A LOOK INSIDE.

THE STUTTGART OFFICE MARKET 2013/2014

MILAN EO Ofce + retail To be completed 1st quarter of 2015 LO O K 2 1 Trlenstr. 2 Ofce + residential To be completed 1stquarter of 2017

CITYGATE Kriegsbergstr.11 Ofce + retail To be completed 4thquarter of 2014

B L OW CARR Lautenschlagerstr. 21 Ofce + retail Completed in 2013 80% let (ofce)

H OS P I TA L H OF Hospitalplatz/Gymnasiumstr. Ofce Completed in 2013 100% let

4 5

D O R O THEEN Q UAR T IE R Dorotheenstr./Holzstr. Ofce + retail + residential To be completed 2ndquarter of 2017 90% let (ofce)

DAS GER BER Marien-/Tbinger-/Paulinenstr. Ofce + retail + residential To be completed 4thquarter of 2014 15% let (ofce)

PA U L INE Paulinenstr. 21 Ofce completed in 2013 70% let (ofce)

CA L EIDO Tbinger Str. 41 43 Ofce + retail + residential completed in 2013 60% let (ofces)

OVERVIEW OF THE STUTTGART OFFICE MARKET

Year Volume in sq. m Representative prime rents Average central business district rents 2000 Vacancies (sq. m) Vacancies (%) Total space (mill. sq. m) Completion volume (sq. m) Pre-leased volume (sq. m)

205,000

16.87

14.90

100,000

1.50

6,356

60,000

No data

2001

160,000

18.41

15.34

137,000

2.00

6,516

160,000

130,000

2002

127,000

17.89

14.80

292,000

4.20

6,828

312,000

220,000

2003

149,000

17.50

14.50

379,000

5.30

6,973

145,000

80,000

2004

152,000

17.00

14.50

415,000

5.70

7,102

129,000

93,500

2005

145,000

17.00

13.50

402,000

5.60

7,170

68,500

51,400

2006

140,000

17.50

13.50

467,400

6.50

7,222*

52,500

20,500

2007

169,000

17.50

14.50

466,000

6.40

7,253

32,600

23,400

2008

180,000

18.00

14.50

460,000

6.20

7,367

117,000

116,000

2009

171,000

18.00

13.60

453,000

6.12

7,401

40,000

22,000

2010

194,000

17.50

14.30

480,000

6.46

7,425

42,400

22,400

2011

285,000

18.80

14.30

424,000

5.70

7,449

45,900

41,200

2012

191,500

20.00

14.60

399,000

5.40

7,416

37,000

36,300

2013

258,000

20.00

14.40

365,000

4.87

7,496

81,200

62,700

* Data from a survey by BulwienGesa AG + Baasner, Mller & Langwald GmbH

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

CONTENTS.
Foreword 8 Stuttgart well prepared for the future Steady progress in the Europaviertel Stuttgarts ofce market delivers impressive performance Strong demand from the public sector and from industry Large rental transactions playing a signicant role Rents remaining steady at a high level Vacancy rate falls below the 5-percent mark Stuttgart leading Germany in growth Stuttgart central business district / city centre: New spaces have attracted many tenants Northern Stuttgart: Increasingly attractive Eastern Stuttgart: Making rapid progress Southern Stuttgart: Record results in some areas Overview of the Stuttgart ofce market Another vibrant market year expected for 2014 Your contact partners ELLWANGER & GEIGER Real Estate 22 23 24 25 27 28 30 31 10 11 12 14 15 16 18 20

FOREWORD.

Stuttgarts future: Investments in infrastructure.

Stuttgarts citizens nd their city very attractive, as do the companies based there and those companies drawn by the many opportunities in the economic region and planning to relocate there. To preserve the citys high quality as a place to live and work, the most recent budget was based on the principle save in order to invest and the citys infrastructure will be a major area for these investments. The raft of investment measures will address the needs of Stuttgarts citizens and businesses, with the aim of improving living conditions in many areas, most importantly child care, mobility, energy and the provision of affordable housing. Industrial and economic policies will focus on those areas of business and industry where the region is already strong. Stuttgarts companies are widely known for their expertise in mobility, machine manufacturing and information technology. The city, already a leading automotive manufacturing location, is also on the way to becoming the major centre for jobs related to mobility. This process will require close cooperation with the local automotive manufacturers and their suppliers. One gure reects the ongoing transition from industrial production to services: 79.9 percent of all e mployees in the city paying into the social insurance system are employed in the service sector. The nancial sector is crucial in this connection. It is a major employer in the city, accounting for 8.2 percent of all jobs in the city, putting Stuttgart in second place among German cities after Frankfurt. The engineering industry is another area in which environmental protection and the efcient use of resources are gaining worldwide importance. Companies will have to develop energy-efcient facilities and meet the requirements of the Industry 4.0 Strategy by implementing the necessary sensor technology and software. The goal is to make Stuttgart, already renowned as a location for research and industry, just as well known as a centre for environmental technologies, while ensuring it remains Germanys most attractive city.

