and characterised by flexibility, environmental awareness and a special focus on internal communication processes. Modern working concepts as a competitive advantage for recruiting Office space is becoming more individual, more comfortable and more digital. Today’s employers are paying greater attention to employees‘ wishes, and office space is now also designed with a closer focus on staff requirements. The pandemic has been a source of permanent change in the working world over the past two and a half years. The trend towards hybrid working has secured a firm position that will continue to expand in the future. The work-life balance is frequently a strong influencer, and many companies are offering working time models that include greater flexibility as a means of integrating this trend in their corporate culture.

Flexibility boosts employees‘ identification with the company and creates stronger ties in times where it has become increasingly difficult to retain qualified specialists and find new talents. Hybrid and distinctive new office construction as demand drivers starting in 2023 The lasting changes in daily work routines have created a greater awareness for the quality of physical office space. Project developers have, accordingly, increased their focus on the cons- truction of high-quality, architecturally modern and, above all, sustainable properties that meet the demands of the new office world. The next two years will see the completion of premium buildings like the VIO Plaza in Meidling, the Francis in the Althan Quartier, the Grand Central in Floridsdorf, the Urban Garden in the myhive am Wienerberg and the LeopoldQuartier close to Vienna’s city centre. These projects give future users a framework to realise flexible, innovative and sustainable office concepts at locations with perfect infrastructure.

Rental prices and vacancy rates

Development of rents 2018 - 2022

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

€ 5/sqm

2020

2021

2022

2018

2019

Source: EHL Market Research | Q3 2022

Prime rents

Standard locations

Quality locations

Prime locations

Rental rates in Vienna office regions

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

Southern Region Wienerberg

Inner city Surroundings

Main Railway Station Quartier Belvedere

Vienna Donau City Surroundings

Lassallestr. Messe Prater

Eastern Region Erdberg

Seestadt Aspern

Northern Region

Western Region

Airport City Surroundings

Source: EHL Market Research | Q3 2022

Prime rents (in EUR/sqm/mth.)

Vacancy rates (in %)

137.5

13.2

London (West End)

Bucharest

80.0

11.9

Paris (CBD)

Warsaw

54.2

10.0

Milan

Frankfurt

47.0

9.8 9.9

Madrid

43.0 43.0

Berlin

Budapest

8.9 8.8

London (Central) Frankfurt

Munich

40.4

8,4

Amsterdam

36.5

8.4

Madrid

Prague

26.0 26.0 25.5 26.0

6.3

Amsterdam

Budapest

5.3

London (West End)

Vienna

4.3 4.1

Munich

Warsaw

Prague

Vienna

19.0

3.2

Bucharest

Berlin

2.8

Paris (CBD)

Source: EHL Market Research | BNP Paribas Real Estate | Q3 2022

1. Inner City | Surroundings

Vienna Office Regions The Vienna office market is structured in several cluster regions which form the focal points for new construction. The following map provides an overview of the most important office axes as well as indicators for the development of supply, demand and rental prices.

Top Properties 1010, Deutschmeisterplatz 2 1010, Goldenes Quartier Office 1010, Haus am Schottentor 1010, Schreyvogelgasse 2 1020, LeopoldQuartier* 1040, Ensemble Schwarzenbergplatz 1090, Francis* 1090, Doppio Due*

Rents

€ 15.0–26.0

Rents tendency Demand Supply

2. Northern Region

Top Properties 1190, Square 1 1190, Muthgasse 9* 1190, Muthgasse 109A* 1200, Millennium Tower 1200, Rivergate 1200, Optimum 1210, Peak Vienna 1210, Grand Central* 1210, TwentyOne 1210, Plus Energie Quartier 21 Top Properties 1120, Forum Schönbrunn 1120, Linke Wienzeile 234 1120, U4-Center 1120, VIO Plaza* 1120, O.A.X* 1130, Hietzinger Kai 131 1140, Workstation Wien West

