RESEARCH

THE

GERMANY REPORT H2 2017

32

THE GERMANY REPORT H2 2017 RESEARCH

Ongoing low interest rates, falling oil prices and the undervalued euro against the dollar have continued to fuel exports, and consumer spending in the domestic economy.

Despite the political uncertainty in the run-up to the German federal election, the spectre of Brexit, along with elections earlier in the year in the Netherlands and France, leading economic indicators reached multi-year highs during the first half of 2017.

Business confidence strengthened, with the Ifo-business climate index climbing to 116.0 points in July – a record high since 1991. This demonstrates that the turbulence and uncertainty created by political events is generally short-term, and as long as the economic conditions are sound, Germany’s growth momentum is expected to stay strong.

The export sector continues to fulfil its role as Germany’s traditional engine of growth. In the second quarter of 2017, German GDP grew at 0.6%. This momentum is expected to carry forward, as economic growth of 1.6% and 1.9% is forecast in

2017 and 2018. High business confidence suggests strong investment growth, even if it is likely to dwindle slightly from the previous quarter’s exceptional level. Private consumption continues to benefit from high consumer confidence and strong employment growth, as the unemployment rate continues its downward trend in 2017, falling to 5.6% in July 2017.

Analysts are closely monitoring how the European Central Bank plans to respond to stronger economic conditions in the euro area. But while nearly all euro-area countries run current account surpluses, calls for any monetary policy tightening have been dismissed until inflation moves closer to the ECB target of below but close to 2.0%. It is for this reason that faster wage and price growth in Germany would be welcomed by the ECB.

Unlike many other markets, Germany’s economy is led by exports rather than domestic spending. A strong labour market has underpinned the economy, but wage restraints have led to high household savings. This combined with low business investment and budget consolidation has contributed to the large account surplus.

EUROPE’S ECONOMIC ENGINE The German economy was in very good shape at the end of the second quarter.

As other euro-area nations must reduce their competitiveness to be in line with Germany, it is in large part the reason why the inflation bloc has fallen short of the ECB’s target. Accordingly, some would argue that Germany’s economy continues to pose challenges for other global economies.

On the political front, Angela Merkel will stand for a fourth term at September’s federal election. Her conservative bloc – Christian Democratic Union (CDU) and its Christian Social Union (CSU) sister party is still the frontrunner despite the challenge of Martin Schulz’s Social Democratic Party (SPD).

The right-wing populist AfD is lagging behind and had hoped to make headway in the wake of the migrant crisis, Brexit vote and Donald Trump’s victory, but the wave of populism may be ebbing after Marine Le Pen lost the French election and Geert Wilders lost the Dutch election. Several coalitions are proposed as a likely outcome. In Schleswig-Holstein, the “Jamaica” coalition formed of the CDU, Greens and FDP, an ideologically disparate grouping, is seen as a template for the federal government.

That said, the federal election seems unlikely to have a seismic effect on Germany’s political and economic landscape. As long as Germany’s underlying economic fundamentals remain robust, its economy will continue to grow at a solid pace. Germany will maintain its safe haven status and be one of the preferred advanced economies in which to invest.

MARMARCH 26Saarland State Parliament ElectionMerkel's CDU achieved 40% of the vote and secured a third term for State Premier Kramp-Karrenbauer. The AfD entered Saarland's Parliament for the first time after claiming 6.2% of the vote.

MAYMAY 7CDU victory in Schleiswig-HolstenThe CDU, led by Günther, won 32% of the vote while the SPD dropped to 27%. The AfD also entered the Schleswig-Holstein parliament after clearing 5%.

MAYMAY 14NRW ElectionThe CDU achieved one of its biggest victories yet. The FDP also made significant gains while the AfD entered the NRW parliament after getting 7%.

JUNJUNE 19Party applications dueCut-off date for any party to announce its intention to run for the Bundestag.

JULJULY 7Who is allowed in?Parties allowed to take part are announced. If a party does not agree with decision, it has four days to file a complaint with Germany's Constitutional Court.