Fritz Kuhn
Mayor of Stuttgart

Ines Aufrecht
Director of Business Development, Stuttgart

8 9

A promising location.
In 2013 the turnover on Stuttgarts ofce market was excellent, and the prospects for the coming years look good too. The city continues to be attractive to investors as well as the working population. Care was taken at an early date to set the right course for the future, and this has paid off. A good example is electromobility, an area in which Stuttgart has been playing a pioneering role. In addition, its universities are continually devising new study courses in renewable energy, and new business clusters are sprouting up in medical technology. The city has taken important steps in these areas to strengthen the links between research and education. Given the current economic climate, the Stuttgart region can look forward to continued growth in 2014, as it will also continue to benet from the export trade of locally-based companies. This means that demand for energy-efcient, certied and optimally congured ofce space will likewise remain strong. In view of developments in past years in the city centre, however, there will certainly be fewer opportunities there for new projects. This will make it all the more important to promote growth in the peripheral parts of Stuttgart. The following pages present detailed facts and gures on developments in Stuttgarts ofce market in 2013. We hope you will nd the report informative and will be glad to respond to any questions or suggestions you may have.

Mario Caroli

Bjrn Holzwarth

STUTTGART WELL PREPARED FOR THE FUTURE.

When planning for the future, cities have always had to take a wide range of continually changing factors into account. In this respect, Stuttgart has been very far-sighted, making itself equally attractive as a place to work for both employees and investors. This has been greatly appreciated in a number of different studies. For example, studies carried out by the HWWI and the Prognos Institute have recently commended the city for its forward-looking planning.
CLOSE LINKS BETWEEN ACADEMIA AND BUSINESS The demand for highly qualified personnel is steadily increasing in industries and service sectors where research and expertise play an important role. It was Stuttgart that recognised this trend at an early stage: in recent years, it has encouraged the development of closer links between academia and business, for example by establishing new business clusters in medical technology and new courses of study in the eld of renewable energy. IMPORTANCE OF ELECTROMOBILITY RECOGNISED AT AN EARLY DATE A number of years ago already, the city started to give strong support to electromobility, becoming one of the four model regions in Germanys Showcase for Electromobility. The Car2Go concept has now become well established, and hybrid buses provide a regular service through the city. INSTITUTIONAL INVESTORS ACTIVE IN THE HOUSING MARKET A well-functioning housing market is also very important for the future. In the last two years, major institutional investors have put money into projects like the Pariser STUTTGART ONE OF GERMANYS MOST ATTRAC TIVE RETAIL LOCATIONS The retail sector is another major contributor to quality of life in Stuttgart: with its 2.6 million consumers, the citys catchment area ranks fourth in the country in a ttractiveness for retailers, behind Berlin, Hamburg and Munich. The healthy state of Stuttgarts economy is reflected in its unemployment rate, which has been low for years: at 4.3percent it is well below the national average of 6.8 percent. Hfe, Milaneo and Gerber: a total of approximately 750 new residential units have now been completed. Additional projects will also help to meet the need to build housing in the coming years, which comes to about 1,500 units annually. The last ten years have also seen efforts by Stuttgarts Student Social Services to create housing for students. In the next three years alone, 1,000 additional units will be built as student residences and will cover the needs of the citys students, who now number more than 70,000.

PER CAPITA PURCHASING POWER IN 2013, IN : CITIES WITH 500,000 OR MORE RESIDENTS
Munich 28,920

Dsseldorf

25,566

Frankfurt

24,920

Stuttgart

24,297

Hamburg

23,469

Cologne

23,236

Berlin 19,423

Source: GfK GeoMarketing, figures as of January 2014

10 11

STEADY PROGRESS IN THE EUROPAVIERTEL.

The Europaviertel is now coming alive. The new City Library has opened, and the 240 apartments in the Pariser Hfe are now occupied. In 2014 the Sparkassenakademie and the Milaneo will be completed, another milestone in the development of this area which will enhance its urban character.
The Pariser Hfe project was completed in late 2012, and in the rst quarter of 2014 the Sparkassenakademie will be ofcially dedicated. The Sparkassenakademie has some 12,600 square metres of new training and admini strative space and about 160 apartments. The Milaneo project currently under construction will provide around 45,000 square metres of retail space, 7,400 square metres of o ffice space and 450 apartments. It will also feature a 165-room hotel belonging to the Starwood chain. The retail premises will open in late 2014. Construction in the other areas, including the residential units, is scheduled for the rst two quarters of 2015. Construction work for the Cloud No. 7 project began in 2013. This residential and commercial high-rise will have some 25 privately owned apartments a 175 room hotel belonging to the Steigenberger Group and about 52 business apartments. It will probably be ready for occupancy by the summer of 2016. In addition, a number of projects have been launched in the areas adjacent to the Europaviertel. Two three-star hotels are being built: a Hampton by Hilton and a Holiday Inn Express with a total of about 321 rooms. In addition, an A&O hostel with some 400 beds is under construction. Completion of these projects is expected by 2015 at the latest. Development of the former Mercedes-Benz site is also under way. This project, called Look 21, consists of an elongated building facing Heilbronnerstrasse and Trlenstrasse, and a residential complex at the rear. Sdwestmetall (Baden-Wrttembergs metal industry association) will have its future headquarters here. Part of the tram line is currently being relocated owing to construction work on the Stuttgart 21 project. By 2016 the new U12 line through the Europaviertel will be nished, and the original line will have been modied.

STUTTGARTS OFFICE MARKET DELIVERS IMPRESSIVE PERFORMANCE.