Rents

€ 11.5–18.5

Rents tendency Demand Supply

U2 U5

3. Western Region

A23

Mietpreise

€ 10.0–19.0

Rents tendency Demand Supply

A21

4. Southern Region | Wienerberg

5. Vienna Donau City | Surroundings

Top Properties 1220, Andromeda Tower 1220, Ares Tower 1220, DC Tower 1220, IZD Tower 1220, Saturn Tower 1220, Vienna Twentytwo*

Top Properties 1100, myhive am Wienerberg

1100, The Brick 1120, Euro Plaza 1120, Inno Plaza 1230, Silo Plus 1230, Silo Next* 2345, Campus 21

Rents

€ 12.0–18.0

€ 13.0–22.0

Rents tendency Demand Supply

*Projekt

6. Lassallestrasse | Messe | Prater

Top Properties 1020, Austria Campus 1020, E-Zone 1020, Galaxy Tower 1020, Quartier Lassalle 1020, Vienna Works 1020, Weitblick, Viertel Zwei*

Rents

€ 13.0–21.0

Rents tendency Demand Supply

A22

7. Eastern Region | Erdberg

Top Properties 1030, Landmarx 1030, MQM 1030, ORBI Tower

1030, Solaris 1030, Tricore 1030, ViE 1110, OCG Office Campus Gasometer

Rents

€ 11.5–19.5

Rents tendency Demand Supply

8. Main Railway Station | Quartier Belvedere Top Properties 1100, QBC 1100, The Icon Vienna 1100, Tower Canettistrasse

10.

Rents

€ 15.0–22.0

Rents tendency Demand Supply

9. Seestadt Aspern

10. Airport City Vienna | Surroundings Top Properties

Top Properties 1220, Hoho Wien 1220, Campus West 1220, Technologiezentrum Seestadt

1300, Office Park 1 1300, Office Park 2 1300, Office Park 3 1300, Office Park 4 2320, Concorde Business Park

1220, SeeHub 1220, Mischa 1220, Seeparq 1220, Sirius

Rents

€ 9.5–22.0

€ 11.5–18.0

Rents tendency Demand Supply

*Projekt

Completions | Rentals

Production of new space fails to meet expectations

The production of new space will nearly double over the previous year to a total of 126,000 sqm in 2022. However, this increase will still be unable to offset the extremely low volume of completions during the past three years. It also explains the decline in the vacancy rate to a record low of 4.1 %. An added factor is the low volume of new space in these completions, which reflects the 82 % attributable to refurbishments (e.g. the

“Quartier Lassalle“ with approx. 78,000 sqm). Since nearly 90 % of the office space scheduled for completion in 2022 has already been pre- let, tenants searching for larger facilities will be unable to find their perfect property over the short-term. The next top property completions at ideal locations – for example, the VIO Plaza, Urban Garden and Francis – are not expected before 2023/2024.

Take-up by regions*

• 3 %

Completions 2022/2023

6 %

7 %

22 %

Property

Size Address

Quartier Lassalle 2* ** Quartier Lassalle 1* **

54,000 sqm 2; Lassallestrasse 5 24,000 sqm 2; Lassallestrasse 1

12 %

Vio Plaza

22,600 sqm 12; Schönbrunner Strasse 230 15,000 sqm 10; Wienerbergstrasse 3-5 14,800 sqm 21; Siemensstrasse 87-89

19 %

myhive am Wienerberg, Urban Garden*

12 %

Twenty One/Innovation Hub Das Lebendige Haus * Vienna Twenty Two (BT 1)

19 %

9,000 sqm 1; Postgasse 8-10

8,000 sqm 22; Dr.-Adolf-Schärf-Platz 1 6,000 sqm 9; Peregringasse 2-4 4,000 sqm 15; Felberstrasse 80 3,800 sqm 4; Schwarzenbergplatz 3,500 sqm 19; Muthgasse 109A 2,500 sqm 1; Schreyvogelgasse 2

