Office Market Report Vienna 2020

We stand for Office

Office Market Report Vienna | Autumn 2020

We stand for real estate.

Introduction

Consequently, supply and demand will remain balanced over the short- to medium-term in spite of the difficult economic environment. The market continues to function, but is now different: cost efficiency, social distancing and the combination of office and remote workplaces have become the determining factors for location and investment decisions. Taking the right decisions for the long-term in today’s environment requires extensive know-how, and the EHL office specialists are committed to supporting you in developing your real estate strategy.

It is a well known fact that crises never arrive at an opportune moment. However, when a market is generally healthy and robust, the chances are good that the challenges can be mastered efficiently and within a reasonable period. Fortunately, the Vienna office market was in good condition right up to the corona lockdown: The first-class projects which have been, or will be, added to the market this year after the record low in new space production during 2019 have, for the most part, been pre-let and the vacancies in existing properties are steady at a very low level.

Michael Ehlmaier FRICS Managing Partner EHL Immobilien GmbH

Stefan Wernhart MRICS Managing Director EHL Gewerbeimmobilien GmbH

Alexandra Bauer MRICS Head of Market Research EHL Gewerbeimmobilien GmbH

Thomas Schanda Head of Office Properties EHL Gewerbeimmobilien GmbH

Franz Pöltl FRICS Managing Partner EHL Investment Consulting GmbH

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Overview of the Office Market in Vienna

Executive Summary

Increase in the production of new space Following a record low in 2019 (approx. 45,000 sqm), the volume of completions will rise to approximately 160,000 sqm this year. Quality- based refurbishments of existing properties represent roughly 20% of this total. Market dominated by Germany and Austrian investors The interest remains strong in office properties with long-term rentals at top locations. German and Austrian investors currently dominate due to the corona-related travel restrictions. Rents I First-time occupancy**** (in EUR/sqm per month) Top location 18.0 – 25.5 Good location 13.5 – 18.0 Average location 10.0 – 13.5 Prime rents 25.5

New rentals slowed by the corona crisis Scores of rental negotiations were interrupted, and many companies have put their relocation plans on hold for the time being. However, two major rentals in the Quartier Lassalle were responsible for sound overall results of approximately 145,000 sqm. Vacancy rate falls to record low High occupancy levels are a common factor in the completions planned for 2020. As a result, the vacancy rate remains steady at a low 4.7% despite the difficult economic environment.

DEMAND* | SUPPLY 2020 Production of new space

160,000 sqm 160,000 sqm

Take-up*

Market indicators Production of new space

rising

Economic data for Austria 2020*

Take-up

slight downward trend

Vacancies

stable

Austria 4.7% EU (27) 6.2% Eurozone (19) 7.4%

Unemployment rate (Eurostat)

Prime yields

slight downward trend

Rental prices Average rents

Nom. GDP EUR billion

411.32 1.20% 1.50% 0.30%

Economic growth

slight upward trend

Inflation rate

Prime rents

stable

Government budget deficit

* 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

11,381,350 5,948,677

Vacancy rate

4.7%

4.4%

Source: EHL Market Research | Q3 2020

Office Market Vienna 2015 - 2020

320,000

300,000 sqm

8 %

270,000

260,000

220,000

225,000 sqm

7 %

185,000

170,000*

160,000

150,000

150,000 sqm

6 %

75,000 sqm

60,000

5 %

45,000

Vacancy rate

0

4 %

2016

2017

2018

2019

2020

3

Deliveries in sqm

*Forecast, EHL Market Research | Q3 2020

Take-up in sqm

© room meets freiland

© Holzbauer@Partner

Corona has become the driver for new office forms and remote working

remote working options. A contrary trend is, however, visible, especially in medium-sized and larger companies with 150 or more employees: Smaller or group offices as an alternative to open- plan structures minimise the risk of infections but require more space.

The Covid-19 shutdown shifted home office to the top of the agenda for large numbers of employees. One positive side effect was a rapid increase in digitalisation which made “remote working“ acceptable for many companies. Modern IT equipment allows for efficient work at any time and any place in this newest version of the traditional home office. The concept has apparently proven successful because the permanent integration of remote working into office organisations has become an important factor for many companies searching for new facilities or considering relocation.

Fewer desks, more room for interaction

These two developments, in total, frequently balance out. The new, smaller number of fixed workplaces will have a different spatial structure with attractive common zones and collaboration areas. The physical office of the future will become more of a place for exchange and integrate high-quality modern office concepts to strengthen employees’ identification with the company. Nevertheless, the more flexible design of working structures will never completely replace the traditional office. Social contacts and the interaction of employees are, and will remain, an indispensable feature. A significant reduction in space requirements is therefore not expected in the coming years.

