Office Market Report Vienna | Autumn 2019

We stand for Office

Office Market Report Vienna |Autumn 2019

We stand for real estate.

Introduction

investors is an additional benefit for our clients. Now, more than ever, anyone looking for space would be well advised to analyse and look at not only existing properties but also projects in the pipeline (be they in the planning phase or already under construction) for suitable offers. Our team is able to identify offers which perfectly match the individual requirement profile of our clients. We invite you to discuss your wishes and expectations for your future office location with our experts. Together we will find an optimal solution – you can count on it.

Currently in Vienna the focus is almost exclusively on the development of high-value new office space. The comparatively low production of new space in 2019 cannot match the high demand. This makes it a challenging situation for prospective tenants. In particular, companies looking for more than 3,000 sqm will only find suitable office space if they do their location planning early enough. Those offices will in return meet even the highest requirements. In this environment the EHL office team’s comprehensive knowledge of the market together with our long-term, good relationships to developers and

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, MA Head of Office Agency EHL Gewerbeimmobilien GmbH

Franz Pöltl FRICS Managing Partner EHL Investment Consulting GmbH

Overview Office Market Vienna

Executive Summary

Rental prices continue to trend upwards Prime rents have remained at the high level of 25.50 EUR/sqm. Average rents have risen to 14.80 EUR/ sqm due to the increasing number of contracts in high-quality new buildings.

Pre-letting increases again Office properties completed in 2018 and 2019 mostly show a high, even close to a full occupancy rate. From 2020 the completion of new space will again increase significantly to 165,000 sqm and the demand for these projects is already driving the market. Vacancy rate hits record low High pre-lettings and low completions of new space have led to the vacancy rate falling to a record low of 4.8 %.

Investment: Office properties remain a rare commodity

Increased demand for investment opportunities as a result of high liquidity and low capital costs, plus a scarcity of core properties results in high demand for older office buildings in 2019. Rents I First occupancy**** (in EUR/sqm per month) Prime locations 18.0 - 25.5 Quality locations 13.5 - 18.0 Standard locations 10.0 - 13.5 Prime rents 25.5

Demand*| Supply 2019 Deliveries

45,000 sqm 220,000 sqm

Take-up*

Market indicators Deliveries

decreasing

Economic Data Austria 2019*

Take-up

stable

Vacancy rate Prime yield

decreasing

Austria 4.6 % EU (28) 6.6 % Eurozone (19) 7.9 %

Unemployment rate (Eurostat)

slightly decreasing

Rental rates Average rents Prime rents

Nom. GDP EUR bn. Economic growth

402.7 2.00 %

slightly increasing

Inflation

2.0 %

stable

State budget deficit

-0.40 %

Office market

Total Space**

VRF***

* Forecast ** All figures in the report refer to total office space consisting of modern office properties and office space in older buildings *** according to Vienna Research Forum, www.viennaresearchforum.at **** EHL-average rent levels of 100 newly built or refurbished office buildings at various locations

Office space in sqm

11,295,050 6,018,988

Vacancy rate

4.8 %

4.4 %

Source: EHL Market Research | Q3 2019

Office Market Vienna 2015 - 2019

320,000

300,000 sqm

8 %

270,000

260,000

220,000*

225,000 sqm

7 %

200,000

185,000

150,000

150,000 sqm

6 %

130,000

75,000 sqm

60,000

5 %

45,000

Vacancy rate

4 %

2015

2016

2017

2018

2019

Deliveries in sqm

*Forecast

Take-up in sqm

Source: EHL Market Research | Q3 2019

Trend for Pre-letting – Tenants must plan long-term

Station (Hauptbahnhof), the area Lasallestraße | Messe | Prater as well as the area on Wienerberg, where the development potential for new buildings is to a great extent exhausted. In these currently highly sought after areas prospective tenants may have to consider taking high-quality renovated buildings, such as Quartier Lassalle in the second district, myhive Ungargasse in the third district or myhive Wienerberg.

The strong decrease in deliveries on the Vienna office market in 2019 means that prospective tenants must start looking for new space earlier. Very little first-time occupancy space of more than 3,000 sqm is immediately available. Companies looking for larger spaces are advised to plan well ahead. For units of 1,000 to 3,000 sqm it is recommended to place a search order at least 12 months before the planned moving-in date. For more than 3,000 sqm the time frame should be up to 18 months. Otherwise, it is possible that requirements relating to quality, size or location might not be completely fulfilled.