With some 258,000 square metres of rented ofce space as of 31 December 2013, Stuttgarts ofce market exceeded all expectations. The result was already visible after the third quarter of the year. At that time the rental turnover, at approximately 194,000 square metres, had already surpassed the previous years total of some 191,500 square metres. Owner-occupiers accounted for about 36,000 square metres of the turnover, and of this amount some 23,000 square metres were contributed by the new building of the German Pension Insurance Association. The rental take-up for the whole year thus exceeded the previous years level by about 34 percent.
HIGHEST TURNOVER IN THE SOUTHERN FRINGE AREAS The highest turnover for 2013 was achieved in Stuttgarts southern fringe areas. The biggest transaction was the long-awaited rental contract of Ernst & Young GmbH in Airport City, for about 25,500 square metres. DaimlerAG signed l eases in Stuttgart-Mhringen and Leinfelden- Echterdingen, for 11,315 and 17,640 square metres respectively. In Stuttgart-Vaihingen the biggest contract, for some 13,500 square metres, was signed by the book wholesaler KNV, which plans to build a new administrative building on the premises it formerly owned. In addition, a new building was let to a single user in the Stuttgart Engineering Park, located in Vaihingen. The t urnover figures in the submarkets of Leinfelden-Echterdingen and Vaihingen-Mhringen were high as well. In the northern fringe areas, the Zuffenhausen/Feuerbach submarket showed good results. The main factor here, however, was the decision of the German Pension Insurance Association to build in Stuttgart-Freiberg, with some 23,000 square metres. In the city centre, not quite as many contracts were signed as in the previous year. The biggest transaction involved the new building project of Sdwestmetall, BadenWrttembergs metal industry association. Located on the former Mercedes premises on Trlenstrasse, it has about 11,200 square metres of space. RENTAL TURNOVER IN STUTTGARTS CENTRAL BUSINESS DISTRICT NOT UP TO PREVIOUS LEVELS The rental turnover in Stuttgarts central business district came to approximately 34,600 square metres, which was well below the levels of the previous two years. The main reason was a lack of big transactions, although the demand for large premises is still strong and some major contracts are currently under negotiation. In 2013 the largest contract in the central business district came to about 5,000 square metres.

12 13

194,000

180,000

159,000

149,000

152,000

145,000

2 001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

RENTAL TAKE-UP IN STUTTGART AND SUBMARKETS IN SQ. M

2003 Central business district City centre Vaihingen/Mhringen Fasanenhof Feuerbach/Zuffenhausen Degerloch Weilimdorf Bad Cannstatt/Wangen Leinfelden-Echterdingen Total 4,600 28,400 14,450 72,500 8,400 3,000 750 14,000 2,900 149,000 2004 55,100 21,700 30,800 4,000 20,600 6,000 3,000 7,700 3,100 152,000 2005 33,300 43,200 10,400 3,700 9,800 3,400 6,600 24,600 10,000 145,000 2006 43,000 31,300 32,600 3,500 2,000 4,500 6,000 13,500 3,600 140,000 2007 61,500 46,600 13,700 2,300 6,800 7,200 5,100 15,400 10,400 169,000 2008 44,400 41,700 18,500 10,600 12,300 9,200 12,800 12,500 18,000 180,000 2009 38,200 83,800 20,200 2,700 3,300 4,900 5,900 8,100 3,900 171,000 2010 32,800 66,600 26,200 5,300 28,500 2,100 11,400 8,300 12,800 194,000 2011 63,000 97,500 56,300 12,500 24,800 4,000 5,500 13,400 8,000 285,000 2012 61,500 58,400 18,200 7,400 18,700 4,800 5,300 12,000 5,200 191,500 2013 34,600 51,000 62,200 5,700 27,200 1,900 7,700 19,800 47,900 258,000

127,000

140,000

169,000

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

171,000

191,500

258,000

RENTAL TAKE-UP OF OFFICE SPACE IN STUTTGART 20012013 IN SQ. M

285,000

STRONG DEMAND FROM THE PUBLIC SECTOR AND FROM INDUSTRY.

Demand from the other office users category, which includes various services providers, self-employed professionals and retail companies, came to approximately 73,900 square metres. This corresponded to about 29 percent of total rental turnover. The public sector was another important source of demand: it accounted for about 24 percent of turnover, or some 61,300 square metres. This gure includes rental transactions by associations, and also the decision of Baden-Wrttembergs metal industry association to build new headquarters on Trlenstrasse with about 11,200 square metres. Following a slight decline in 2012, demand from the energy and industry sectors came back strongly. The companies in this category rented some 45,500 square metres of office space, amounting to about 18 percent of the total rental volume. Prominent among them was Daimler AG, with two major transactions. The consultants In terms of percentage, demand in the IT/telecommunications category declined, but this was only due to the increase in the markets total turnover, and not to a fall in demand. In absolute terms, the demand in this category came to approximately 21,600 square metres, almost matching the previous years level of 22,300 square metres. Demand in the nancial service providers category fell last year by more than 50 percent compared to 2012. It amounted to only 7,100 square metres, as against 14,600 square metres the previous year. Demand was also lower in the media/communications category. It likewise came to only 7,100 square metres, or 2.7 percent of total turnover. category again played a significant role in Stuttgarts ofce market. The transactions here totalled approximately 41,500 square metres, most importantly the 25,500 square metres leased by Ernst & Young at Stuttgart Airport.

TAKE-UP BY SECTORS IN %
2004 Media/Communication Financial service providers Consultants Public sector Other Energy/Industry IT/Telecommunications Total 4.00 34.00 5.00 9.00 29.00 9.00 10.00 100 2005 8.00 12.00 10.00 21.00 28.00 13.00 8.00 100 2006 6.64 9.93 20.29 3.21 35.21 12.86 11.86 100 2007 6.27 10.36 18.4 17.75 37.28 9.94 100 2008 5.56 15.78 13.39 7.22 36.94 21.11 100 2009 6.14 8.36 7.72 30.41 40.94 6.43 100 2010 4.07 8.41 13.35 8.14 48.04 17.99 100 2011 3.82 8.67 8.00 13.68 40.42 15.79 9.62 100 2012 5.20 7.60 16.70 14.50 35.00 9.30 11.70 100 2013 2.74 2.77 16.00 23.74* 28.61 17.77 8.37 100

* including take-up by associations amounting to approx. 30%

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

14 15

LARGE RENTAL TRANSACTIONS PLAYING A SIGNIFICANT ROLE.