Reassessment of space requirements

Potential tenants currently in an advanced stage of negotiations are increasingly re-evaluating their space requirements at possible new locations. Innovative, alternative workplace concepts frequently need to include a reduction in space compared with the original plan.

The number of required fixed workstations can, in fact, be optimised through the inclusion of

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Rental prices and vacancy rates

Development of rents 2013 - 2020

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

€ 5/sqm

2013

2014

2015

2016

2017

2018

2019

2020

Standard locations

Quality locations

Prime locations

Prime rents

Source: EHL Market Research | Q3 2020

Rental rates in Vienna office regions

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

Inner city Surroundings

Southern Region Wienerberg

Northern Region

Western Region

AirportCity Surroundings

Lassallestr. Messe Prater

Eastern Region Erdberg

Seestadt Aspern

Vienna Donau City Surroundings

Main Railway Station Quartier Belvedere

Source: EHL Market Research | Q3 2020

Prime rents (EUR/sqm/month)

Vacancy rates (in %)

113.8

10.2 10.3

London (West End)

Milan

75.0

Paris (CBD)

Bucharest

50.0

8.2

Milan

Madrid

47.0

7.9

Frankfurt

Warsaw

39.5 40.0

7.3

Budapest

Berlin

6.9

Munich

Frankfurt

38.3

6.1

Prague

Amsterdam

36.3

5.7

Amsterdam

Madrid

4.7

25.5 25.0

Vienna

Vienna

3.8

London (West End)

Budapest

23.0 24.0

2.4

Munich

Warsaw

2.1

Paris (CBD)

Prague

19.0

1.9

Berlin

Bucharest

Rents in sqm per month, Source: EHL Market Research | BNP Paribas Real Estate | Q3 2020

5

1. Inner City | Surroundings

Vienna Office Regions The Vienna office market is divided into 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, Operngasse 6* 1010, Goldenes Quartier Office 1010, Haus am Schottentor 1010, Hohenstaufengasse 9* 1010, Schreyvogelgasse 2* 1030, myhive Ungargasse 1040, Ensemble Schwarzenbergplatz 1090, Francis Vienna* 1090, Doppio Due*

Rents

€ 15.0–25.5

Rents tendency Demand Supply

2. Northern Region

Top Properties 1190, Skyline

1190, Square 1 1200, Rivergate 1200, Millennium Tower 1200, Optimum

U4

1210, Florido Tower 1210, Twenty One*

U5

Rents

€ 11.0–18.5

U3

Rents tendency Demand Supply

U2 U5

U4

A1

3. Western Region

Top Properties 1060, Gumpendorfer Gürtel 2b 1120, Forum Schönbrunn 1120, Arcade Meidling 1120, U4-Center 1120, VIO Plaza* 1130, Kai West 1130, Hietzinger Kai 131 1140, Workstation Wien West

U2

A23

U6

Rents

€ 10.0–14.5

S1

Rents tendency Demand Supply

A21

A2

4. Southern Region | Wienerberg

5. Vienna Donau City | Surroundings

Top Properties 1100, myhive am Wienerberg

Top Properties 1220, Ares Tower 1220, DC Tower

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

1220, Andromeda Tower 1220, Tech Gate Vienna 1220, IZD Tower 1220, Saturn Tower 1220, Vienna Twentytwo*

Rents

Rents

€ 11.5–18.0

€ 12.5–22.0

Rents tendency Demand Supply

Rents tendency Demand Supply

* Project

6

6. Lassallestrasse | Messe | Prater

Top Properties 1020, Austria Campus 1020, Quartier Lassalle* 1020, Galaxy 21 1020, E-Zone 1020, Weitblick, Viertel Zwei* 1020, Prater Glacis

Rents

€ 12.0–18.0

Rents tendency Demand Supply

A22

U1

7. Eastern Region | Erdberg

Top Properties 1030, Austro Tower* 1030, Solaris 1030, ORBI Tower 1030, MGC Office Park 1030, MQM 1030, T-Center 1030, ViE 1110, OCG Office Campus Gasometer

S2

U6

U2

Rents

€ 11.5–19.5

Rents tendency Demand Supply

8. Mail Railway Station | Quartier Belvedere

Top Properties 1100, QBC 1100, The Icon Vienna 1100, Laxenburger Strasse 36

U3

1100, 1100 Columbus 1110, Element Offices*

A4

U1

10.

Rents

€ 15.0–22.0

1

Rents tendency Demand Supply

9. Seestadt Aspern

10. AirportCity Vienna | Surroundings

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

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

1220, SeeHub 1220, Mischa

Rents

Rents

€ 9.5–22.0

€ 11.5–18.0

Rents tendency Demand Supply

Rents tendency Demand Supply

* Project

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Completions | Rentals

More high-quality refurbishments

properties will continue to increase in the coming years. Noteworthy examples are the “Quartier Lassalle“ with approximately 83,000 sqm near the Praterstern and the “Doppio Due“ with approximately 6,000 sqm in the 9th District, both of which will be completed in 2021/2022.

