19.04.2018
DEMIRE Deutsche Mittelstand Real Estate AG DE000A0XFSF0
DGAP-News: Survey by DEMIRE & bulwiengesa on Germany's Office Real Estate Market: Second-Tier Cities Combine Higher Returns with Lower Risks when Compared to the Metropolises
DGAP-News: DEMIRE Deutsche Mittelstand Real Estate AG / Key word(s): Market
Report/Real Estate
Survey by DEMIRE & bulwiengesa on Germany's Office Real Estate Market:
Second-Tier Cities Combine Higher Returns with Lower Risks when Compared to
the Metropolises (news with additional features)
19.04.2018 / 17:55
The issuer is solely responsible for the content of this announcement.
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Survey by DEMIRE & bulwiengesa on Germany's Office Real Estate Market:
Second-Tier Cities Combine Higher Returns with Lower Risks when Compared to
the Metropolises
* Bonn, Dortmund, Koblenz and Essen show most favourable risk-return
ratios
* Net initial yields in second-tier cities outperform the Class A cities
by 1.0 to 3.8 percentage points
* Low propensity to relocate among office tenants in second-tier cities
* Reduced risk of market upheavals in second-tier cities
Langen, 19 April 2018 - The company DEMIRE Deutsche Mittelstand Real Estate
AG and the bulwiengesa research institute published their second
comprehensive survey, "Office Real Estate Market: Investment Opportunities
in Secondary Locations." The survey compares 31 selected second-tier cities
in Germany with the country's so-called "Big Seven" cities. The second-tier
cities examined offer higher return potentials than the seven Class A
cities. At the same time, they boast a greater stability of income. The
elevated return potential manifests itself most conspicuously in higher net
initial yields. The bracket of net initial yields in second-tier cities
extends from 4.1% in Bonn to 7.0% in Stralsund and Chemnitz. In the Class A
cities, by contrast, net initial yields are 3.2 percent on average. The
higher stability of income in most of the second-tier cities is also
reflected in a lower rent volatility: The markets of Bonn and Dortmund, for
instance, are characterised by a very low spread of rents. This reduces the
threat of market-driven corrections in rents. Conversely, big cities such as
Berlin and Munich show serious fluctuations in their rent averages.
The survey places the return potentials (net initial yields) and earnings
risk (volatility of office rents) of the examined cities in relation to each
other. The findings identified the most favourable relations in the cities
Bonn, Dortmund, Koblenz and Essen. By contrast, the Class A cities Berlin,
Munich and Hamburg-but Leipzig as well-placed at the very bottom of the
list. Only one Class A city, Düsseldorf, made the top ten in terms of
risk-return ratio.
"Due to the better chances for returns in second-tier cities and the absence
of investment opportunities in the Class A cities, market players are
increasingly committing themselves in second-tier cities. Last year,
approximately 27.5 billion euros were invested outside the metropolises,
thereof approximately 15 billion euros in all of the second-tier cities,"
commented Sven Carstensen, head of the Frankfurt branch of bulwiengesa AG.
"While rising demand will push the net initial yields in the secondary
locations down to historic lows as well, the yield spread between these
markets and the Class A cities is still considerable at 2 percentage
points."
Low Propensity to Relocate among Office Tenants in Second-Tier Cities
The survey also studied the relation of the office take-up to a given city's
total office stock. If the take-up is high compared to the stock, the fact
indicates a strong propensity among local office tenants to relocate. The
sentiment is much more pronounced in the Class A markets than in the
secondary locations. "The survey findings also confirm our first-hand
experiences in the market," commented Ralf Kind, CEO of DEMIRE AG. "We
benefit from a strong tenant loyalty in our properties. The tenancy in
second-tier cities is dominated by mid-market companies, and these tend to
remain loyal to their respective place of business."
New Office Completions: Reduced Risk of Market Upheavals in Second-Tier
Cities
Speculative building activity may cause increased vacancy levels in times of
slowing demand. Unlike in the Class A markets, where the share of unlet
floor area approximates 40 percent at the start of a given project, new
developments in secondary locations are generally aligned with demand, i.e.
they are realised with a high pre-let ratio. It is a good way to reduce the
risk of market upheavals as a result of excess supply.
All things considered, the construction activity in many second-tier cities
nonetheless outpaces the metropolises, relatively speaking. This is
suggested by a comparison of new completions with the total floor space
stock. Since new schemes in second-tier cities rarely represent speculative
construction, they reflect an actual increase in demand that is generated by
local companies. Ingolstadt is a particularly good case in point. Out of the
city's present office stock, 24 percent is ten years old or younger. Other
second-tier cities with a high share of new buildings include Ulm (14
percent), Darmstadt (14 percent) and Kempten (13 percent). The proportion of
new-build property in the Class A cities averages ten percent only. In terms
of absolute new-build figures, the highest completion rates were registered
in the second-tier cities Essen, Bremen, Dortmund, Münster, Bonn and
Mannheim.
The complete study can be downloaded from
http://www.demire.ag/en/property/research
Press Contact
Rueckerconsult GmbH
Wallstrasse 16
D-10179 Berlin
Phone: +49 30 28 44 987 65
[email protected]
Contact Details
DEMIRE Deutsche Mittelstand Real Estate AG
Robert-Bosch-Strasse 11
D-63225 Langen
Phone: +49 (0) 6103 - 372 49 - 0
Fax: +49 (0) 6103 - 372 49 - 11
[email protected]
www.demire.ag
_______________________________________
About DEMIRE Deutsche Mittelstand Real Estate AG
DEMIRE - First in Secondary Locations
DEMIRE Deutsche Mittelstand Real Estate AG has commercial real estate
holdings in mid-sized cities and up-and-coming locations bordering German
metropolitan areas. As of September 30, 2017, DEMIRE held real estate with a
value of approx. EUR 1 billion. As of the reporting date, annualised
contractual rents had been firmly agreed upon in the amount of circa EUR 72
million for an average term of 4.8 years.
DEMIRE Deutsche Mittelstand Real Estate AG shares (ISIN: DE000A0XFSF0) are
listed in the Prime Standard segment of the Frankfurt Stock Exchange.
About bulwiengesa
bulwiengesa is one of the major, independent real estate industry analysis
companies in continental Europe. For over 30 years, bulwiengesa has
supported its partners and clients in questions of real estate and location
and market analysis, including with sound data services, strategic advice
and bespoke surveys, analyses and valuations. Meaningful individual data,
time series, forecasts and transaction data are supplied by the information
system RIWIS online. Users of the data from bulwiengesa include the Deutsche
Bundesbank for the ECB, BIS and OECD.
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Additional features:
Document: http://n.eqs.com/c/fncls.ssp?u=YLQTFQLBMD
Document title: Survey Demire Secondary Markets 2018
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19.04.2018 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
The DGAP Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.dgap.de
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Language: English
Company: DEMIRE Deutsche Mittelstand Real Estate AG
Robert-Bosch-Straße 11 im 'the eleven'
63225 Langen (Hessen)
Germany
Phone: +49 6103 37249-0
Fax: +49 6103 37249-11
E-mail: [email protected]
Internet: www.demire.ag
ISIN: DE000A0XFSF0
WKN: A0XFSF
Listed: Regulated Market in Frankfurt (Prime Standard); Regulated
Unofficial Market in Berlin, Dusseldorf, Stuttgart,
Tradegate Exchange
End of News DGAP News Service
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676739 19.04.2018
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