„Prospective tenants should plan their moves well ahead and also consider properties in the new hotspots.“

Pre-lettings dominate the market

The current letting figures clearly show the changed market situation. Of the lettings with more than 1,000 sqm this year, 40 % were pre-lets where the rental period began more than 12 months after the contract was signed. However, even early planning is no guarantee that companies will find suitable space at their preferred location. This is especially true in the recently strong growing office clusters like Quartier Belvedere by the new Vienna Central

From 2022 there will be new hotspots in the Vienna office market with large-scale developments such as „ViennaTwentytwo“ in the 22 nd district, „Francis Vienna“ on the Althangründe close to the train station Franz-Josefs-Bahnhof or the office tower „Weitblick“ in Viertel Zwei.

Rent levels and vacancy rates

Development of rents 2012-2019

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

€ 5/sqm

2012

2013

2014

2015

2016

2017

2018

2019

Prime rents

Standard locations

Quality locations Prime locations

Source: EHL Market Research | Q3 2019

Rental rates in Vienna office regions

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

Southern Region Wienerberg

Inner city Surroundings

Hauptbahnhof Quartier Belvedere

Vienna DC Surroundings

Lassallestr. Messe Prater

Eastern Region Erdberg

Seestadt Aspern

Northern Region

Western Region

AirportCity Surroundings

Source: EHL Market Research | Q3 2019

Prime rents (in EUR/sqm per month)

Vacancy rates (in %)

115.4

10.2

London (West End)

Bucharest

70.8

10.2

Paris (CBD)

Milan

50.0

9.3

Milan

Madrid

44.0

8.5

Frankfurt

Warsaw

39.0

7.1

Frankfurt

Munich

37.0

6.7

Amsterdam

Berlin

35.8

6.3

Amsterdam

Budapest

35.5

4.8

Vienna

Madrid

25.5

4.0

Vienna

Prague

25.0

3.5

London (West End)

Budapest

24.0

2.2

Munich

Warsaw

23.0

1.7

Prague

Berlin

1.5

19.0

Paris (CBD)

Bucharest

Source: EHL Market Research | BNP Paribas Real Estate | Q3 2019

1. Inner city | Surroundings

Vienna Office Regions

Top properties 1010, Hohenstaufengasse 9 1010, Operngasse 6 1010, Goldenes Quartier Office 1010, Haus am Schottentor* 1010, Kärntnerringhof 1010, Schwarzenbergplatz 3 1010, Schreyvogelgasse 2* 1030, myhive Ungargasse*

The Vienna Office Market consists of several cluster regions where office production is concentrated. The following map provides an overview of the most important office axes as well as indicators for the supply, demand and development of rent levels.

Rents

€ 15.0–25.5

Rents tendendy Demand Supply

2. Northern Region

Top properties 1190, Skyline

1190, Square 1 1200, Rivergate 1200, Millennium Tower 1200, Optimum 1210, Florido Tower

Rents

€ 11.0–18.5

Rents tendency Demand Supply

u2 u5

3. Western Region

Top properties 1120, Forum Schönbrunn 1120, Arcade Meidling 1120, U4 -Center 1130, Kai West 1130, Hietzinger Kai 131 1150, BahnhofCity Wien West

A23

Rents

€ 10.0–14.5

Rents tendency Demand Supply

A21

4. Southern Region | Wienerberg

5. Vienna DC | Surroundings

Top properties 1100, myhive am Wienerberg 1100, The Brick - Biotope Offices am Wienerberg

Top properties 1220, Ares Tower 1220, DC Tower

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

1120, Euro Plaza 1120, Inno Plaza 1230, Silo Plus 2345, Campus 21

Rents

€ 11.5–18.0

€ 12.5–22.0

Rents tendency Demand Supply

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

7. Eastern Region | Erdberg

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

Rents

€ 11.5–19.5

Rents tendency Demand Supply

8. Hauptbahnhof | Quartier Belvedere

Top properties 1100, QBC 1100, The Icon Vienna 1100, Laxenburger Straße 36 1100, 1100 Columbus

10.

Rents

€ 15.0–22.0

Rents tendency Demand Supply

10. AirportCity Vienna | Surroundings

9. Seestadt Aspern

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, Part 2*

1220, SeeHub 1220, Mischa

Rents

€ 9.5–22.0

€ 11.5–18.0

Rents tendency Demand Supply

*Project

Completions | Lettings

Large lettings invigorate the market

exceeding 10,000 sqm, and also that rental rates have increased slightly. Strong demand and limited completions of new space have had a positive effect on the vacancy rate which is expected to fall further to 4.7 % by the end of the year.