JULJULY 17Who made the list?Political parties have until the 69th day before the election to determine which candidates will be running in which constituency.

JULJULY 27Fighting for a spot on the ballotSmaller parties that filed a suit with the Constitutional Court to be allowed to take part in the election will receive their verdicts today.

AUGAUGUST 13Campaigning officially beginsThe campaign floodgates open. AUG

AUGUST 20Who can vote?Electoral register is compiled. In Germany, every citizen who is 18 years or older can vote in the general election.

SEPSEPTEMBER 3Three weeks outAll eligible voters should have recieved an authorisation certificate in the mail. Those not on the voter list still have time to register.

SEPSEPTEMBER 18Prepping the pollsBallots, polling booths and transport boxes start rolling in and electionworkers are trained. SEP

SEPTEMBER 24Election dayPolling stations open at 8am and close at 6pm. The votes are tallied and the Federal Returning Officer announces the preliminary results that same night.

SEPSEPTEMBER 25Winners and losersOnly after all of the representative and party votes are counted, the final result is announced.

OCTOCTOBER 24The 19th Bundestag convenesThe newly elected parliament must meet for the first time no later than one month after the election. Coalition negotiations follow and a secret ballot to elect the next Chancellor.

NOVNOVEMBER 24Everything fair-and-squareThe validity of the election can be challenged up until this time by all voters, the state election overseers, the President of the Bundestag and the Federal Election Commissioner.

TIMELINE OF GERMANY’S ELECTION MARCH-NOVEMBER 2017

THE ECONOMY AND POLITICS

“ THE FEDERAL ELECTION SEEMS UNLIKELY TO HAVE A SEISMIC EFFECT ON GERMANY’S POLITICAL AND ECONOMIC LANDSCAPE.”

3.0%MUNICH

5.1%FRANKFURT 8.8%

BERLIN

UNEMPLOYMENT BY STATE

GERMANY KEY STATS 2017

116.0POINTS

0.6%GDP growth in Q2 2017On par with the Eurozone

In July 2017 Ifo-businessclimate index rose to a record

LEFT

FDPGrüne

SPDDieLinke

RIGHT

9%

8.5%

AFD8.7%

7.4%

23.9%

AUTHORITARIAN

LIBERTARIAN

PARTIES REPRESENTED IN THE BUNDESTAG AND POLLING AVERAGE

CDU/CSU38.4%

Note: Polling average at August 13, 2017

Source: German Federal Statistics Office, Institute for Economic Research (Ifo)

54

THE GERMANY REPORT H2 2017 RESEARCHTHE GERMANY REPORT H2 2017 RESEARCH

As Brexit negotiations have now started, albeit with little progress so far, transaction volumes in the UK have dropped by 16% compared with H1 2016. This suggests a divergence between the UK and the Eurozone. Although some countries, such as France, Sweden and Poland, have also significant reductions in transactional activity, overall Eurozone investment volumes have increased. This trend has primarily been driven by Germany, which was the number one European destination for cross-border capital in H1 2017. All-sector transaction volumes reached nearly €32 billion in H1, surpassing the 10-year average by a momentous 75%.

At a city level, London remained the most active investment market in Europe in H1. Prices have risen to pre-referendum levels, despite Brexit uncertainty. Berlin came in second, attracting around €5 billion in capital during H1 2017. The top 10 markets in Europe also included Frankfurt, Munich, the Ruhr Valley and Hamburg. The remaining big German markets – Düsseldorf, Cologne and Stuttgart – all saw transaction volumes increase by more than 70%.

Feedback from Knight Frank’s international client base emphasises the same underlying trend – German property is very much in demand. US investors have remained the largest source of foreign capital as they placed almost double the amount of capital into Germany than into the UK.

However, the appetite from Asian investors is increasing phenomenally. Knight Frank has tracked growing demand from locations such as Japan, China, Taiwan, South Korea and Singapore. We expect that Japanese investors, in particular, could become an important part of the German market over the next two years. Recent data from

AMP Capital estimates that Japanese institutions have approximately €3.7 trillion under management; a 5% allocation would see circa €200 billion of capital directed towards global real estate. This could mean billions of Euros for German property.

