Office Market Report Vienna | Spring 2021

We stand for Office

Office Market Report Vienna | Spring 2021

We stand for real estate.

Introduction

The corona crisis has had a significant influence on our working world during the past twelve months. Numerous developments that had only begun to emerge were accelerated and, to a large extent, transformed into concrete effects by the pandemic. The office world has experienced a boom in digitalisation and innovation during the shortest possible time. Demands by tenants and investors on office properties have changed substantially, and the necessary actions to meet these demands are now well underway.

The Vienna office market has also demonstrated its extraordinary stability in these corona times. In comparison with other major European cities, it has seen only limited losses since the outbreak of the pandemic and continues to present a very healthy and solid market environment. In times like these, it is even more important to make the right investment decision. Our EHL office specialists have the necessary know-how and are committed to help you develop your individual real estate strategy.

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

New rentals remain stable Sound rental performance during 2020 (approx. 210,000 sqm) against the backdrop of a difficult economic environment was followed by strong de- mand (approx. 47,000 sqm) for high-quality office space in the first quarter of 2021. Vacancy rate falls to new record low The low production of new space in recent years has led to a steady decline in the vacancy rate. In international comparison, the current 4.5% marks an extremely low level.

Growing focus on refurbishments Roughly 45% of the new space scheduled for com- pletion in 2021 (approx. 82,000 sqm) represents high-quality refurbishments in existing properties. Due to the limited supply of vacant sites, this trend will also influence the market in the future. Investment The interest remains strong in office properties with long-term rentals at top locations. German and Austrian investors currently dominate the mar- ket due to the corona-related travel restrictions. Rents I First-time occupancy**** (in EUR/sqm per month) Prime location 18.0 - 25.5 Quality location 13.5 - 18.0 Standard location 10.0 - 13.5 Prime rents 25.5

Demand* | Supply 2021 Production of new space

82.000 sqm 180.000 sqm

Take-up*

Market indicators Production of new space

slight downward trend

Economic data for Austria 2021*

Take-up

stable

Vacancies

slight downward trend

Austria 5.8 % EU (27) 7.5 % Eurozone (19) 8.3 %

Unemployment rate (Eurostat)

Prime yields

stable

Rental prices Average rents

Nom. GDP EUR billion

396.22

stable stable

Economic growth

6.1 % 1.5 % -4.3 %

Prime rets

Inflation rate

Government budget deficit

Office supply

Total market**

VRF***

* 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 space in sqm

11,436,350 5,888,179

Vacancy rate

4.5 %

3.9 %

Source: EHL Market Research | Q1 2021

Office Market Vienna 2017 - 2021

300,000 sqm

8 %

270,000

260,000

220,000

210,000

225,000 sqm

7 %

185,000

180,000*

150,000

150,000 sqm

6 %

125,000

82.000

75,000 sqm

5 %

45,000

Vacancy rate

0

4 %

2017

2018

2019

2020

2021

3

Deliveries in sqm

*Forecast, Source: EHL Market Research | Q2 2021

Take-up in sqm

© Christian Stemper

© k18.at

Corona pandemic sets new impulses on the Vienna office market

The worldwide corona pandemic has triggered a deep-seated transformation in the working world. Large, profitable companies, in particular, are increasingly turning their attention to the re-orientation of their space requirements to be better equipped for future challenges.

In their function as a hub for teamwork and tangible corporate culture, they will set the stage for hybrid and flexible working in an attractive environment. The design of the common areas (e.g. lobby, reception area) is focused on hotel and lounge concepts with a range of special services (e.g. co-working space, concierge lobby, meeting points). Some companies have started to look for new space as a result of these added value factors and are sounding out the Vienna office market. Whether these searches actually lead to signed rental contracts will only become known later this year.

Growing popularity of hybrid and flexible forms of work

The past year brought a rapid increase in digitalisation and anchored hybrid working in many sectors. Flexible working models allow for a combination of mobile and office-based working. Companies and project developers are now challenged to implement these new demands in an appropriately designed and organised office world. The physical office of the future will become more of a point for communication and cooperation and, with modern office concepts, strengthen employees’ identification with their company.

Office worlds with living room character and a hotel atmosphere

Project developers and renters are reacting to these developments with even greater attention to suitably designed concepts. One example is the myhive concept by IMMOFINANZ, which is characterised by particular flexibility and a stylish hotel character.

The office of the future as a place for collaboration and corporate philosophy

The offices of the future will differ significantly from traditional concepts.