Stuttgart has a tradition of a large number of transactions for small premises. In 2013 there were again more than 200 leases for premises up to 500 square metres. But eight major transactions accounted for the biggest share of the rental turnover. A total of 314 contracts were signed.
In the segment up to 500 square metres, there were 229 transactions, with a total rental volume of approximately 54,300 square metres. Of these, 133 were in the central business district and city centre. In all, they came to 31,100 square metres, or about twelve percent of the total rental turnover. For premises in the range from 501 to 1,000 square metres, there were 53 transactions, a slight decline compared with the previous year. Transactions in the segment from 1,001 to 2,000 square metres almost reached the previous years level. Here 18 leases were signed totalling some 24,800 square metres. In the segment from 2,001 to 5,000 square metres there was much less movement. The largest share of the transactions, accounting for 46 percent of the total and approximately 120,000 square metres, was in the segment above 5,000 square metres. Only eight leases sufced to reach this gure. Four were for premises exceeding 10,000 square metres, such as the transaction by the State of Baden-Wrttemberg and two by Daimler AG in Mhringen and Leinfelden-Echterdingen. Two exceeded 20,000 square metres: Ernst & Young at Stuttgart Airport and the German Pension Insurance Association in Stuttgart-Freiberg. Whereas there were 14 transactions in this range in 2012, there were only six in 2013.

COMPARISON OF NEW CONTRACTS BY SIZE

54,720

54,258

40,868

37,183

43,146

24,003

24,733

22,141

28,763

119,685

2012 Total space 2012: 191,500 sq. m < 500 sq. m 5011,000 sq. m 1,0012,000 sq. m 2,0015,000 sq. m > 5,000 sq. m

2013 Total space 2013: 258,000 sq. m

COMPARISON OF NEW CONTRACTS BY NUMBER

229

197

59

53

2012 18 18 14 Total number 2012: 292 6 4 8

2013 Total number 2013: 314

< 500 sq. m

5011,000 sq. m 1,0012,000 sq. m 2,0015,000 sq. m

> 5,000 sq. m

Source for both charts: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

RENTS REMAINING STEADY AT A HIGH LEVEL.

In 2013, the rent levels on Stuttgarts office market again held steady: the average rent for Stuttgart as a whole was relatively high at 12.00 euros per square metre.
A total of 137 leases, or 43 percent, were signed in the price segment up to 10.00 euros per square metre. In the range from 10.01 to 13.00 euros per square metre 112 leases were signed. The next segment, 13.01 to 15.00 euros per square metre, showed a significant increase: 78 transactions in 2013 as compared to 48 in 2012. In the range above 15.00 euros per square metre, 27 ofce premises were newly rented, 11 of which were above 17.00 euros per square metre. CENTRAL BUSINESS DISTRICT: HIGH-QUALITY P REMISES COMMAND PRIME RENTS In 2013, the prime rent in Stuttgarts central business district remained at about 20.00 euros per square metre, as confirmed by a number of new lease agreements. The average rent, at about 14.40 euros per square metre, was slightly below the 2012 average of 14.50 euros. Rents in the city centre showed signicant increases, with new projects and expensive renovations of old buildings pushing the peak rent from 16.00 euros per square metre in the previous year to 17.00 euros per square metre. The average rent rose accordingly, from 11.50 to 12.00 euros per square metre. Rents showed a declining trend only in the northern fringe areas: of the leases signed in 2013, the most expensive was for only about 10.10 euros per square metre. There were few transactions for new premises owing to a lack of supply. The average rent was about 8.50 euros per square metre. SUBMARKETS DEVELOP THEIR POTENTIAL In the southern outlying districts of Vaihingen/Mhringen/ Fasanenhof and Leinfelden-Echterdingen, the peak rent rose to 15.00 euros per square metre and the average rent to about 11.60 euros per square metre, largely on account of the Ernst & Young transaction and new leases in the Colorado ofce building. In the eastern submarkets, the average rent rose from 10.00 euros in 2012 to 10.60 euros per square metre, owing to various new leases in Bad Cannstatt.

20.00

18.41

18.00

17.89

17.50

17.50

18.00

17.50

17.00

15.34

17.00

14.80

Prime rents 14.50 14.50 14.50 14.50 14.50 14.30 14.30 14.40

13.50

2 001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

13.60

Average rents

13.60

17.50

18.80

20.00

PRIME AND AVERAGE CENTRAL BUSINESS DISTRICT RENTS 20012013 IN /SQ. M

16 17

PRIME AND AVERAGE RENTS 2013 IN /SQ. M

20.00

17.00

14.40

12.00

15.00 11.50 10.10 8.50 10.60 11.60

Prime rents

Average rents XXX

Central City centre b usiness district

Outlying districts Outlying districts Outlying districts to the north to the east to the south

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

VACANCY RATE FALLS BELOW THE 5-PERCENT MARK.