Doppio Due*

F80*

Lukoil- Headquarter* **

Muthgasse 109A

Schreyvogelgasse 2* **

Western Region Northern Region

* Refurbishment

Source: EHL Market Research | Q3 2022

** Fully let resp. owner-occupied

Take-up by sectors*

Rentals 2022 (selected examples)

• 2 %

5 % •

Tenant

Size Addresse

11 %

23 %

ISS Facility Services GmbH NexCo Beteiligungs GmbH

6,200 sqm 2; Quartier Lassalle 1 5,900 sqm 23; Liesinger Flur-Gasse 2c

13 %

ATOS Österreich

5,200 sqm 22; IZD-Tower 4,400 sqm 9; Doppio Due 3,300 sqm 22; IZD-Tower

16 %

Law office

14 %

Austria Power Grid

16 %

DLA Piper Weiss-Tessbach

3,300 sqm 1; Haus am Schottentor

IWG Gruppe

3,300 sqm 9; Francis

Pharma and health Public sector tenants

2,400 sqm 3; Erdberger Lände 26 2,200 sqm 2; Lassallestrasse 9b

* Take-up > 1,000 sqm included Source: EHL Market Research | Q2 2022 Pharma and health Trade and services Educational and trainings institutions Public sector Serviced office / co-working Construction, Real Estate Law firms, consultants, tax advisors IT | high-tech

MSC Austria

2,200 sqm 12; Inno Center

Johnson Controls

2,100 sqm 21; Brunnerstrasse 81a 1,900 sqm 2; Leopold Moses Gasse 4

Public sector tenants

Nuance Communications Austria GmbH

1,800 sqm 12; Euro Plaza 1

Source: EHL Market Research | Q3 2022

Investment market

Prime yields on office properties in European comparison (in %)

Source: EHL Market Research | BNP Paribas Real Estate | Q3 2022

Investment market The real estate sector has witnessed what appears to be the longest positive development cycle since 2008. However, rising interest rates seem to have halted this upward trend – a conclusion that has

from the Ukraine crisis and high inflation have star- ted to influence the prime segment. These factors are now reflected in price adjustments and, in many cases, to a “wait and see” approach by investors. The office market in Austria has always been a symbol of stability and low volatility. Rents in other European markets like Frankfurt, Paris and Berlin have been known to rise sharply in good times, but the Austrian market has been distinguished by con- tinuity and stability. The price level in this country changes much more slowly, and there is little room for speculation. Then again, this also points towards a substantially lower fallback potential, especially in volatile periods – a positive development that is currently visible on the market. In spite of today’s greater challenges, the office asset class will continue to play an important role on the investment market in the future with funda- mental demand coming from institutional as well as private investors. The issue of energy efficiency in combination with ESG and the EU Taxonomy re- presents a major challenge, and properties that are unable to meet these standards have an inherent potential that can be realised by specialised market participants.

been confirmed by many recent transactions. This development has touched all segments of the real estate sector without exception. Prime properties – regardless of the segment – will be less affected than buildings with vacancies or technical deficits. The office asset class has enjoyed sound demand in recent years. In line with earlier trends on the real estate investment market, the yields for prime products fell to historical lows while rental levels trended slightly upward. The beginning of the Covid-19 pandemic brought a clear price differentiation between the top office segment and the downstream quality segments. Demand was strong for properties in very good locations with long-term, first-class tenants and structural features that meet the increasing sustainability demands of the EU Taxonomy. In con- trast, older properties with weaker occupancy that are not taxonomy compliant were faced with yield mark-ups but also benefited from good demand. The current highly volatile, rising interest rate environment as well as the uncertainties resulting

