STUTTGART ON THE MOVE.

THE STUTTGART OFFICE MARKET 2011/2012

PA U LI N E Paulinenstrasse 21 Ofce To be completed at unknown date CAL EIDO Tbinger Strasse 41 43 Ofce + retail + residential To be completed 3rd quarter of 2013 C A SA N O VA Augustenstrasse 1/Paulinenstrasse 41 Ofce + retail Completed in 2011

E 65 Eberhardstrasse 65 Ofce + retail To be completed 3rd quarter of 2014

MARKTSTRA SSE 6 + 8 Ofce + retail To be completed 2nd quarter of 2012

G E RB E R Marienstrasse / Tbinger Strasse Ofce + retail + residential To be completed 2nd quarter of 2014

T HE O 10 Theodor-Heuss-Strasse 10 Ofce + retail Completed in 2011

HO SP I TA LHO F Hospitalplatz 20 / Gymnasiumstrasse 36 Ofce To be completed 4th quarter of 2013

Q UAR TIER AM KA RL SPL ATZ Holzstrasse 15 + 17 Ofce + retail To be completed at unknown date

G A LLI O N HA U S Theodor-Heuss-Strasse 8 Ofce + retail Completed in 2011

D A S Q U A D RAT Bchsenstrasse / Hospitalstrasse Ofce + retail + residential Completed in 2011

B LO W C A RR Lautenschlagerstrasse 21 Ofce + retail To be completed 1st quarter of 2013

P O ST Q U A RT I E R Lautenschlagerstrasse 17 Ofce + retail Completed in 2011

C I T Y G AT E Kriegsbergstrasse 11 Ofce + retail To be completed 2nd quarter of 2014

Photograph: Manfred Storck

OVERVIEW OF THE STUTTGART OFFICE MARKET

Year Volume (sq. m) Representative peak rents Average central Vacancies business district (sq. m) rents
13.60 13.35 12.75 12.65 13.85 14.80 14.90 15.34 14.80 14.50 14.50 13.50 13.50 14.50 14.50 13.60 14.30 14.30 225,000 190,000 290,000 270,000 186,000 118,000 100,000 137,000 292,000 379,000 415,000 402,000 467,400 466,000 460,000 453,000 480,000 424,000

Vacancies (%)

Total space available (mill, sq. m)

4.00 3.30 4.90 4.50 2.80 1.80 1.50 2.00 4.20 5.30 5.70 5.60 6.50 6.40 6.20 6.12 6.46 5.7 5.926 6.056 6.108 6.231 6.266 6.296 6.356 6.516 6.828 6.973 7.102 7.170 7.222* 7.253 7.367 7.401 7.425 7.449

Completion volume (sq. m)

317,000 130,000 52,000 123,000 35,000 39,000 60,000 160,000 312,000 145,000 129,000 68,500 52,500 32,600 117,000 40,000 42,400 45,900

Pre-leased volume (sq. m)

no data no data no data no data no data no data no data 130,000 220,000 80,000 93,500 51,400 20,500 23,400 116,000 22,000 22,400 41,200

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

120,000 120,000 135,000 140,000 180,000 230,000 205,000 160,000 127,000 149,000 152,000 145,000 140,000 169,000 180,000 171,000 194,000 285,000

14.83 14.32 14.32 14.83 15.08 15.85 16.87 18.41 17.89 17.50 17.00 17.00 17.50 17.50 18.00 18.00 17.50 18.80

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

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

4 5

CONTENTS.
Foreword Stuttgart an attractive and promising location Stuttgart 21 Section A1 is coming alive Rental volume at an all-time high Increased demand for ofce space in many sectors Renewed interest in large premises Rental rates exceeding previous years level Marked decline in vacant ofce space Nationwide upturn continuing Central Stuttgart: Persistently strong demand Northern Stuttgart: Mixed trends Eastern Stuttgart: Untapped potential Southern Stuttgart: A top location with a sunny outlook Overview of the Stuttgart ofce market Forecast: Stuttgarts ofce market stronger than ever Your contact partners ELLWANGER & GEIGER Real Estate 6 8 9 10 12 13 14 16 18 20 21 22 23 25 27 28 29