Completions will total roughly 160,000 sqm in 2020. Roughly 20% represent quality-based refurbishments like the Haus am Schottentor, the myhive office properties on the Wienerberg and in the Ungargasse as well as the top-renovated older buildings at Operngasse 6 and Walfischgasse 13. The importance of extensively modernised

Take-up by regions*

Completions 2020 | 2021

1 % •

3 % •

Property QBC 1+2

Size

Address

5%

36,000 sqm 10, Am Belvedere 10, Wiedner Gürtel 5

5%

Office Park 4

26,000 sqm 1300, Towerstrasse 19,000 sqm 10, Triester Strasse 89-91

7 %

The Brick

Bel & Main**

17,000 sqm 10, Arsenalstrasse / Canettistrasse 14,500 sqm 1, Schottengasse 6-8 11,000 sqm 14, Linzerstraße 225 10,000 sqm 10, Wienerbergstrasse 7-9 9,000 sqm 1, Rathausstrasse 1 7,000 sqm 3, Ungargasse 37 4,300 sqm 2, Perspektivstrasse 4 2,700 sqm 1, Walfischgasse 13 29,000 sqm 2, Lassallestrasse 1 28,000 sqm 3, Schnirchgasse 17 14,800 sqm 21, Siemensstrasse 87-89

7 %

Haus am Schottentor *, **

9 %

Allianz Campus**

63 %

myhive Wienerbergstrasse 7-9 *

Rathausstraße 1 ** myhive Ungargasse *

Lassallestrasse | Messe | Prater Inner City | Surroundings Northern Region Main Railway Station | Quartier Belvedere Eastern Region | Erdberg Western Region Southern Region | Wienerberg AirportCity Vienna | Surroundings

Prater Glacis **

Walfischgasse 13*;** Quartier Lassalle 1*

Austro Tower

Twenty One/Innovation Hub

Das Lebendige Haus *

9,000 sqm 1, Postgasse 8-10 7,000 sqm 3, Schnirchgasse 9+9a 6,000 sqm 9, Peregringasse 2-4 5,200 sqm 2, Stella-Klein-Löw-Weg 8 2,500 sqm 1, Schreyvogelgasse 2

TrIIIple

Doppio Due*

Take-up by sector*

Tribüne Viertel Zwei Schreyvogelgasse 2*

• 3%

2% •

2% •

Operngasse 6 *

2,000 sqm 1, Operngasse 6

4%

* Refurbishment **Owner-occupied

EHL Market Research | Q3 2020

5%

5 %

Rentals 2020 (selected examples)

9 %

70 %

Tenant

Size

Address

Public sector tenants Public sector tenants

54.000 sqm 2, Quartier Lassalle 2 10.300 sqm 2, Quartier Lassalle 1 4.900 sqm 13, Kai West 4.800 sqm 19, Square One 3.500 sqm 1, Hansenstrasse 3 2.000 sqm 3, Guglgasse 7-9 1.900 sqm 12, Euro Plaza 1.800 sqm 2, Austria Campus

Swietelsky AG

Public sector Pharma and health IT/ high-tech

AOP Orphan Pharmaceuticals AG

Republic of Austria Fonds Soziales Wien

Construction / real estate Attorneys and consultants Banking and insurance sector Trade and services Other

Jumio

Refurbed GmbH

Delta Holding GmbH

1.800 sqm 3, ViE

MSD Ges.m.b.H

1.800 sqm 10, The Icon Vienna 1.700 sqm 10, The Icon Vienna

Dynatrace Austria GmbH

*Take-up > 1,000 sqm included Source: EHL Market Research | Q3 2020

Quelle: EHL Market Research | Q3 2020

8

Investment market

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

Source: EHL Market Research | BNP Paribas Real Estate | Q3 2020

Investment Market

In contrast, all types of risks – e.g. vacancies, expiring rental contracts, sub-optimal locations or technical equipment – have been generally overrated in the current market environment, and this is leading to a substantial increase of up to 200 basis points in the yield gap between prime locations and the lower quality segments. The weak economic outlook has made developers clearly more reserved in launching new projects. Consequently, there will be a noticeable decline in office building completions during 2021 and, above all, in the following years. The supply of properties available for sale will, as a result, remain low and represent the limiting factor for the market volume. At the same time, the interest in safe investments in prime properties will be further fuelled by current expectations of the ECB continuing its low interest policy for years to come. This combination will lead to a general upward trend in prime segment prices because the difference to government bond yields is sufficiently large. There has been a noticeable shift in the distribution of buyers since the beginning of the corona crisis. The market was characterised for many years by a steady increase in transactions by international investors, primarily from Asia, but has now turned local and is influenced primarily by German and Austrian investors.