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Rental prices and vacancy rates

Development of rents 2011 - 2021

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

€ 5/sqm

2014

2015

2016

2017

2018

2019

2020

2021

2011

2012

2013

Prime rents

Standard locations

Quality locations

Prime locations

Source: EHL Market Research | Q2 2021

Rental rates in Vienna office regions

€ 30/sqm

€ 25/sqm

€ 20/sqm

€ 15/sqm

€ 10/sqm

Lassallestr. Messe Prater

Southern Region Wienerberg

Inner city Surroundings

Main Railway Station Quartier Belvedere

Vienna Donau City Surroundings

Eastern Region Erdberg

Seestadt Aspern

Northern Region

Western Region

Airport City Surroundings

Source: EHL Market Research | Q2 2021

Prime rents (in EUR/sqm/mth.)

Vacancy rates (in %)

111.8 Paris (CBD)

11.3

London (West End)

Bucharest

75.0

10.1

Milan

50.0

9.9

Warsaw

Milan

47.0

9.0

Frankfurt

Madrid

8.0

39.5 40.0

Berlin

Budapest

7.8

Frankfurt

Munich

38.3

7.0

Amsterdam

Prague

36.3

5.7 5.8

Madrid

London (West End)

25.5 25.0

Amsterdam

Vienna

4.5

Vienna

Budapest

23.0 23.0

3.6

Warsaw

Paris (CBD)

3.0

Munich

Prague

19.0

2.4

Bucharest

Berlin

Source: EHL Market Research | BNP Paribas Real Estate | Q2 2021

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* 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, Peak Vienna 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 1220, Ares Tower 1220, DC Tower

Top Properties 1100, myhive am Wienerberg

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

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6. Lassallestraße | Messe | Prater

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

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, Tricore 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. Main Railway Station | Quartier Belvedere Top Properties 1100, QBC 1100, The Icon Vienna 1100, Laxenburger Straße 36 1100, 1100 Columbus 1100, Tower Canettistraße 5 1110, LMNT Offices*

U3

A4

U1

10.

Rents

€ 15.0–22.0

1

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

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

High-quality refurbishments define the space offering

AThe production of new space will remain com- paratively low at roughly 82,000 sqm in 2021, whereby a substantial component of 45% will be created by high-quality revitalisation projects. The importance of modernised properties will conti- nue to increase over the coming years due to the limited vacant areas in established business clus-

ters. In addition, sublet space is taking on a more important role in Vienna. The long-term implemen- tation of remote and home office has helped a number of companies to substantially reduce their space requirements. This vacant space is, in part, returning to the market.

Take-up by regions*

Completions 2021

Property

Size Address

7 %

Austro Tower

28,000 sqm 3, Schnirchgasse 17 17,000 sqm 10, Canettistrasse 5 14,500 sqm 1, Schottengasse 6-8 9,000 sqm 1, Postgasse 8-10 6,000 sqm 9, Peregringasse 2-4 5,200 sqm 2, Stella-Klein-Löw-Weg 8

11 %

Tower Canettistraße 5 Haus am Schottentor * Das Lebendige Haus *

50 %

Doppio Due *

Tribüne Viertel Zwei *

32 %

Operngasse 6 *

2,000 sqm 1, Operngasse 6

* Refurbishment

Source: EHL Market Research | Q2 2021

Main Railway Station | Quartier Belvedere Southern Region | Wienerberg Eastern Region | Erdberg Other

Take-up by sectors*

Rentals 2021 (selected examples)

• 4%

4% •

Tentant Size Address Austrian Workers‘ Compensation Board AUVA 9,100 sqm 10, myhive am Wienerberg Public Employment Service Austria 5,500 sqm 10, Favoritenstrasse 73 Dedalus HealthCare GesmbH 2,400 sqm 10, QBC 1 Infoscore Austria GmbH 2,300 sqm 10, QBC 1+2 Weidinger & Partner Wirtschaftstrainings- und Organisationsentwicklungsgesellschaft mbH 2,200 sqm 3, Franzosengraben 1 Die Berater 2,000 sqm 12, Wolfganggasse 58-60 Australian Embassy 1,200 sqm 10, The Icon Vienna Ready2order GmbH 1,100 sqm 3, Hintere Zollamtsstrasse 17 Unzer Austria GmbH 1,000 sqm 10, 1100 Columbus Shops&Offices

5%

7%

9 %

55 %

16 %

Public sector Educational and trainings institutions IT | high-tech Pharma and health Other Trade and services Banking and insurance sector

Source: EHL Market Research | Q2 2021

*Take-up > 1,000 sqm included Source: EHL Market Research | Q2 2021

8

Investment market

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

Source: EHL Market Research | BNP Paribas Real Estate | Q2 2021

Investment market The real estate investment market in Austria and here, above all, the office segment again demons- trated their attractiveness and crisis resistance in 2020. Although the year created major challen- ges for private as well as institutional investors, properties with a combined value of approximately EUR 3.5 billion changed hands. A comparison with the years from 2017 to 2019 shows a decline, but the overall results for 2020 are positive. Only a very limited number of investors reduced their real estate activities as a result of the corona crisis, but there have been substantial delays in transactions. Travel warnings and lockdowns have prevented the closing for many deals which should have been completed, and these transactions will now shift into the first half of 2021.

