Facts and Figures

Office market Frankfurt am Main Q3 2017

‘‘The essence of knowledge is, having it, to apply it.‘‘

Dr. Konrad Kanzler Head of Research +49 (0) 69 - 970 505-614konrad.kanzler@nai-apollo.de

Radomir Vasilijevic Head of Office & Retail Letting +49 (0) 69 - 970 505-106radomir.vasilijevic@nai-apollo.de

Lenny Lemler Co-Head of Investment +49 (0) 69 - 970 505-174lenny.lemler@nai-apollo.de

Quote from Confucius

If you require any further information, please do not hesitate to contact us. We can put you in touch with our specialists who are always happy to provide you with expert support. We look forward to hearing from you!

Martin Angersbach Head of Business Development Office Germany +49 (0) 69 - 970 505-122martin.angersbach@nai-apollo.de

Population development Frankfurt a. M.

2010 2011 2012 2013 2014 2015 2016 Jun-17

Inhabitants June 2017: 736,222

0

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012 2013 2014 2015 2016 2017

Purchasing power per capita Germany Purchasing power per capita Frankfurt a. M.

Purchasing power per capita 2017: Germany €22,239 / Frankfurt €25,532

Purchasing power per capita Germany and Frankfurt a. M.

Unemployment / employees subject to social insur. contribution

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

0

100,000

200,000

300,000

400,000

500,000

600,000

2010 2011 2012 2013 2014 2015 2016 Aug-17

Consumer price index Germany and Hesse

85

90

95

100

105

110

2010 2011 2012 2013 2014 2015 2016 Aug-17

CPI Germany (base year: 2010) CPI Hesse (base year: 2010)

CPI August 2017: Germany 109.5 / Hesse 108.9

Market Environment

The Frankfurt am Main metropolitan area continues to be characterised by signifi-cant population growth during 2017. Ac-cording to latest figures from the City of Frankfurt, the number of inhabitants stood at 736,222 on 30 June 2017, rep-resenting an increase of 6,598 inhabit-ants or 0.9 % over the first half of the year. According to official city forecasts, the population is expected to exceed 750,000 by the end of 2018, with the number of residents then passing the 800,000-mark in 2027.

In line with the increasing population, the Frankfurt employment market also con-tinues to show a consistently positive performance. Based on the latest up-date on 31 December 2016, the number of employees that are subject to social insurance contributions increased by 1.8 % to 559,566 compared to the pre-vious year. The rate of unemployment fell by a further 0.4 %-points by August 2017 compared to the same month a year ago, and now stands at 5.8 %.

At the same time, the shortage of skilled workers is proving to have a limiting ef-fect on Frankfurt’s economic develop-ment. According to the IHK Fachkräfter-eport 2017 (report on skilled workers 2017) published by the Frankfurt Cham-ber of Industry and Commerce (IHK), the economy in the state of Hesse currently faces a shortage of around 56,000 skilled employees. Even though a sub-stantial decrease in overall demand is expected by 2030, a far greater decline in skilled labour can be predicted. The supply shortage of skilled workers is therefore expected to reach 200,000 people by 2030. The office-related con-sultancy and business services sectors currently face a shortage of 15,000 em-ployees in Hesse, a number that is ex-pected to rise to 49,000 by 2030.

Sou

rce:

GfK

Geo

Mar

ktin

g G

mb

H, F

eder

al S

tatis

tical

Offi

ce

Sou

rce:

Sta

te S

tatis

tical

Offi

ce H

esse

, Em

ploy

men

t Age

ncy

Sou

rce:

Fed

eral

Sta

tistic

al O

ffice

S

ourc

e: C

ity o

f Fra

nkfu

rt a

. M.

760,000

740,000

720,000

700,000

680,000

660,000

640,000

620,000

600,000

Employees Frankfurt a. M.

Unemployment rate Germany

thereof tertiary sector

Unemployment rate Frankfurt a. M.