Knight Frank’s dedicated Japanese Desk and Global Capital Markets Platform has been capturing new capital from this part of Asia. Interest is emanating from private UHNWIs, institutional investors, developers and sovereign wealth funds, such as Japan’s €1 trillion+ Government Pension Investment Fund – the world’s largest – which has begun its search for global alternative asset managers. Due to a mature domestic market, Japanese investors such as Mori Trust, Japan Post Bank and Mitsui

GERMANY – EUROPE’S MOST ACTIVE MARKET During H1 2017, Germany confirmed its safe haven status, with transaction volumes rising by 30% and record levels of cross-border investment.

Fudosan are increasing their international investment activities.

Among European occupier markets, Frankfurt is emerging as the biggest winner from last year’s Brexit vote, with some of the world’s biggest banks considering to base their new European Union headquarters in the German city. Citigroup, Goldman Sachs, Standard Chartered, Morgan Stanley, VTB of Russia and Woori Bank of South Korea are among those planning to expand their presence in Germany’s banking capital.

Various Japanese institutions have also announced their relocation plans. Japan’s biggest brokerage Nomura investment bank, Daiwa Securities and Sumitomo Mitsui have all picked Frankfurt as the location of the headquarters for their European Union operations after the UK leaves the bloc, according to press reports.

Elsewhere in Germany, the positive upward trend in the leasing market continued with Berlin recording the highest take-up in Q2 2017, with a vacancy rate of below 3%.

With record levels of foreign property investment, continued strong domestic investment demand, low interest rates, healthy occupational markets and a very attractive debt market, it is very difficult to see Germany losing its appeal and therefore its position as Europe’s most active real estate market. This could mean that even further yield compression is on the cards in the major German cities.

CAPITAL MARKETS OVERVIEW

€1.6

4DÜ

SSEL

DORF

€4.6

2FR

ANKF

URT

€2.7

1M

UNIC

H

€4.8

1BE

RLIN

GERMAN MARKETS BY INVESTMENT VOLUME (€ BILLION) H1 2017

€0.2

3DR

ESDE

N

€1.1

5CO

LOGN

E

€1.9

8HA

MBU

RG

€0.1

4BR

EMEN

€0.2

5

HANO

VER

€0.9

6LE

IPZI

G

€2.0

0RU

HR V

ALLE

Y

€1.0

5ST

UTTG

ART

€0.4

2NU

REM

BERG

€6.2

4

€6.0

1

€5.8

0

€2.8

9

€2.8

5

€2.3

7

€2.1

2

€1.2

5

€1.0

5

€0.8

9

€0.4

9

€0.5

7

€0.6

4

FRAN

KFUR

T

BERL

IN

MUN

ICH

COLO

GNE

HAM

BURG

DUSS

ELDO

RF

RUHR

VAL

LEY

STUT

TGAR

T

DRES

DEN

NURE

MBE

RG

LEIP

ZIG

HANO

VER

BREM

EN

12 MONTHS TO JUNE 2017GERMAN MARKETS BY COMMERCIAL INVESTMENT VOLUME (€ BILLION)

“ WITH RECORD LEVELS OF FOREIGN PROPERTY INVESTMENT, CONTINUED STRONG DOMESTIC INVESTMENT DEMAND, LOW INTEREST RATES, HEALTHY OCCUPATIONAL MARKETS AND A VERY ATTRACTIVE DEBT MARKET, IT IS VERY DIFFICULT TO SEE GERMANY LOSING ITS APPEAL AND THEREFORE ITS POSITION AS EUROPE’S MOST ACTIVE REAL ESTATE MARKET.”

