CBRE: Real estate yields increasing in Vienna and Europe (EUR)

After the record years 2006 and 2007 the Vienna and Austrian real estate and investment market approached the level of 2004 and 2005. Austria keeps pace with the European trend, though was spared out from massive collapses, like the UK or Germany sustained, so far. Vienna is even among the few European cities where prime rents increased by 7% to €23.50/m²/month y-o-y –and remained unchanged in Q4 2008.

"Vienna proved itself as one of the most stable markets in the world; nevertheless it must be said that the real estate crisis left its mark also hereabouts," analyzes Dr. Andreas Ridder, Managing Director CB Richard Ellis Austria, discussing the current situation.

Austrian real estates in the value of ca. €2 bln changed their owner in 2008. For the first time since 2001 the investment volume regressed by 30%, though being above the level of 2005 (€1.9 bln.). The largest deal in 2008 was closed by Unibail Rodamco – a Dutch real estate and investment company - which purchased the Shopping City Süd for €607 mln. in spring. It is notable –and actually contrary to Europe's general trend - that in Q4 the investment volume increased by 50% (€640 mln) q-o-q.

Austria's share in the investment-pie amounts to ca. 1.7% and is by 0.7% higher than in recent years. Whilst in 2008 the investment volume declined by 30% in Austria, the European investment market was more than halved: 2007 – €236 bln, 2008 – €116 bln.

Besides Shopping City Süd following properties changed their owner in 2008: ÖGB purchased Katamaran at the Handelskai comprising ca. 40,000 m² NLA, Deka purchased City Point in Marxergasse, Goodman European Logistic Fund invested in the Kühne & Nagel property in Simmering, Arcotel Kaiserwasser is recently owned by Union Investment and the Green Park Center at Wienerberg was acquired by Credit Suisse. CB Richard Ellis was acting as advisor on Vendor's side for the last two deals.

Real estates located in Vienna were attractive for investors with large funds in 2008, and it is likely that they will become even more attractive in 2009. Vendors are unable to achieve the recent years' price level due to the international real estate and financial crisis resulting in a low demand.

Lower purchase prices affected the yields which increased by 50 bps in the Vienna office market in Q4 2008. These days, yields around 5.5% can be achieved for newly erected office buildings with long-term leases outside of the City Center (2007: ca. 4.75%). This prime yield is likely to increase to 6% until the end of 2009. A yield of 7.25% is acquirable for properties with short-term leases in locations without any access to the public transports. "Many attractive investment opportunities will be provided for equity driven investors, resulting from declining prices and increasing yields. Vienna also offers some interesting options," states Dr. Andreas Ridder.

For the first time since 2002 lettings declined in 2008. Only 400,000 m² office space was let in 2008, whereas in the record year 2007 ca. 470,000 m² was let, approaching roughly the level of 2006 (ca. 390,000 m²). It is notable that the total take-up came to only ca. 70,000 m² in Q4 2008.

The inner city, accounting for ca. 39% of the total lettings, followed by Wienerberg, accounting for ca. 21% of the office take-up in 2008, continue being the most attractive sub-locations.

The most active tenants are the Computers/Hi Tech Sector, accounting for 25% of all new lettings, the Professional Services and Financial Services, both accounting for 18%. Further distribution of tenants: 13% Public Sector, 12% Business Services, 9% Industrial & Energy (MIE) and 5% Consumer Services & Leisure (CSL).

In total, Vienna comprises approx. 10 mln m² office space, whereof 2.7 mln m² (including 20% generally refurbished old buildings) were completed between 1999 and 2008. Hereof 250,000 m² were completed in 2008 (newly built & generally refurbished), which means a decline of ca. 50,000 m² compared to the previous year.

Vacancy rate amounted to ca. 4.3% in Vienna in 2008 due to lim

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