Take-up, vacancy, prime rent, average rent, prolongation 1,

950

sqm

1,79

0 sq

m

1,59

0 sq

m

1,68

0 sq

m

1,76

0 sq

m

1,96

0 sq

m

1,52

0 sq

m

1,34

0 sqm

1,31

6 sq

m

1,25

1 sq

m

1,24

6 sq

m

1,07

0 sq

m

505

sqm

547

sqm

510

sqm

350

sqm

472

sqm

427

sqm

515

sqm

452

sqm

369

sqm

394

sqm

541

sqm

432

sqm

210

sqm

97 s

qm

74 s

qm

24 s

qm

34.70

40.0042.00

39.00 39.00

36.50 36.0038.00 38.00

39.20 39.00 39.20

17.0019.00

21.00 20.30 20.00 19.5020.50 20.50 20.50 20.50

19.30 20.10

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

0

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1-Q3 2017

Market Data

Take-up according to location Q1-Q3 2017

91,200 sqm

46,200 sqm

31,900 sqm

21,500 sqm

7,600 sqm2,000 sqm

38,900 sqm31,800 sqm

16,400 sqm

1,400 sqm

107,300 sqm

0

20,000

40,000

60,000

80,000

100,000

120,000

Bankenlage Westend Bahnhofsviertel Stadtmitte City West Messe Westhafen Nordend Bockenheim OF-Kaiserlei Eschborn Niederrad (Büro) Mertonviertelother locations

65 Deals

91 Deals

42 Deals

68 Deals

3 Deals

143 Deals

5 Deals13 Deals

Total: 432,200 sqm

34 Deals

19 Deals

6 Deals

5 Deals

The Frankfurt market for office space lettings including Eschborn and Offenbach-Kaiserlei was able to continue the very positive development of the previous two quarters. The period from July to September 2017 represented the strongest third quarter of the past ten years, with space take-up by tenants and owner-occupiers of 183,900 sqm. This also represented a year-on-year increase of 45.1 % or 57,200 sqm. Space take-up for the first nine months of 2017 amounted to 432,200 sqm, which exceeded the previous year’s level by around a quarter.

The Frankfurt office market is chasing new records, and for the full year will in all likelihood achieve the second-highest space take-up volume since 2000. Partly as a consequence of Brexit, large deals in particular will help generate above-average take-up for the fourth quarter of 2017.

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

Frankfurt office market with prospect of second-best annual result

Vacancy (in thousand)

Take-up (in thousand)

Prolongation after market screening (in thousand)

Average take-up 10 years (in thousand)

Prime rent (in €/sqm)

Average rent (in €/sqm)

9,100 sqm12,600 sqm18 Deals

14,300 sqm18 Deals

Take-up according to unit size Q1-Q3 2017

152,100 sqm

73,400 sqm 71,600 sqm 71,400 sqm63,700 sqm

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Total 432,200 sqm

449 Deals

47 Deals 19 Deals 11 Deals4 Deals

Take-up according to rents Q1-Q3 2017

20,100 sqm

109,600 sqm 114,000 sqm

38,300 sqm

58,400 sqm 57,600 sqm

0

20,000

40,000

60,000

80,000

100,000

120,000

< €10 €10 < 15 €15 < 20 €20 < 25 €25 < 30 ≥ €30

78 Deals 35 Deals

Total: 398,000 sqm*

34 Deals

150 Deals 162 Deals

68 Deals

*lettings only, no owner occupiers

Take-up according to space quality Q1-Q3 2017

Total 432,200 sqm

Take-up according to industry Q1-Q3 2017

Banking, Financial Services & Insurances

Consulting, Marketing & Research

Construction & Real Estate

Communication & IT

Law Firms, Notaries & Legal Services

Others & n/a

Market Data

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

< 1,000 sqm 1,000 - 2,500 sqm 2,501 - 5,000 sqm 5,001 - 10,000 sqm > 10,000 sqm

superior

average

ordinary

59.2 %

31.2 %

9.6 %

23.6 %

12.2 %

10.4 %9.2 %

8.2 %

36.4 %

The two categories above 5,000 sqm have already registered especially strong growth in the first three quarters of the year. Take-up increased by 29.5 % year-on-year in the “5,001 – 10,000 sqm” cluster, while in the “10,000-sqm-plus” cluster the volume grew by as much as 124.4 %.