The real estate investment market and, in particular, the office property segment in Vienna have remained robust to date in spite of the corona crisis: The investment volume in the first half-year failed to reach the record 2019 level despite a series of exceptional transactions but – with a total investment volume of EUR 1.5 billion – the difference was not as significant as expected. It reflects the fact that most of the transactions were in a very advanced stage prior to the lockdown and closed during or after this period. Of special note is the high three-digit million range for several properties (Austro Tower, Quartier Lassalle). The supply remains limited, demand is driven by low interest rates From a structural viewpoint, the generally steady and substantial interest on the part of investors has changed significantly: The demand is now greater than ever before for properties with good locations and first-rate technical equipment that feature rentals to quality tenants with excellent financial standing. Buyers are prepared to accept higher prices than in 2019 for these types of properties. Prime yields are currently low at roughly 3.0%, and the strong demand combined with the limited supply of genuinely prime properties will add to the pressure on yields. The best prices will be realised for properties rented to the public sector or state-affiliated companies.

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© cHenning-Kreft

© ZOOMVP

Market Activity

Selected investment transactions in 2020

Property

Type of use

Size/sqm

Seller

Buyer

Büro- und Rechenzentrum Geiselberg Office

34,000 Erste Group Immorent

ARE Austrian Real Estate

Austro Tower

Office

32,000 SORAVIA

DEKA

Blue Colibri Capital

Brehmstrasse 14

Office

13,824 Warburg-HIH Invest Austria

Quartier Lassalle - Lassallestraße 1

Office

29,000 Imfarr

EPH Eastern Property Holdings

AIRA Tower

Residential

5,500 AIRA Real Estate Development

PATRIZIA

Favoritenstrasse 92

Residential

9,500 JP Immo

Erste Immo KAG

Q11

Residential

10,400 NID

ArtInvest

Wohngarten 11

Residential

33,700 INVESTER United Benefits

ZBI

Max und Moritz

Residential

4,400 STC Swiss Town Consult

Wealthcore

Temporary housing 224 rooms Bruckner Studios Linz

Catella

Milestone Linz

Mixed use

20,000 Signa

Deka

Forum I Salzburg

HATRIC Q2

Retail

6,800 Rutter Immobilien Gruppe

Union Investment

FMZ PANNONIA

Retail

8,166 Nuveen Global

ERGO Versicherung

Quester construction markets

Retail

17,900 Agora

Private investor

KAUFein Stockerau

Retail

4,960 Family Office

Private investor

Mariahilfer Strasse

Retail

6,000 Private investor

Private investor

The Ring

Hotel

68 rooms Luxembourg Funds

Breiteneder

Logistics | Industry

20,500 Garbe

Union Investment

Logistrial-Portfolio AT

Logistics | Industry

20,000 Segro

Nuveen Global

CityPark Wien

Source: EHL Market Research | Q3 2020

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EHL References

Reference Projects

Investment

Austro Tower EHL advised the buyer on the acquisition of the Austro Tower (32,000 sqm of floor space) by a special fund managed by DEKA Immobilien.

Business Point Leonding, Linz

EHL brokered the sale to a private foundation of a 3,000 sqm office property completed by Linzer Modul X

GLA

GLA

32,000 sqm

3,000 sqm

Client

Client

DEKA

Modul X

Brehmstrasse In spring 2020 – during the first corona lockdown – EHL brokered a long-term lease for an office pro- perty (total area: 13,800 sqm) to a Luxembourg real estate fund.

QBC 4 At Vienna’s main railway station, EHL brokered the sale of the QBC 4 office building owned by the BDO chartered accounting firm to the Swiss investor EPH.

GLA

GLA

17,360 m 2

13,800 sqm

Client

Client

BDO

HIH

Letting

silo plus EHL was commissioned with marketing the remaining space in this innovative and particularly environment- friendly office property.

Element Offices EHL was commissioned with the marketing of this attractive office property, which is scheduled for completion in 2023.

Address 23., Lemböckgasse 59 GLA 10,500 sqm

Address

11., Brehmstraße 19

GLA

19,000 sqm

Quartier Lassalle EHL was commissioned

Operngasse 6 EHL was commissioned with the rental of this prestigious office space at a top location in Vienna’s inner city.

with marketing the 83,000 sqm of office space in this outstanding refurbished office building and successfully achieved an occupancy level of nearly 80% one year before completion.

Address 2., Lassallestrasse 1+5 GLA 83,000 sqm

Address

1., Operngasse 6

GLA

2,000 sqm

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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: © Flughafen Wien AG

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

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