FOREWORD.
STUTTGART MOTOR FOR TOMORROW.
The future of humanity is in cities. Two hundred years ago, about 97 percent of the worlds population lived in rural areas. Today half of all people live in cities. According to United Nations predictions, that gure will be three-quarters by the middle of this century. Cities are motors of future growth. Their expansion is driven by factors like quality of life, economic vigour and education. At the same time, they face a major challenge: while continuing to grow, they must preserve their quality of life. How can Stuttgart do this? The instruments to do so can be found in the many topics that hold promise for the future: a wide range of sustainable technologies, especially in mobility, construction, tourism, health services and knowledge for tomorrow. Stuttgart is making rapid progress in these areas, and its related business clusters have become an important source of its economic strength. One major milestone in the eld of knowledge for tomorrow was the opening of the large new city library, which will draw 1.2 million visitors each year. A mobility map will explain Stuttgarts integrated mobility services, and sustainable mobility networks will foster the development of public and private transport. Architects, urban planners, civil engineers and tradespeople are working to supply urban districts with renewable energy, build zero-energy houses and develop mixed-use residential, working and leisure areas. By constructing new buildings and expanding its existing ones, the Stuttgart Clinic is enhancing the citys healthcare prole. These are just a few examples of how the city is promoting the local economy with extensive measures. Because Stuttgart is committed to being a motor for business development and it intends to stay that way. We would like to thank ELLWANGER & GEIGER Privatbankiers for their many years of excellent cooperation and for their continuation of the public-private partnership that has made it possible to produce a new edition of this publication.

Dr. Wolfgang Schuster

Mayor of Stuttgart

Ines Aufrecht
Director of Business Development, Stuttgart

6 7

STUTTGART THE OFFICE MARKET IS BOOMING.

If you had another chance to decide, would you select this city as your place of business? This was the question that IW Consult put to a number of companies in a survey. Wed do it again is what almost 90 percent of the companies in Stuttgart replied. In terms of positive responses, Stuttgart took fth place among German cities, well ahead of most. So Stuttgart seems to have all the right ingredients as a business location, and demand for ofce space is correspondingly brisk. Established businesses in particular have expanded in Stuttgart and stimulated the market by renting premises on a large scale. As a consequence, the rental volume for 2011 was the highest of all time. But current developments should not make landlords and investors complacent: they must continue to work on meeting modern requirements in areas like energy efciency, certication according to the LEED or DGNB standards and the provision of ample parking space. Expectations among users of office space are rising, and in some areas, particularly in the central business district and city centre, premises are still in short supply. Steps should be taken now to renovate and modernise existing buildings, invest in attractive new construction projects and promote the development of other locations. Project development is an especially effective way of creating demand for high-quality premises, and it helps to give the city a fresh and modern appearance. What is the current situation in the ofce market and how has it developed? What trends can we observe and how will they affect the rental situation? This report on the ofce market will provide detailed information and give you new things to think about. We hope that you will benet from reading it, and we would be glad to answer any questions you may have about these topics.

Mario Caroli

Bjrn Holzwarth

STUTTGART AN ATTRACTIVE AND PROMISING LOCATION.

In Stuttgart the waves of the economic crisis have now receded. The city weathered the crisis well, thanks to its versatility and innovative spirit. During the current period of recovery, its economy is also being boosted by factors like traditionally low unemployment and a highly qualified workforce, creating an attractive market.

VARIETY INSTEAD OF MONOCULTURE Although the region experienced a sharp rise in unemployment, it was able to recover very quickly: in less than twelve months the unemployment rate dropped by 40 percent, clearly demonstrating that the region is not exclusively dependent on the automotive industry. In fact, the diversity of the regions industries is what enabled it to respond so quickly to economic uctuations. And business diversity is continuing to increase: biotechnology and medicine, for example, are growing in importance. FORWARD-LOOKING INVESTMENTS The local automotive industry is also preparing itself for future challenges, investing in electric vehicles and future forms of mobility which have considerable potential. According to a worldwide study carried out by the consulting rm Arthur D. Little (ADL), investments in networked urban mobility could almost triple by 2050 from the current level of 300 billion euros per year. Stuttgart, the home of major automakers and suppliers, is especially well positioned to benet from these developments. And its companies have not been napping: the Daimler

project Car2go, for example, has been a major success. The city of Stuttgart has likewise taken the initiative and is drafting a master plan for a Mobility Card. Projects like this make the region more attractive, because mobility is the key factor for investors seeking a location. In the ADL mobility check, Stuttgart now holds fourth place among major German cities. FRUITFUL INTERACTION BETWEEN ACADEMIA AND BUSINESS Companies that are in close touch with events and have access to corresponding research results are able to detect trends at an early stage and prepare themselves better for change. The Baden-Wrttemberg Cooperative State University and the University of Hohenheim provide Stuttgart with the necessary transfer of knowledge between academia and local business. This fruitful symbiosis fosters an awareness of systemic risks a key factor for economic success.