The supply of vacant office space continued to decline. At the end of the year, it totalled some 365,000 square metres, as compared to the total office space of about 7.5 million square metres. This equates to a vacancy rate of about 4.9 percent. There was also a marked drop in the supply of space for subtenants: at present only about 7,200 square metres are available.
COMPLETION VOLUME IN SQ. M

312,000

Building completion 220,000

Pre-letting

145,000

143,500

131,500

115,600

104,900

80,000

81,200

68,500

79,700

82,300 43,100

51,400

49,000

40,000

42,400

45,900

41,200

37,000

28,500

32,600

23,400

22,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

In spite of the appreciably higher completion volume, only a small amount of new space came onto the market, because many new premises had been pre-let. In Stuttgarts central business district and city centre, the supply of ofce space remained almost unchanged. The situation was however better for high-quality office space in the central business district. Large units became available in existing buildings, and a number of new construction projects like the Blow Carr, Caleido and

Pauline were completed. There is still a shortage in the segment below 500 square metres. Leinfelden-Echterdingen showed significant change: leases were signed for large amounts of space in existing premises, reducing the total vacant space from about 68,100 square metres to about 50,500 square metres. The number of available premises in relation to demand is still too high, however.

23,200

36,300

62,700

77,100

18 19

VACANT OFFICE SPACE AS OF 31 DECEMBER 2013

Degerloch 10,200 sq. m Feuerbach, Zuffenhausen 14,100 sq. m

2.79% 3.86%
Stuttgart city centre 71,000 sq. m Bad Cannstatt, Wangen etc. 23,200 sq. m

6.36% 19.45%
Vaihingen 23,500 sq. m

100%
(equal to approx. 365,000 sq. m) 19.23%
Stuttgart central business district 70,200 sq. m

6.44%

Fasanenhof 24,000 sq. m

6.58%

8.85% 13.84%
Mhringen 32,300 sq. m

12.60%

Leinfelden-Echterdingen 50,500 sq. m

Weilimdorf 46,000 sq. m

Source for both charts: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2013

In Vaihingen and Mhringen, the supply of vacant ofce space diminished as a result of new leases in the Am Wallgraben commercial area. A construction project in progress in the Stuttgart Engineering Park has already found a tenant, accounting for most of the available space here too. The supply was also slightly reduced in the southern district of Degerloch. In the Fasanenhof commercial area, the supply of vacant space remained almost unchanged.

Bad Cannstatt in eastern Stuttgart experienced a signicant decline in available space: hardly any new building space was created, and major transactions with Deutsche Telekom and the State of Baden-Wrttemberg cut the supply from some 30,600 square metres in 2012 down to about 23,200 square metres at the end of 2013. In the north, Feuerbach and Zuffenhausen showed very little change. Weilimdorf did however increase its supply of v acant space from some 41,100 square metres to approximately 46,000 square metres.

STUTTGART LEADING GERMANY IN GROWTH.

The markets in Germanys seven top real estate locations (Berlin, Dsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart) were largely stable. Dsseldorf and Frankfurt posted good gains. Peak rents stayed constant or, as in the case of Cologne, Munich and Dsseldorf, increased. In Berlin the average rent declined. Vacancy rates went down at all office locations.
All told, the turnover of ofce space in the Big Seven came to some 2.9 million square metres. Whereas Hamburg and Cologne showed only slight increases of 2.3 and 3.7 percent respectively, Dsseldorf and Stuttgart had gains of 12.7 and 34.7 percent respectively. Dsseldorf led the group, with some 347,000 square metres the best result in ve years. Berlin had a decline of 17.3 percent to 521,000 square metres, mainly owing to a drop in leases in the segment above 5,000 square metres. In Munich, the turnover volume fell by 15.1 percent to 608,200 square metres. The sharpest drop in the vacancy rate was in Berlin, where In Hamburg, Berlin and Stuttgart, the peak rents held steady at the previous years levels of 24.00 euros, 22.00 euros and 20.00 euros per square metre respectively. In Cologne, the peak rent rose slightly to 21.25 euros per square metre. Munich, with 32.50 euros per square metre, it fell by 10 percent from 1.10 million square metres to 0.99 million square metres. Stuttgart followed with a decline of 8.5 percent from 399,000 square metres to 365,000 square metres. The average rent in Hamburg remained unchanged at 14.00 euros per square metre, whereas in Berlin and Stuttgart it declined to 12.30 and 12.00 euros per square metre respectively. Dsseldorf saw a rise (6 percent), as did Cologne (4.5 percent), while in Munich it rose (1.3percent) to 15.10 euros per square metre. was about 0.50 euros higher than in 2012. Dsseldorf posted a gain of 1.50 euros to 27.50 euros per square metre.

20 21

2008

COMPARISON OF VACANCY RATES IN GERMANY IN %

15.1 14.3 14.4 13.9

2009 2010 2011 2012

13.9

13.7

2013 11.8 11.5 11.6 10.9

10.3

9.8

9.6

8.9

9.1

9.7

8.3

8.3

8.9

8.2

8.2

8.4

8.4

9.8 7.5 8.1 7.4

7.6

7.4

7.7

6.8

6.7

7.0

6.2

5.9

6.1

6.5

5.7

6.3

5.3

5.4

Frankfurt

Dsseldorf

Cologne

Munich

Berlin

Hamburg

Stuttgart

Source: GPP German Property Partners, figures as of 31 December 2013

TURNOVER OF SPACE OF THE BIG SEVEN 20032013 IN SQ. M

820,000 853,000

765,000

620,000

716,700

580,000

540,000

590,000

510,000

480,000

608,200

Munich Berlin Frankfurt Hamburg Dsseldorf Cologne Stuttgart

285,000

180,000

149,000

152,000

145,000

2 003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: GPP German Property Partners, figures as of 31 December 2013