The biggest deals in both the third quar-ter and the year to date include the owner-occupier purchase of the Main-Park (29-35 Kaiserleistraße) with ap-proximately 27,500 sqm of office space by Landesbank Hessen-Thüringen (Helaba) and the lease contract for 14,400 sqm at 277-293 Mainzer Land-straße by the City of Frankfurt am Main.

The banking, financial services and in-surance sector was again in first place in a ranking of the different office user groups, accounting for a volume of 102,100 sqm or a 23.6 % market share. The group comprising consulting, mar-keting and research was next in line with 52,900 sqm or a 12.2 % share, followed by the construction and real estate in-dustry with 45,100 sqm or 10.4 % of the market.

Due to the Helaba purchase, the super-ordinate location “office centres” gained further in significance and accounted for 20.5 % of take-up or 88,400 sqm in total (H1 2017: 16.6 %). However, the Central Business District remained the most popular location with 236,400 sqm or a 54.7 % market share.

Large lettings in high-priced project de-velopments such as “Omniturm” or “Four” influenced rental prices in the third quarter of 2017. Compared to the previous quarter, the average rent in-creased by €0.60/sqm to €20.10/sqm. The prime rent grew by €0.20/sqm to the current level of €39.20/sqm.

Main Location Vacancy

F-CBD 446,500 sqm F-WEST 53,000 sqm F-SOUTH 91,500 sqm F-NORTH 56,500 sqmF-EAST 46,200 sqm OFFICE CENTRES 375,900 sqm

Total 1,070,000 sqm

data as of 30.09.2017 * inclusive subletting spaces in comparison to pervious reports changed main locations edition: January 2008 / © Stadtvermessungsamt Frankfurt a. M., 2008

Frankfurt am Main Airport

Office stock

Take up

Average rent

Prime rent €27.00/sqm

371,200 sqm

26,700 sqm

€20.00/sqm

Office Locations Frankfurt a.M. Q3 2017 We have divided the office market Frankfurt into the most important main locations and have colored them separately. In addition, every location is divided into the particular borough and identified with the correspond-ing apellation of site.

Sou

rce:

NA

I apo

llo

Office Locations

Submarkets Office stock (sqm) vacancy (sqm) in % Ø-rent (€) Prime rent (€) Rentable objects1. Höchst 189,000 6,500 3.4 8.00 16.00 82. Eschborn-West 168,100 31,600 18.8 10.00 13.00 83. Eschborn-Süd 386,300 94,000 24.3 11.00 15.30 244. Eschborn-Ost 123,900 8,500 6.9 11.50 15.00 45. Sossenheim 87,300 6,800 7.8 11.00 12.50 36. Nied 700 0 0.0 8.90 11.00 07. Rödelheim 115,500 22,900 19.8 9.50 12.50 108. Griesheim 16,800 0 0.0 6.00 8.50 09. City West 517,100 73,600 14.2 14.50 21.00 1410. Gallus 580,300 16,400 2.8 11.00 15.00 811. Niederrad (Büro) 609,700 88,900 14.6 12.00 16.00 1712. Niederrad (Stadt) 12,500 0 0.0 10.00 13.00 013. Gutleutviertel 138,300 300 0.2 11.50 13.00 114. Westhafen 88,100 11,900 13.5 22.50 27.00 615. Bahnhofsviertel 404,000 46,600 11.5 17.00 26.50 3116. Messe/Europaviertel 313,400 36,600 11.7 23.50 34.50 417. Bockenheim 311,200 22,200 7.1 14.50 19.00 818. Westend 658,600 92,400 14.0 22.50 37.00 6219. Bankenlage 1,122,300 96,300 8.6 30.00 39.20 2320. Stadtmitte 581,700 53,000 9.1 23.00 36.00 5521. Nordend 126,700 13,900 11.0 17.50 25.00 1022. City Ostend 226,300 2,600 1.1 14.50 17.00 323. Sachsenhausen 444,600 38,600 8.7 13.00 19.00 2424. Oberrad 4,500 700 15.6 12.00 15.50 325. OF-Kaiserlei 239,800 33,600 14.0 10.00 12.50 826. Ostend-Ost 355,300 26,400 7.4 13.00 18.50 2427. Bornheim 36,900 200 0.5 9.00 13.50 228. Riederwald/Fechenheim 226,400 10,100 4.5 8.00 11.00 729. Bergen-Enkheim 50,600 6,800 13.4 7.00 12.00 630. Seckbach 15,100 100 0.7 7.00 9.00 131. Eckenheim 13,900 900 6.5 12.00 16.00 232. Eschersheim 33,400 800 2.4 10.00 16.50 233. Nieder-Eschbach 138,000 36,700 26.6 8.00 10.50 1234. Mertonviertel 275,500 119,300 43.3 12.00 14.00 835. Heddernheim 10,900 700 6.4 10.00 12.00 236. Praunheim/Hausen 108,000 16,500 15.3 11.50 13.50 7Total(inclusive other locations)

11,371,000 1,070,000 9.4 20.10 39.20 417

Sou

rce:

NA

I apo

llo

Geographical localisation of office spaces completions 2017 accor. to size categories (> 1,000 sqm)

Geographical localisation of large-scale lettings Q1-Q3 2017 accor. to size categories (> 1,000 sqm)

Market Data

Lettings according to size

> 1,000 sqm - ≤ 2,500 sqm> 2,500 sqm - ≤ 5,000 sqm> 5,000 sqm - ≤ 10,000 sqm>10,000 sqm

Office space completion according to size

> 1,000 sqm - ≤ 5,000 sqm> 5,000 sqm - ≤ 10,000 sqm> 10,000 sqm - ≤ 20,000 sqm> 20,000 sqm

Vacancy according to vacancy size Q3 2017

79,400 sqm

161,800 sqm209,200 sqm

274,300 sqm

344,800 sqm

152,100 sqm 73,400 sqm 71,600 sqm 71,400 sqm 63,700 sqm0

100,000

200,000

300,000

400,000

500,000

600,000

< 1,000 sqm 1,000 - 2,500 sqm 2,501 - 5,000 sqm 5,001 - 10,000 sqm > 10,000 sqm

Vacancy Take-up Q1-Q3 2017

199 (sub-)properties

99 (sub-)properties

61 (sub-)properties

40 (sub-)properties

18 (sub-)properties

Total: 1,070,000 sqm (417 sub-properties), occupied within three months

Vacancy according to asking rent Q3 2017

140,500 sqm

463,100 sqm

178,700 sqm

20,100 sqm 109,600 sqm 114,000 sqm 38,300 sqm 58,400 sqm 57,600 sqm0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

< €10 €10 < 15 €15 < 20 €20 < 25 €25 < 30 ≥ €30

Vacancy Take-up Q1-Q3 2017

Total: 1,070,000 sqm (417 sub-properties), occupied within three months*

70 (sub-)properties

148 (sub-)properties

99 (sub-)properties

103,400 sqm 108,000 sqm 75,900 sqm

42 (sub-)properties 35 (sub-)properties 23 (sub-)properties

*average asking rent of all spaces per property

Vacancy according to quality of space Q3 2017

Total: 1,070,000 sqm (417 sub-properties), occupied within three months

Completions

80,1

00 s

qm

157,

400

sqm

300,

500

sqm

110,

500

sqm

126,

200

sqm

98,7

00 s

qm

102,

500

sqm

9,20

0 sq

m

17,7

00 s

qm

49,9

00 s

qm

35,5

00 s

qm

32,6

00 s

qm

7,40

0 sq

m

27,2

00 s

qm

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2012 2013 2014 2015 2016 2017 2018