Source: Knight Frank Research

Source: Real Capital Analytics

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

H1

2017

H2

2016

H1

2016

H2

2015

H1

2015

H2

2014

H1

2014

H2

2013

H1

2013

H2

2012

H1

2012

H2

2011

H1

2011

H2

2010

H1

2010

H2

2009

H1

2009

H2

2008

H1

2008

H2

2007

H1

2007

FrankfurtMunich

Berlin

HamburgDusseldorf

PRIME OFFICE YIELDS

3.1%MUNICH

5.1%FRANKFURT

3.0%

116.1POINTS

BERLIN

DOMESTIC AND CROSS BORDER CAPITAL INTO GERMANY

GERMANY KEY STATS 2016

0.6%GDP growth in Q1 2017

In July 2017 Ifo-businessclimate index rose to

DOMESTIC AND CROSS BORDER CAPITALINTO GERMANYSectors: Office, Retail, Industrial, Hotel

47%CROSS BORDER

38%DOMESTIC

53%DOMESTIC

GERMANY COMMERCIALINVESTMENT VOLUME

€50.0BNYE JUNE 2017

11.10%CHANGE ON YE JUNE 2016

DOMESTIC AND CROSSBORDER CAPITAL INTO GERMANYH1 2017

GERMANYINVESTMENT VOLUME

€32.0BNH1 2017

+30.0%CHANGE YEAR-ON-YEAR

CROSS BORDER62%

Source: Real Capital Analytics

76

THE GERMANY REPORT H2 2017 RESEARCH

“ The occupational market in Berlin is by no means slowing down. Demand remains at exceptional levels and actual take-up was suppressed by an estimated 25% due to stock shortages. Most new developments are rapidly pre-let and the existing available Grade A stock has commanded significant rental premiums over the last 6 months.”

OLE SAUER Managing Partner

BERL

INwith tech firms and start-ups the most active tenants.

Overall, take-up increased in the first half of 2017 reaching around 430,000 sq m. By the end of 2017, full year take-up is forecast to reach around 900,000 sq m. According to McKinsey, there are over 100 serviced offices in Berlin and tech start-ups could deliver as many as 100,000 jobs by 2020, creating even more demand for office space. The growth of the technology sector is also being signalled by the volume of venture capital invested into Berlin’s tech sector. London & Partners’ research shows that Berlin has received €880 million in venture capital funding since Brexit, second only to London, which saw more than €2.05 billion invested.

Berlin has become the second largest conurbation for co-working in Europe, second to London. Although lettings in this sector have accounted for only a small proportion of occupier activity, we expect the sector’s share of total take-up to increase significantly over the next few years. This in part is a reflection of the burgeoning start-up scene, as co-working environments are equipped to meet their short-term requirements and offer cost-effective solutions, avoiding the hassle of long-term lease agreements. Against this backdrop, occupiers’ space requirements are unable to be met due to supply shortages, leading to pent-up demand for co-working environments. This has been driving activity in the sub-lettings market,

Rents have been soaring over the last 12 months due to lively demand for space. Over the 12 months to June 2017, rents in Berlin have increased by 20% outperforming all other German markets. This has been largely attributed to a number of high priced transactions in prime locations in Prime East and Prime West. Prime office rents in Berlin are currently at €30/sq m/month although there is evidence that exceptional space in new office towers, such as Upper West, is being let for €39/ sq m/month. The combined shortage of supply and strong demand will inevitably continue to drive rental growth in Berlin.

2

3

A DEARTH OF SUPPLY

RENTS CONTINUE UPWARD TREND

2016

H1 2

017

2015

2014

2013

2012

2011

2010

2009

2008

2007

502,

700

468,

300

410,

200

512,

000

542,

500

543,

900

454,

600

610,

000

820,

000

850,

000

430,

000

SQM COMPLETIONS (LHS) % VACANT (RHS)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

50

100

150

200

250

300

H1

H2(f)

(‘000

s)

0%

2%

4%

6%

8%

10%

12%

14%

16%

2016

H1 2

017

2015

2014

2013

2012

2011

2010

2009

2008

2007

21 22 20 20 21.5

22.5

23 23.5

24 30 30

CO-WORKING SEGMENT TO RISE RAPIDLY 1

Berlin Office Take-Up (sq m) Berlin Office Completions and Vacancy

Berlin Prime Office Rents (sq m per month)

Submarkets Rental range (€/sq m/month)