STUTTGART COMPARED TO OTHER GERMAN CITIES

Average rent in the central business district in 2012 22.00 26.00 35.00 24.00 21.00 32.00 20.00 2013 12.30 14.95 18.50 14.00 11.90 15.10 12.00 2012 13.20 14.90 17.50 14.00 11.40 14.90 12.40

Turnover of space in sq. m 2013 Berlin Dsseldorf Frankfurt Hamburg Cologne Munich Stuttgart 521,000 347,000 447,600 440,000 280,000 608,200 258,000 2012 630,000 308,000 514,800 430,000 270,000 716,700 191,500

140,000

169,000

Peak rent in 2013 22.00 27.50 38.00 24.00 21.25 32.50 20.00

171,000

194,000

191,500

Vacancy rate in % 2013 5.3 10.9 13.7 7.0 7.4 6.3 4.9 2012 5.9 11.6 13.9 7.4 7.6 6.8 5.4

Source: GPP German Property Partners, figures as of 31 December 2013

258,000

4.9

STUTTGART CENTRAL BUSINESS DISTRICT / CITY CENTRE: NEW SPACE HAS ATTRACTED MANY TENANTS.
In 2014 the upgrading of the Gerberviertel will be completed. Negotiations for these attractive new premises in the city centre are already under way. In the central business district, 92 percent of the new leases were in the segment up to 1,000 square metres. Demand for large and expensive premises was very weak.
In 2013, following a wave of completions in 2011 and 2012, tenants were found for many of the new premises. In the Caleido project, for example, 60 percent of the space has been let, and for the Pauline building the gure is 70 percent. The Gerberviertel project recently announced its rst lease, which was signed with a law rm. By 2015 some 7,000 square metres of ofce space will be available here. The Gerberviertel is growing steadily in attractiveness: the retail areas will be completed in the a utumn of 2014, the office space and apartments will be ready for occupancy in 2015, and the Globetrotter building in the Tbinger Carr (formerly Eberhard-Passagen) will open in 2014. Three new leases were signed in the Blow Carr, raising the occupancy level to 80 percent. The CityGate project will be ready for occupancy in late 2014, and a number of leases are already being negotiated. In the central business district, 43 percent of the rented premises were in the segment up to 500 square metres, and 23 percent were in the range up to 1,000 square metres. No leases were signed in the segments between 2,001 and 4,000 square metres. In the range above 5,000 square metres there was only one contract: In the city centre, 57 percent of the rented premises were in the segment up to 1,000 square metres and 20 percent in the segment from 1,001 to 3,000 square metres. A single contract for 11,200 square metres, accounting for 22 percent of the total, was concluded on the former Mercedes-Benz site on Trlenstrasse. Twenty-six percent of the premises were let for up to 10 euros per square metre, 71 percent for 10 to 15 euros, and only 2 percent for 15.01 euros or more. In the city centre, the Rosenberghfe project, with some the German Federation of Trade Unions, which is currently renovating its building, signed an interim lease. In the central business district, 49 percent of the rented premises went for less than 14.00 euros per square metre, and 35 percent for 14.00 to 17.00 euros per square metre. Only 17 percent were let for 17.00 euros or more.

11,400 square metres of ofce space, is currently under EuG_RE-J-13014_B The AOK, which intends to return to its former site, will Vers1.jpg occupy some 5,000 square metres, while an IT company has signed for about 1,600 square metres. Currently, about 50 percent of the space has been let; completion is scheduled for June 2014.

construction on the site formerly occupied by the AOK. Inh_2012_lay02_A

22 23

NORTHERN STUTTGART: INCREASINGLY ATTRACTIVE.

FEUERBACH/ZUFFENHAUSEN Feuerbach and Zuffenhausen have always been closely linked to the automotive industry. In 2013, automotive suppliers signed fewer new leases than in previous years, but the decision by Porsche AG to establish new factories for vehicle bodies and engines will do much to strengthen these locations. On Heilbronnerstrasse too, where automotive manu facturers are concentrated, the trend is positive. Audi opened its new branch here in late 2013. Daimler AG acquired property adjacent to its sales area at the corner of Heilbronnerstrasse and Borsigstrasse in order to e stablish a branch. VW will follow with a new facility on WEILIMDORF In 2012 Stuttgarts Business Development Department and several property owners launched an initiative to enhance the attractiveness of the location. Their reason was the departure of the large-scale user Ernst & Young, scheduled for the rst quarter of 2016. The planning so far includes the establishment of a day nursery and the energy-efcient upgrading of a number of buildings. If implemented before the departure of Ernst & Young, these measures would have a favourable impact on the locations general image. Another helpful factor is the continued growth of the software company Vector Informatik: this company has been steadily expanding in recent years. Major companies like Siemens and Vodafone are also contributing to the development of the location. The rental turnover in Weilimdorf came to 7,700 square metres, 45 percent more than in 2012 and signicantly above the ten-year average of 6,200 square metres. Ten leases were signed in the segment up to 500 square On the whole, demand was low on the Feuerbach/ Zuffenhausen market in 2013. Although the annual turn over of about 43,000 square metres might first seem i mpressive compared with the previous ten-year average of 13,500 square metres, it must be pointed out that the new building of the German Pension Insurance Association alone accounted for 23,000 square metres of that total. metres, and two were signed between 500 and 2,000 square metres. Ninety-two percent of the rented space was let for rents between 8.00 and 9.00 euros per square metre.