Completions thereof rentable (before completion)

Outlook next 12 months

Market Data

No office properties of any significance were completed in the third quarter of 2017, while in contrast around 18,000 sqm was removed from the mar-ket and converted into residential space. As a result, office stock declined to 11.37 million sqm at the end of Q3 2017.

In the year as a whole, the projected completions volume currently stands at 98,700 sqm, of which only 7,400 sqm is still available on the rental market.

Vacancies fell further in the period from July to September, continuing an ongo-ing trend. Market-active vacancies on the Frankfurt office market – that is, of-fice space that can be occupied within three months of the contract signing – decreased by a further 74,000 sqm to 1.07 million sqm within the quarter. This translates into a vacancy rate of 9.4 %, which fell 0.6 %-points during the previ-ous three months.

The lettings pipeline is still well-filled and will have a significant impact on the fourth quarter of 2017, which is why it is able to forecast space take-up of signif-icantly above 600,000 sqm for the full year. As a consequence, vacancies will continue to decline and rents will con-tinue to rise.

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

Sou

rce:

NA

I apo

llo

Take-up

Average rent

Vacancy

Prime rent

Office stock

Sou

rce:

NA

I apo

llo

$

$

$

$

%

superior

average

ordinary

53.6 %

27.2 %

19.2 %

Market Data Surroundings of Frankfurt Average and Prime Rents

Source: NAI apollo Map Basis: RegioGraph GfK GeoMarketing GmbH On the basis of 5,314 offers (08/2016 - 07/2017) empirica-systeme Marktdatenbank

Surroundings

Frie

dric

hsdo

rf 7.

20 /

11.

60€/

sqm

Bad

Hom

burg

9.

90 /

15.

20€/

sqm

Obe

rurs

el

8.40

/ 1

3.00

€/sq

m

Kro

nber

g

10.7

0 /

14.7

0€/s

qm

Bad

Sod

en

9.70

/ 1

3.20

€/sq

m

Kel

khei

m

8.00

/ 1

2.70

€/sq

m

Ste

inba

ch

6.90

/ 1

0.00

€/sq

m

Sch

wal

bach

10

.70

/ 12

.80€

/sqm

Sul

zbac

h

9.30

/ 1

3.80

€/sq

m

Lied

erba

ch

7.10

/ 1

0.00

€/sq

m

Hof

heim

6.

60 /

13.

00€/

sqm

Krif

tel

7.30

/ 1

0.40

€/sq

m

Hat

ters

heim

9.

40 /

13.

00€/

sqm

Kel

ster

bach

8.

80 /

13.

10€/

sqm

Mör

feld

en-W

alld

orf

7.70

/ 1

0.80

€/sq

m

Lang

en

7.70

/ 1

1.90

€/sq

m

Dre

ieic

h

6.70

/ 1

2.10

€/sq

m

Neu

-Ise

nbur

g

9.20

/ 1

3.10

€/sq

m

Die

tzen

bach

6.

30 /

10.

70€/

sqm

Offe

nbac

h

9.40

/ 1

4.50

€/sq

m

Mai

ntal

5.

40 /

10.

10€/

sqm

Han

au

6.90

/ 1

2.20

€/sq

m

Bad

Vilb

el

8.90

/ 1

2.60

€/sq

m

Airp

ort

20.0

0 /

27.0

0€/s

qm

Top take-up Q1-Q3 2017

Cities

Office space, take-up, vacancy, prime rent, average rent Q3 2017

Prime yields Q3 2017

Frankfurt a. M.