In the course of 2019 the Vienna office market has picked up dramatically. Take-up of 162,000 sqm in the first three quarters provided the basis for a strong intermediate result, which was almost as strong as last year’s figure of 167,000 sqm. In total, lettings in 2019 will presumably reach 220,000 sqm. It is notable that once again there have been some large lettings

Completions 2019 |2020

Take-up by regions*

1 % •

Objekt

Size

Location

Inno Plaza

15,000 sqm 1120, Lehrbachgasse 18 11,000 sqm 1230, Lemböckgasse 57-59 7,700 sqm 1220, Janis-Joplin-Promenade 26 7,100 sqm 1220, Christine-Touaillon-Str. 11

15 %

Silo Plus

29 %

HoHo Wien

Technologiezentrum Seestadt, BT 2

18 %

Mischa

3,900 sqm 1220, Sonnenallee 22

QBC 1+2

36,000 sqm 1100,WiednerGürtel 5, AmBelvedere 10

19 %

Office Park 4

26,000 sqm 1300, Towerstraße

18 %

* Refurbishment **Owner-occupied Source: EHL Market Research | Q3 2019 The table only includes those properties for which construction has already begun. Numerous pro- jects for which construction will only commence when pre-let to a suitable degree are not included. 24,500 sqm 1010, Schottengasse 6-8 The Brick - Biotope Offices am Wienerberg 19,000 sqm 1100, Triester Straße 89-91 myhive Wienerbergstraße 7-9 * 10,000 sqm 1100, Wienerbergstraße 7-9 Rathausstraße 1 ** 9,000 sqm 1010, Rathausstraße 1 myhive Ungargasse* 7,000 sqm 1030, Ungargasse 37 Prater Glacis 4,300 sqm 1020, Perspektivstraße 4 Operngasse 6 * 2,000 sqm 1010, Operngasse 6 Haus am Schottentor *

Hauptbahnhof | Quartier Belvedere Inner city and surroundings Lassallestraße | Messe | Prater Souther Region | Wienerberg

Eastern Region | Erdberg Vienna DC | Surroundings

Take-up by sectors*

• 2 %

3 % •

4 % •

Selected Lettings 2019

5 %

31 %

Tenant

Size

Location

15 %

Erste Group AMS & MA 40

17,000 sqm 1100, Bel & Main 13,100 sqm 1120, Inno-Plaza

Wiener Wohnen XING E-Recruiting

6,600 sqm 1030, Erdbergstraße 200 5,600 sqm 1010, Haus am Schottentor 5,100 sqm 1020, Obere Donaustraße 33

15 %

25 %

itworks Personalservice

Vienna University of Economics

4,300 sqm 1020, Prater Glacis 4,000 sqm 1100, QBC 1+2

Public sector Banks and insurance companies IT | High-Tech Law firms, consultants, tax advisors Other Educational and training institutions

Grant Thornton Austria

Ministry of Education, Science & Research

3,900 sqm 1090, Wasagasse 2 3,800 sqm 1030, Erdbergstraße 200 3,000 sqm 1020, Galaxy Tower 2,800 sqm 1020, Austria Campus 2,650 sqm 1020, Austria Campus 2,500 sqm 1100, The Icon Vienna

Fonds Soziales Wien World Bank Group

Dimension Data Porsche Holding Western Union

Life Sciences and Health Construction, Real Estate

Source: EHL Market Research | Q3 2019

*Lettings of more than 1,000 sqm Source: EHL Market Research | Q3 2019

Investment market

Prime office yields across Europe (in %)

Source: EHL Market Research | BNP Paribas Real Estate | Q3 2019

Investment market

in 2020 were secured a few years ago by mainly institutional investors using Forward Purchases in the very early stages of development (e.g. Bel & Main and The Icon Vienna). This trend can also been seen for properties due to be finished after 2020 (e.g. the sale of QBC1+2).

The Vienna office investment market is, as a result of investment pressure, still characterized by a considerable excess in demand and has exceptional future potential. As a result of the continued zero- interest policy of the ECB, the high market liquidity, and the comparably stable Austrian economy with its relatively low vacancy rates, price increases – sometimes considerable – have been recorded in all segments. Prime yields for newly-developed and long-term rented top properties in good locations have hit a record low of 3.5 %, for exceptional locations with long-term top tenants yields are even lower. For average locations yields are already trending towards 4 %. As a result of the latest interest rate decision by the ECB it is expected that prices will continue to develop further upwards in the coming months. Especially because of the scarcity of high-volume core projects, investors are concentrating strongly on middle-sized properties between 25 and 100 million EUR, although even in this segment the number of properties available is the limiting factor for the transaction volume. The market for high- quality newly-built properties is by and large empty – even properties due to be finished this year or

Focus shifts on existing properties and beyond Vienna

The scarcity of top office properties in the core market of Vienna is leading investors to look more and more at other quality segments or to other segments of the market. As a result, there is more focus on the regional capitals, in particular on Graz, Linz and Salzburg. A considerable amount is flowing into the residential segment as more and more buildings are being developed for rental rather than for sale; the buildings are then sold via global sales to investors. German investment funds and pension funds are very active in this product category. In general, German-speaking buyers are still the biggest group on the Austrian market. However, the increasing interest of Asian investors is clear to see, as shown by the recently completed sales of the T-Center or the Hilton Vienna am Stadtpark.