Bueromarktber_ the Kiefer site in 2015. The Oasis II construction project is scheduled to be completed in the rst quarter of 2015. The Skyline project, which includes further apartments and some 10,000 square metres of ofce space, is in the planning stage.

Ansicht_18-19_

EASTERN STUTTGART: MAKING RAPID PROGRESS.

BAD CANNSTATT/HEDELFINGEN/WANGEN In 2013 land-use planners continued to push ahead with the Neckarpark, located on the site of the former goods station in Bad Cannstatt: the project will be implemented in the coming years. It has now been agreed to create a central green area covering a space of 60x200 metres. One party has been given a purchase option on the sites for the planned ofce building on Daimlerstrasse. Following intensive negotiations with users like the Red Cross and the sports clinic, it now appears that construction can soon begin on several sites. The area around the Kegelenstrasse metropolitan train station has also been improved. The new youth club called DAS CANN has opened, and in 2012 already the former Friedel chocolate factory was converted into the Friedel Lofts. Together with the new city museum, these buildings add much to the attractiveness of the area adjoining the Neckarpark. The number of new leases declined slightly in comparison with previous years, but turnover stayed at the same level. In fact, at some 19,800 square metres it was well above the ten-year average of roughly 12,900 square metres, due to a major contract signed in 2013 by the State of Baden-Wrttemberg for the police, which amounted to about 11,500 square metres, and a contract by Deutsche Telekom for about 3,600 square metres. Thanks to these transactions, 89 percent of the space was let in the price segment between 10.01 and 11.00 euros per square metre. The Cannstatt/Hedelfingen/Wangen office market continues to be characterised by transactions for less than 500 square metres. Throughout the area there is a shortage of small, well-equipped ofce units, so the market offers interesting potential for developers with the right ideas.

24 25

SOUTHERN STUTTGART: RECORD RESULTS IN SOME AREAS.

DEGERLOCH Degerloch, in particular the area around Albplatz, continues to be a sought-after ofce location. Unfortunately, once again there were no new construction projects in 2013, severely limiting the supply of modern office space. E xisting premises with open-plan structures are not much in demand, and it takes a long time to market them. The Trnke industrial estate offers simpler kinds of ofce space for production-related use. Turnover continued to be low in 2013: of the total rented space, which amounted to 1,900 square metres, 58 percent was in the segment below 500 square metres. Only one contract, for 790 square metres, was signed for larger premises. Although demand for large premises exists, no other contracts were signed in the area owing to a lack of suitable offers. Ninety percent of the rented space went for prices between 9.01 and 11.00 euros per square metre. The scarcity of premises in Degerloch has already made itself felt in the neighbouring district of Mhringen, where developers are pushing to build in the site formerly occupied by the Hansa company. LEINFELDEN-ECHTERDINGEN With a total of some 47,900 square metres of rented ofce space, Leinfelden-Echterdingen achieved very good turnover. This was mainly the result of two large trans actions for space in existing buildings: one by a carmaker for about 17,600 square metres and one by an IT company for 1,350 square metres. The Leinfelden-Unteraichen submarket, which had a high vacancy rate in past years, beneted in particular. Ernst & Young signed the lease for its new premises at the airport. This helped pave the way for the construction of Airport City, with a potential total volume of some 100,000 square metres of new building space for ofces, services and hotels. Stuttgarts long-distance coach terminal is already under construction, and the infra structure will soon be expanded when the ICE train station is complete. Most of the 13 transactions were in the segment up to 500 square metres. Eight leases, for a total of 21,900 square metres and hence about 45 percent of the total turnover, were signed for rents in the range from 7.50 to 11.00 euros per square metre. There were three trans actions for more than 12.00 euros per square metre. The average rent for the Leinfelden-Echterdingen submarket was thus 12.70 euros per square metre.

FASANENHOF Fasanenhof stands to benet signicantly as a location when the infrastructure is improved by the suburban railway being extended to the airport, providing access to the future long-distance train station. For the rst time, a project exists that could permit the creation of a user- specic building within a predictable period. The total turnover came to some 5,700 square metres, slightly above the previous years gure of 5,200 square metres. Nineteen leases were signed, most of which, as in previous years, were for premises smaller than 500 square metres. There were two transactions in the segment from 501 to 1,000 square metres. The segment from 9.01 to 10.00 euros per square metre accounted for 89 percent of the leased space, and about 11 percent of the space went for less than 9.00 euros per square metre. The average rent was 9.50 euros per square metre.

In the Stuttgart Engineering Park (STEP), construction has begun on the new building project 7.1, which comprises some 5,800 square metres. Work on the second phase, 7.2, can be expected to start soon, as the premises under construction have already been let. The Centre for Solar Energy and Hydrogen Research, situated adjacent to the projects 7.1 and 7.2, has now been approved. The building will provide some 10,000 square metres for research labs, workshops and ofces. The industrial estate on Sigmaringerstrasse, which is a part of Mhringen, includes the area formerly occupied by the production plant of Hansa Metallwerke AG. This company is building its new administrative building on these premises, which cover some 5,000 square metres. Completion is scheduled for the second quarter of 2015. The remaining area will be able to accommodate up to 10,000 square metres of ofce space.

VAIHINGEN/MHRINGEN AND STEP The turnover in 2013 was excellent: approximately 62,200 square metres of ofce space was let to new users, almost three times the average rental take-up rate for the previous ten years.