Prime West – Kurfürstendamm

20.00 - 36.00

Potsdamer Platz / Leipziger Platz

22.00 - 36.00

Prime East – Friedrichstrasse

22.00 - 32.00

Media Spree 18.00 - 25.00

Europa City 22.00 - 30.00

City West 12.00 - 18.00

City East 12.00 - 18.00

Decentralised North 8.00 - 14.00

Decentralised East 8.00 - 14.00

Decentralised South 8.00 - 14.00

Decentralised West 8.00 - 14.00

Adlershof 10.00 - 18.00

Media Spree

EuropaCity

Prime East –Friedrichstrasse

City West

Adlershof

Berlin-SchoenfieldAirport

DecentralisedNorth

DecentralisedWest

DecentralisedSouth

DecentralisedEast

Prime West –Kurfüerstendamm

City East

Potsdamer Platz /Leipziger Platz

Media Spree

EuropaCity

Prime East –Friedrichstrasse

City West

Adlershof

Berlin-SchoenfieldAirport

DecentralisedNorth

DecentralisedWest

DecentralisedSouth

DecentralisedEast

Prime West –Kurfuerstendamm

City East

BERLIN

Potsdamer Platz /Leipziger Platz

Source: Knight Frank Research Source: Knight Frank Research

Source: Knight Frank Research

Berlin’s supply reserves will continue to come under pressure as the market struggles to keep a pace with demand. In the first half of the year, Berlin welcomed the largest volume of office space of all the German markets. But with 300,000 sq m of office supply under construction and 80% already pre-let, this leaves less than one year’s supply in Berlin. Strong occupier demand in Berlin’s office market has pushed the vacancy rate below the 3% mark in Q2 2017. Small units (i.e. those below 500 sq m) particularly in desirable downtown locations, are currently hard to come by. In addition, there is an ongoing trend of office withdrawals from the market for reconversion to residential uses. This in turn is exacerbating the supply-demand imbalance.

98

THE GERMANY REPORT H2 2017 RESEARCH

£115

“ Frankfurt’s office market is on an upward trend, particularly as Brexit-related impacts are starting to materialise in leasing deals. We expect a buoyant 2017.”

ELVIN DURAKOVIC Managing Partner

Frankfurt registered office take-up of 231,000 sq m in the first half of 2017, nearly 10% up on the same period last year. With Brexit in the background, numerous banks and financial institutions have been weighing up their options and are in full motion with their contingency planning. These plans will become more evident and concrete as further details of the Brexit negotiations emerge. Frankfurt is leveraging the fact that it is home to the European Central Bank, which plays a leading role in the supervision of banks in the EU. Recently, Japan’s Nomura, Daiwa and Sumitomo investment banks along with Korean investment bank Woori have announced their application for a German banking licence.

As one of the cheapest financial centres in the European Union to live and work, Frankfurt is emerging as the favoured destination for investment banks. In response to Britain’s exit from the EU, the Association of Foreign Banks in Germany expects there to be 3,000 and 5,000 new jobs in Frankfurt over the next two years, and 12 to 14 major banks to significantly expand their sites or build new ones. British lender Standard Chartered along with Japan’s Nomura, Mizuho, Daiwa Securities and Sumitomo Mitsui investment banks have announced their decision to open new subsidiaries in the EU. However, it is uncertain at this stage as to how many jobs will be relocated or newly created in Frankfurt. Morgan Stanley and Citigroup

The vacancy rate in Frankfurt has continued its downward spiral falling to 8.4%. A combination of good leasing activity and office stock withdrawals for reconversion and refurbishment have contributed to tightening market conditions. Vacancies however tend to be highest in peripheral locations, particularly in secondary grade buildings offering low-quality space. Contrastingly, in the central and most sought-after areas, availability is particularly constrained. But with an additional 135,000 sq m of office space scheduled to enter the market by 2019 across numerous schemes, this may relieve the space strain in the market. Even then, the majority of this is still a number of years away from completion, leaving limited choice for occupiers over the short-term.