Top investments Q1-Q3 2017

Top 5 – Key Facts

Prime office yields Prime retail yields

Berlin 3.10 % 3.25 %

Dusseldorf 3.80 % 3.40 % 4.70 %

Frankfurt a. M. 3.45 % 3.45 % 4.70 %

Hamburg 3.20 % 3.30 % 4.70 %

Munich 3.10 % 2.95 % 4.65 %

Total Ø = 3.35 % Ø = 3.25 % Ø = 4.70 % Sou

rce:

NA

I apo

llo

Office space (in m. sqm) Vacancy (in %) Prime rent (€/sqm) Average rent (€/sqm)

Berlin 18.60 2.4 30.00 17.10

Dusseldorf 9.13 7.9 26.50 14.50

Frankfurt a. M. 11.37 9.4 39.20 20.10

Hamburg 13.70 4.9 26.50 15.10

Munich 20.15 3.4 36.00 16.60 Sou

rce:

NA

I apo

llo

Leased area in sqm

27,500

14,400

Clifford Chance 11,800

Omniturm, Große Gallusstraße 16-18 / Bankenlage Morgan Stanley 10,000

Berliner Straße 316 / Offenbach-Kaiserlei Axa Versicherung 8,000

Tenant / owner occupier

Helaba

Property + Location

MainPark, Kaiserleistraße 29-35 / Offenbach-Kaiserlei

Mainzer Landstraße 277-293 / Gallus Stadt Frankfurt

Junghof Plaza, Junghofstraße 18-26 / Bankenlage

Sou

rce:

NA

I apo

llo

Amundi Real Estate

Purchase Price

approx. €310,000,000

T8, Taunusanlage 8 Mirae Asset Global Investments Co. approx. €300,000,000

Eschborn Plaza, Mergenthalerallee 3-5 Aurec / Migdal Insurance Group etc. approx. €236,000,000

WestendCarree, Grüneburgweg 14-18 Infrared Capital Partners approx. €127,000,000

Frankfurt Airport Center 1 (FAC 1), Hugo-Eckener-Ring 1 Madison International Realty / Peakside approx. €120,000,000

Property + Location

Grand Central, Adam-Riese-Straße

PurchaserS

ourc

e: N

AI a

pollo

Prime logistics yields

4.70 %

ONE PARTNER. ALL SERVICES. ALL ASSET CLASSES. OFFICE - RETAIL - LOGISTICS - RESIDENTIAL

ASSET MANAGEMENT

ACCOUNTING

BUILDING MANAGEMENT

PROJECT DEVELOPMENT

VALUATION AND RESEARCH

CORPORATE FINANCE ADVISORY

CORPORATE REAL ESTATE SERVICES

PROPERTY MANAGEMENT

SALES

LETTING

This report is for information purposes only. It was compiled with the

utmost care and is based on information from sources that we regard as

being reliable, but for which we assume no liability for their accuracy,

completeness or correctness. Estimates, figures and forecasts con-tained in this document are for guidance only. This report does not pur-

sue the aim of promoting the purchase or sale of a particular financial

investment and thus should not be considered as such an offer. The

reader of this report must make his or her own independent decisions in

regards to correctness and completeness. The NAI apollo assumes no liability for direct or indirect damage that arises through inaccuracies,

omissions or errors in this report. We reserve the right to make changes

and/or additions to the information contained therein at any time. Neither

the report nor parts thereof may be published, reproduced or passed on

without the written consent of the NAI apollo.

Copyright © NAI apollo, 2017. YOUR PROPERTY PARTNER – WE DISTINGUISH OURSELVES BY

OWNER-MANAGED

PARTNER ACTIVE IN DAY-TO-DAY BUSINESS

MORE THAN 25 YEARS OF MARKET EXPERIENCE

INDEPENDENT - INNOVATIVE - SOLUTION-ORIENTED

LOCAL - NATIONAL - TOP NETWORK

FLEXIBLE - CUSTOMER-FOCUSED - COMPETENT