In 2013, on the initiative of the city of Stuttgart, a planning study was produced for the vacant IBM site. The complex, which was designed by the architect Egon Eiermann, is to be preserved and put to appropriate use. A total of 48 leases were concluded in the Vaihingen/

Demand for space in the Am Wallgraben industrial e state was high, one major transaction being the renting of an ofce building with some 15,500 square metres by a carmaker. Another major transaction was concluded by the book wholesaler Koch, Neff & Volckmar. A new administrative building with some 13,500 square metres is being con structed on the companys former site. More than 600 employees will move in when the building is completed in late 2015. In addition, the city, the Business Development Department, the region, the local council and a new i nvestor are planning further development of the site, which covers a total of some 80,000 square metres. A number of existing buildings will be preserved and new construction projects are planned. As a result, the area including Industriestrasse, Ruppmannstrasse, S chockenriedstrasse and Wallgraben will help enhance the quality of the industrial estate.

Mhringen submarket. Eight of them were for less than 8.00 euros per square metre and 17 were for 8.01 to 10.00 euros per square metre. Together they accounted for about 37 percent of the turnover in this submarket. Most of the leases were in the segment from 10.01 to 13.00 euros per square metre. Rents exceeding 16.00 euros per square metre were achieved in the 19-storey Colorado ofce tower in Vaihingen. There were 26 transactions for premises smaller than 500 square metres, corresponding to 54 percent of the leases. Thirteen ofce units were let in the segment from 501 to 1,000 square metres, and there were only four between 1,001 and 3,000 square metres. Four leases were signed for premises larger than 4,000 square metres. Two, together accounting for 9,100 square metres, were in the range between 4,001 and 5,000 square metres. Three leases, each for more than 5,000 square metres, brought the total to 30,600 square metres of rented space, or about 49 percent of the entire turnover in the Vaihingen/Mhringen area.

Western Stuttgart Southern Stuttgart

Central Stuttgart

Eastern Stuttgart

26 27

A 8 towards Karlsruhe

A 81

Stuttgart motorway intersection

A 8 towards Munich

OVERVIEW OF THE STUTTGART OFFICE MARKET.

Turnover of ofce space in 2013
< 10,000 sq. m 10,000 20,000 sq. m 20,000 30,000 sq. m 30,000 40,000 sq. m

A 81 towards Heilbronn

above 40,000 sq. m Industrial parks/ofce locations

A 81 towards Singen

Northern Stuttgart Central Stuttgart Eastern Stuttgart

Western Stuttgart Southern Stuttgart

A 8 towards Karlsruhe

A 81

Stuttgart motorway intersection

A 8 towards Munich

ANOTHER VIBRANT MARKET YEAR EXPECTED FOR 2014.

The economic forecasts for Germany point to a relatively successful 2014. The Stuttgart region, which benefits strongly from exports by local companies, can look forward to continued growth in the year ahead. Unlike previous years in which it was difficult to make predictions, 2014 seems to be a year for which forecasting is easier.
Although the completion volume more than doubled in 2013, only a few of the premises were new on the market because many had already been pre-let. Demand for energy-efcient, certied and optimally congured ofce space will however remain strong, as there has been a clear trend for many years now towards optimisation among both users and developers. Numerous projects have been completed in recent years, and as a consequence there are fewer opportunities to implement new projects in the city centre. For the most part, the demolition or renovation of existing buildings are the only remaining options. Peak rents will remain high in 2014, as a number of trans actions can be expected in new and high-priced projects. In recent years, rents have shown a continuous upward trend, especially in the southern fringe areas. Renters in the other submarkets have likewise demonstrated a willingness to pay an appropriate price for new, high quality premises. Major changes in the market have brought about a signicant improvement in the quality of the available premises.

28 29

On the other hand, there are still many users on the Stuttgart market who need simple premises at an a verage price. The marketing of existing premises has become more difcult, however; this is because of the more rigorous requirements of public authorities and factors like increasing energy prices. As a result, owners of such properties who want to remain competitive will be forced to reduce their basic rent in order to compensate for the increased b urden on their tenants.

On the other hand, they also have to consider comprehensive refurbishment work, which ultimately raises rents to their market level. Through this process, low-priced premises become rarer on the market. Assuming that the turnover for small premises will remain relatively stable and that several anticipated major trans actions will take place, the turnover in ofce space for 2014 will probably be about 220,000 square metres.

YOUR CONTACT PARTNERS.

ELLWANGER & GEIGER Real Estate is the ideal partner for marketing your ofce properties. Our long y ears of experience and unique range of services enable us to move the market and proactively identify budding trends. For us, having a sixth sense isnt a supernatural ability but simply part of the service we offer you. Our team in Stuttgart is looking forward to your call or visit. Contact us: Phone: +49 (0)711 2148 300, Fax: +49 (0)711 2148 290 On the Internet: www.ellwanger-geiger.de www.bueroflaeche-stuttgart.de

Ulrich Nestel Head of Ofce Letting and Retail Stuttgart Phone +49 (0)711 2148 291 ulrich.nestel@ellwanger-geiger.de

Sebastian Degen Ofce Letting Consultant Phone +49 (0)711 2148 166 sebastian.degen@ellwanger-geiger.de

Helga Schner Research and Commercial Property Consultant Phone +49 (0)711 2148 269 helga.schoener@ellwanger-geiger.de

DISCLAIMER:
Although this study has been p repared with all due care, we can accept no liability for the correctness of the assessments presented. We are sure that you will understand this.

Matthias Hgele Ofce Letting Consultant Phone +49 (0)711 2148 292 matthias.haegele@ellwanger-geiger.de

Laura-Teresa Seiler Commercial Property Assistant Phone +49 (0)711 2148 297 laurateresa.seiler@ellwanger-geiger.de

30 31

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