Market Activity

Selected investment transactions 2022

Property

Type of use

Size / sqm

Seller

Buyer

24,818

CA Immo Westcore Europe

Investorenkonsortium Private investor

Office

U6 Center

Office

23,000

Donau Business Center

Office

17,016

Konsortium von Privatinvestoren Union Investment

GalCap Europe ARE Austrian Real Estate GmbH

Green Worx

Office

9,000

Space One | Technologie Park

Office

6,122

Zürich Versicherung AG UBM Invester United Benefits STC / Roombuus

Bank Austria Real Invest Family Office Bank Austria Real Invest ZBI AG

Stolberggasse 26

Office

6,000

Lassallestrasse 7

Residential

16,862

High Five

Residential

15,967

Lavater 2

Residential

14,700

Invester United Benefits ARWAG Private investor Realtrade Immobilien Gruppe Private investor S+B Gruppe

Wealthcore Erste Immo KAG Catella Residential Quantum Wealthcore Greystar

Gross-Enzersdorfer Str. 66-72

Residential

10,000

Grosses Glück

Residential

6,884

Lorenz-Mandl-Gasse

Residential

4,500

Theresiengasse 2

Residential

4,054

LEO 19

Commercial housing

21,000

Dresdner Strasse 90

18,000

DLH

DEKA

SkyLog Park

Logistics | Industry

Soravia KanAm Grund Group

12,979

Pfeiffer Beteiligungs GmbH Meir Immobilien-Gruppe Privatinvestorenkonsortium ECE Real Estate Partners

Cross Dock Upper Austria

Logistics | Industry

50,000

Eagle Portfolio

Retail

Vermehrt Gruppe Institutionelles Investorenkonsortium

35,000

Haid-Center Linz

Retail

60,000

Trinity Park Linz

Development property

LLB

11,560

Vermehrt Gruppe

TLAPA

Mixed use

10,700

Family Office

GalCap Europe

Art & Garden

Mixed use

Source: EHL Market Research | Q3 2022

EHL References

Reference projects

Investment

TLAPA Vienna EHL brokered the new

Allianz Tech Center EHL brokered the property at Linzer Strasse 225 with roughly 12,000 sqm of rentable space and 260 parking spaces, which is rented to Allianz Elementarversicherung through a long-term contract, to a Swiss Life open-ended property fund.

FRANCIS This modern office building at a well-established business location is currently undergoing high-quality refurbishment that is scheduled for completion in 2024. EHL is charged with the marketing on a co-exclusive basis. VIO Plaza The spectacular VIO Plaza buil- ding complex includes office and retail space with perfect furnishings and traffic connec- tions (completion in 2023). EHL is marketing this property on a co-exclusive basis. Green Worx EHL brokered the Green Worx office EHL brokered the Green Worx office and commercial building with around 17,000 sqm of usable space, located in a prime location near the Praterstern at Walcherstrasse 6/Lasallestrasse 7A, to ARE Austrian Real Estate GmbH. development of the former TLAPA department store at Favoritenstrasse 73-75 with roughly 11,600 sqm of rentable space and 120 parking spaces to the LLB open-ended property fund.

GLA

11,600 sqm

12,000 sqm

Client

Vermehrt Gruppe

RPHI

U6 Center EHL brokered the sale of the U6 Center (approx. 25,000 sqm of rentable space) by Westcore Europe to the Austrian real estate investor Andromeda Exklusiv Immobilien.

GLA

17,016 sqm

25,000 sqm

Client

Off Market Deal

Westcore Europe

Letting

URBAN GARDEN EHL is marketing this

innovative new construction project (completion in 2023) in the established “myhive am Wienerberg“ business cluster on a co-exclusive basis.

Address

Address 12., Schönbrunner Str.230 GLA 22,000 sqm

10., Wienerbergstr. 3-5

GLA

15,000 sqm

GRAND CENTRAL This striking office project in the heart of Floridsdorf is currently under construction with completion planned for 2024. EHL is charged with marketing this optimally equipped office space on a co-exclusive basis.

Address 9., Julius-Tandler-Platz GLA 45,000 sqm

Address 21., Schlosshofer Str. 17 GLA 12,500 sqm

This report is a translation. In the event of doubt the German-language version is to be used. The information and forecasts in this report are made without guarantee, warranty or liability.

Cover: © IFAG

The digital version of the report can be downloaded under www.ehl.at/research

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