3 VACANCY RATES CONTINUE TO FALL

SQM COMPLETIONS (LHS) % VACANT (RHS)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

50

100

150

200

250

300

H1

H2(f)

0%

2%

4%

6%

8%

10%

12%

14%

16%

(‘000

s)

UBS | up to 1,500

Goldman Sachs | up to 1,500

Citigroup | up to 250

Morgan Stanley | up to 200

Standard Chartered | low tensNormura | several dozen

CONSIDERING CONFIRMED

SIGNS OF BREXIT-EFFECTS BEGINNING TO EMERGE FINANCE SECTOR JOBS TO INCREASE 1 2FR

ANKF

URT

2016

H1 2

017

2015

2014

2013

2012

2011

2010

2009

2008

2007

559,

000

512,

000

368,

000

472,

200

420,

000

513,

100

430,

000

378,

200

391,

000

530,

375

230,

900

Frankfurt Office Completions and Vacancy

Banks considering job relocations to FrankfurtFrankfurt Office Take-Up (sq m)

Submarkets Rental range (€/sq m/month)

Bahnhofsviertel 9.00 - 19.50

Bankenviertel 17.50 - 43.00

City-West 10.00 - 18.50

Eschborn 8.50 - 15.00

Innenstadt 13.50 - 36.50

Kaiserlei 8.50 - 13.50

Mertonviertel 10.00 - 13.50

Messe / Europaviertel 15.00 - 35.00

Niederrad 9.00 - 14.50

North 8.00 - 16.00

East 8.00 - 16.00

Sachsenhausen / South 10.00 - 16.50

West 8.50 - 17.50

Westend 13.50 - 38.50

Westhafen 18.50 - 25.50

A648

A66

A661

A5

West

City-WestWestend East

Sachsenhausen/South

Niederrad

KaiserleiBahnhofs-viertel

Banken-viertel

Westhafen

Innen-stadt Messe/

Europaviertel

Eschborn North

Merton-viertel

Source: Knight Frank Research

Source: Knight Frank Research

Source: Knight Frank Research

Source: Association of Foreign Banks and Bloomberg

are also establishing their EU trading headquarters in Frankfurt. Citigroup is expected to shift some trading activities from London to its existing location in Frankfurt. Meanwhile, the move for Morgan Stanley is expected to take place next year. Frankfurt is also on the radar for several other banking institutions, including UBS, Goldman Sachs, JP Morgan and Deutsche Bank. JP Morgan is proposing to use its existing branches in Dublin, Frankfurt and Luxembourg as anchors for its operations and may relocate up to 1,000 bankers from London. Deutsche Bank is also considering shifting jobs from London to Frankfurt and other EU locations over the next several years.

1110

THE GERMANY REPORT H2 2017 RESEARCH

“ The inner city’s constrained development pipeline is causing large-scale tenants to shift their focus to surrounding areas, while the continued fall in incentives is creating more landlord favourable conditions and this is unlikely to change over the next few years.”

DANIEL CZIBULAS Managing Director, Agency

MUN

ICH

Munich’s vacancy rate has continued its downward trend. The significant fall in availability over recent years has been due to a combination of robust take-up and low volumes of completions. Vacancy rates of 1.5% within the city limits are making it almost impossible for occupiers to find suitable space. In more peripheral locations, availability is higher at around 5%, although well-equipped and flexible office space remains hard to come by. Munich is expected to receive a sizeable share of Germany’s office supply pipeline. Over 230,000 sq m of supply is scheduled for completion by 2019 across a number of schemes.

While this will assist in meeting the short-term requirements of occupiers, there will be a need for even more new office development to enable businesses to move within the city limits and also to allow occupiers to undertake expansion plans. Despite strong leasing activity and supply shortfalls, prime rents have remained unchanged although incentives have been falling turning the market increasingly in favour of the landlord.