Market activity

Selected investment transactions 2019

Property

Type of use

Size in sqm

Seller

Buyer

T-Center

Office

100,000 Doric Group

Hana Group

QBC 1+2

Office

38,000 UBM | s Immo

EPH Eastern Property Holdings

Austria Campus BT 39.2

Office

22,000 Signa

Bayrische Versicherungskammer

Geiselbergstraße 15-19

Office

20,345 IMMOFINANZ AG

Private investor

BDO Büro

Office

17,366 BDO

EPH Eastern Property Holdings

OPTIMUM

Office

17,000 Commerz Real

Conren Land

Hainburger Straße 33

Office

15,300 KETA Liegenschaftsverwaltung

Phekda GmbH & Co KG

Silo 1

Office

13.000 Erste Bank Immorent u. Strabag Real Estate Erste Immobilien KAG

Gudrunstraße 179

Office

7,600 HGA Capital

Oberösterreichische Versicherung

Kölblgasse 8-10

Office

7,600 KGAL

Immowert

Liechtensteinstraße 111-115

Office

4,880 Hallmann Holding

Mazda Rainer

G5 Hauptbahnhof

Office

4,200 Rhomberg

Warburg HIH

Passage Linz

Retail

25,000 Raiffeisenlandesbank Oberösterreich

Cone Capital AG

Retail portfolio Vösendorf

Retail

24,300 Private investors

LeasInvest

Welas Park

Retail

15,060 Rutter-Immobilien-Gruppe

Union Investment

KARO Bischofshofen

Retail

8,843 Real IS AG

Slbg. Projektpartner Management

Bel & Main (Office and Hotel)

mixed use

15,000 Signa

Private investor

Maderstraße 1

mixed use

3,500 Private investors

GRUND & WERT Immobilien AG

Mariahilferstraße 114

mixed use

3,300 Real Rendite

JPI

Hilton Vienna

Hotel

579 rooms Invester United Benefits

Hana, NH & Meritz

Intercity Hotel Graz

Hotel

229 rooms GBI AG

DEKA

Tishman Speyer | BVK

Bel & Main (Residential)

Residential

17,300 Signa

Siebenbrunneng./Stolbergg.

Residential

17,000 S Immo

UBM

Smart City Graz - Building Part South

Residential

16,800 Trivalue, Haring Gruppe, Wegraz Gruppe

LLB

City-Suits

Residential

5,800 Der Tonweber

ifa AG

Himberger Straße 17

Residential

5,080 Haring Group

Union Investment

Trinum Residential portfolio

Residential

4,200 Moser Architekten

AEW Europe/Dt. Pensionskasse

Jadenhof

Residential

4,000 6B47

Immo Solutions

Open Up!

Residential

3,858 6B47

Immo Solutions

Erzbischofgasse 5

Residential

2,998 UNIQA Österreich Versicherungen AG

Lotos Vermögensverwaltung GmbH

Westring 28

Logistics| Industrial

2,500 Adler Immobilien

Private investor

Source: EHL Market Research | Q3 2019

EHL References

Reference projects

Investment

QBC 4 EHL brokered the sale of the QBC 4 office building at the main railway station by BDO Austria Wirtschaftsprüfungs- und Steuerberatungsgesellschaft to the Swiss investor EPH.

Geiselbergstraße 15-19 EHL successfully brokered the office property in the 11th district to a private investor. The property is leased among others to ibis acam.

GLA

17,360 sqm

20,300 sqm IMMOFINANZ

Client

BDO

Kölblgasse 8-10 EHL acted as broker for an office property in the 3rd district of Vienna for a KGAL fund.

Gudrunstraße 179 EHL handled the sales process for a property bought by the Oberösterreichische Versicherung.

GLA

7,620 sqm

7,600 sqm HGA Capital

Client

KGAL

Letting

Prater Glacis EHL was commissioned

ING DiBa EHL accompanied ING DiBa on its rental of 1,200 sqm in the modern office building Ezone in the booming office cluster Lassallestraße | Messe | Prater.

exclusively with the letting of Prater Glacis, an office building which is currently still under construction. EHL achieved full occupancy a year before completion.

Property

Prater Glacis

Property

Ezone

Office space

4,300 sqm

1,200 sqm

Tenant

Vienna University of Economics

ING DiBa

Rexel Austria EHL accompanied the leading electro-wholesaler Rexel from a comprehensive location analysis through to completion of a rental contract in the Austria Campus.

Porsche Holding EHL supported Porsche

Holding with its exploration of the market for a new location in Vienna through to leasing 2,650 sqm in the Austria Campus.

Property

Austria Campus

Property

Austria Campus

Office space

2,400 sqm Rexel Austria

2,650 sqm

Tenant

Porsche Holding

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.

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

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