attractive prime office properties with long-term rentals to quality tenants have continued to rise, while the gap to average yields has increased. Risks are currently “penalised“ with high price discounts, among others because financing for properties outside the top segment has become more difficult and more expensive. Activities by investors from more distant markets have declined significantly due to the corona pandemic. Non-European buyers now represent a share of only two per cent. In contrast, German investors strengthened their dominant position with an increase in their market share to a record 51%. Austrian investors were responsible for about 42% and Swiss investors for 5%. The most active investors are currently found in the institutional segment, above all in special and mutual funds as well as pension funds. They were responsible for nearly 60% of the total transaction volume in 2020. Family offices and private investors as well as project developers tended to be more guarded due to the current situation, which was reflected in a share of roughly 17%, respectively approx. 11% of the transactions during the past year.

Prime segment supply remains limited, low interest rates drive demand Prime office properties currently represent the main point of interest for institutional investors. These properties are very rare, as is demonstrated by the strong demand and year-on-year decline in prime yields to a record low of 3%.

The development of prime yields is, however, only part of the picture. The prices for particularly

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© EHL

© JAMJAM

Marktet Activity

Selected investment transactions Q1 2021

Property

Type of use

Size / sqm

Seller

Buyer

Europlaza

Office

28,500 DWS

ARE Austrian Real Estate

Nordbahnstraße 50

Office

15,500 REInvest

Family Office

Ikano Office Park

Office

11,600 Family Office

Family Office

Canon Gebäude

Office

5,500 LHI

Octapharma

Bahnhofplatz 1

Office

4,750 Apleona Invest

Österreichischer Spezialfonds

Logistik Center Simmering

Logistics | Industry

47,000 WLS

Garbe Industrial

DHL Verteilerzentrum

Logistics | Industry

12,250 Karimpol

AEW Europe

Amazon Verteilzentrum

Logistics | Industry

9,000 Exeter Property Group

Allianz

Danube Flats Bauteil 2

Residential

10,000 Soravia & S+B Gruppe

Auris Immo Solutions

Wohnneubauprojekt Das Herzog

Residential

7,243 Haring

STC

Grünstück 22

Residential

5,391 BUWOG

BVK

Felmayerpark Schwechat

Residential

5,000 Grossmann Immobilien

ARE Austrian Real Estate

Seniorenzentrum Tillmitsch

Retirement home

84 rooms IMMAC GmbH

Auris Immo Solutions

K2 Kittsee

Retail

9,614 Privatinvestor

LLB

FMZ Klagenfurt

Retail

7,014 Union Investment

Privatinvestor

Source: EHL Market Research | Q2 2021

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EHL References

Reference projects

Investment

Austro Tower EHL advised DEKA Immobilien on the acquisition of the Austro Tower (32,000 sqm of floor space) by one of its managed special funds.

IKANO OFFICE PARK

EHL brokered the sale of this two-section office property in Vienna to an Austrian private investor.

GLA

GLA

32,000 sqm

11,600 sqm Privatinvestor

Client

Client

DEKA

Nordbahnstrasse 50 EHL brokered the 15,500 sqm, fully rented Nord- bahnstrasse 50 office property to an Austrian family office through an off-market deal.

Quartier Lassalle – Quartier 2 EHL brokered the fully rented office property at Lassallestrasse 5 with over 53,000 sqm of rentable space to a German special fund in the second half of 2020.

GLA

GLA

53,000 sqm Family Office

15,500 sqm

Client

Client

REInvest

Letting

Tower Canettistrasse EHL was commissioned on a co-exclusive basis with the rental of luxury, first- time occupancy space at the heart of the flourishing business hot spot at Vienna’s main railway station. Quartier Lassalle EEHL was commissioned with marketing the 83,000 sqm of office space in this outstanding refurbished office building and success- fully achieved an occupancy level of nearly 80 % one year before completion.

Ensemble Schwarzenberg EHL received an exclusive commission for the rental of the elegant Palais am Schwarzenbergplatz. Offices starting at 800 sqm are available in this extraordinary, prestigious older building. myhive amWienerberg EHL was commissioned on a co-exclusive basis with the rental of the remaining vacant space in the Twin Tower and the marketing of the distinctive new construction project WBS 3-5 (completion in 2023).

Adress

Adress 4., Schwarzenbergpl. 14 GLA 8,000 sqm

10., Canettistraße 5

GLA

8,000 sqm

Adress

Adress 10., Wienerbergstr. 3-5+11 GLA 20,000 sqm

2., Lassallestraße 1+5

GLA

83,000 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: © k18 / SIGNA / ARE

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

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