2 3OCCUPIER DEMAND CONTINUES TO STRENGTHEN AN INCREASING SUPPLY PIPELINE

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

50

100

150

200

250

300

H1

H2(f)

(‘000

s)

0%

2%

4%

6%

8%

10%

12%

14%

16%

SQM COMPLETIONS (LHS) % VACANT (RHS)

STRONG LABOUR MARKET DRIVING OCCUPIER ACTIVITY 1

A92

A99

A94

A8

A995

A95

A96

A8

A9

OutsideMittlerer Ring West

Suburbs North

OutsideMittlerer Ring South

Randgemeinde –Suburbs South

Randgemeinde –Suburbs East

Randgemeinde –Suburbs West

M

I

C

H

AD

JG

E

K

P

N

B

F

L

O

Q

R

S

T

OutsideMittlerer Ring North

OutsideMittlerer Ring East

Arabellapark

Parkstadt Schwabing

TheresienhöheCity Centre

BogenhausenArnulfpark

Grünwald

Riem

Submarkets

City centre

Bogenhausen

Theresienhöhe

Arnulfpark

Parkstadt Schwabing

Arabellapark

Innerhalb – inside Mittlerer Ring Nord/north

Innerhalb – inside Mittlerer Ring Ost/east

Innerhalb – inside Mittlerer Ring Süd/south

Innerhalb – inside Mittlerer Ring West/west

Submarkets Rental range (€/sq m/month)

A CBD 23.50 - 36.00

B Bogenhausen 15.00 - 29.00

C Theresienhöhe 16.00 - 20.50

D Arnulfpark 21.00 - 26.00

E Parkstadt Schwabing 15.00 - 23.00

F Arabellapark 14.00 - 22.00

GInnerhalb – inside Mittlerer Ring North

17.00 - 28.00

HInnerhalb – inside Mittlerer Ring East

14.00 - 26.00

IInnerhalb – inside Mittlerer Ring South

13.00 - 18.00

JInnerhalb – inside Mittlerer Ring West

14.00 - 22.00

K Outside Mittlerer Ring North 11.50 - 18.00

L Outside Mittlerer Ring East 10.00 - 15.00

M Outside Mittlerer Ring South 10.50 - 18.00

N Outside Mittlerer Ring West 10.00 - 23.50

O Riem 13.00 - 16.00

P Suburbs North 9.00 - 14.00

QRandgemeinde – Suburbs East

9.00 - 13.50

RRandgemeinde – Suburbs South

9.00 - 13.50

SRandgemeinde – Suburbs West

8.00 - 15.00

T Grünwald 15.00 - 27.00

Munich’s occupational market had an unprecedented start to the year. Office take-up was 415,000 sq m in the first half of 2017 – up 7% on the same period last year. Large IT corporations have been the most active, generating demand in excess of 100,000 sq m. Manufacturing firms have also been active particularly in the north of Munich. By the end of the year, a further 335,000 sq m of office space is anticipated to be leased. Office space shortages are causing many occupiers to shift to peripheral locations, where a significant proportion of take-up has been witnessed, and this has been driven further by rental price increases in the city centre.

2016

H1 20

17

2015

2014

2013

2012

2011

2010

2009

2008

2007

823,9

00

775,0

00

525,0

00

585,0

00

887,0

00

753,9

00

625,0

00

641,0

00

750,0

00

780,0

00

415,0

00

Munich Office Take-Up (sq m)Munich has been an important engine for economic growth in Germany. GDP growth in the Bavarian capital is forecast at 1.5% per annum over the 2017-2021 period meaning it outperforms the national economy. The labour market is also thriving. Unemployment levels have continued to fall in the State and are now at an historic low of 3%. According to Oxford Economics, an additional 25,000 jobs are expected to be created in the office sector in Munich over the next four years, translating into the potential requirement of around 625,000 sq m of additional office space. The IT and business services sectors will represent a sizeable share of the additional office jobs, placing further pressure on Munich’s dwindling office supply.

25,000

625,000

ADDITIONAL OFFICE JOBS (2017-2021)

TOTAL OFFICE SPACE REQUIREMENT

(2017-2021)

Forecast Employment and Office Space

Munich Office Completions and Vacancy

Source: Oxford Economics Source: Knight Frank Research

Source: Knight Frank Research

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