PER CAPITA PURCHASING POWER IN 2011, IN CITIES WITH 500,000 OR MORE RESIDENTS
Munich 26,863

Dsseldorf

23,708

Frankfurt

22,929

Stuttgart

22,131

Cologne

21,788

Hamburg

21,320

Berlin
Stuttgart-Marketing GmbH

17,808

Data source: GfK GeoMarketing, figures as of November 2011

8 9

S PAR KAS S ENAKA DE MIE Training + residential To be completed 3rd quarter of 2014 PA R I S E R H F E Ofce + residential To be completed 1st quarter of 2012 E UR O PE PLAZA Ofce To be completed at unknown date

Development model
SITE SE CTION 4

Under construction or completed Available space

CITY L IBRARY

SITE SECTION 5

SI T E SE C T I O N 7 Hotel + residential To be completed 3rd quarter of 2014

SI T E SE CTIO N 12

SITE SECT I O N 15

Wol fra

mst

rass

MIL ANEO Ofce + retail + residential To be completed 3rd quarter of 2014

ss Wolframstra

STUTTGART 21 SECTION A1 IS COMING ALIVE.

The referendum of 27 November 2011 gave a clear go-ahead for Stuttgart 21, the project to rebuild Stuttgarts main railway station, putting an end to the uncertainty which had blocked progress in construction, and will allow work to move forward.
The dedication of the new Library of the 21st Century in October breathed new life into Section A1. In the period up to December alone, the library drew more than 100,000 visitors, and it is expected to attract more than a million each year in the future. Construction work on another project, Pariser Hfe, is making good progress. Work on its 250 apartments and the ofce wing with approximately 8,000 square metres should be nished by the first quarter of 2012, and this too will bring new life into the area. The next planned construction phases have also gained momentum: Sparkassenakademie, a training institution run by the German Sparkasse banks, is expected to complete a training centre by mid-2013. Covering 11,400 square metres, it will provide space for some 26,000 training course participants and have roughly 160 apartments for them too. In addition, the building will offer 1,200 square metres of ofce space. There is also a plan to include a day nursery in this complex, to serve the new Section A1. Construction of Milaneo Construction of the planned hotel and residential tower block at the corner of Heilbronner Strasse and Wolframstrasse will start in late 2012; completion is expected in the second half of 2014. The planning for Europe Plaza is now complete, and construction will begin as soon as sufcient advance rental agreements are in place. Most of the projects in Section A1 are thus ready to start or are already in progress. By late 2014, construction in this area should be nished except in site sections 4/5/12/15, at which time Stuttgarts urban scene will have a new addition. has now started, almost at the same time. This is a joint project of ECE, STRABAG and Bayerische Hausbau with some 43,000 square metres of retail space, 7,400 square metres of ofce space, roughly 417 apartments and a 160-room hotel. For those who will some day live and work in the new district, this project will be a considerable enhancement.

RENTAL VOLUME AT AN ALL-TIME HIGH.

The economic upturn of 2011 allowed the Stuttgart ofce market to set an all-time record: the total rental volume for office space was 285,000 square metres, of which some 45,500 square metres were used by owner-occupiers. This represented a 47 percent improvement over the previous years strong results.

CENTRAL BUSINESS DISTRICT DOUBLES ITS RENTAL VOLUME Stuttgarts central business district, namely the area in the city ring between the main station, Theodor-Heuss-Strasse, Hauptsttter Strasse and Paulinenbrcke, almost doubled its rental volume, which was 32,800 square metres in 2010. Rental transactions by public institutions, which came to approximately 35,000 square metres, accounted for a large part of this increase. The largest single transaction in this period involved the relocation of the Ministry of Education to the Postquartier, and amounted to about 14,000 square metres.

OUTLYING AREAS CONTINUE TO SHOW STRONG DEMAND Demand was also strong in Vaihingen/Mhringen and Fasanenhof, the areas to the south. Two transactions by Bosch, for about 12,000 and 4,000 square metres, were especially prominent. To the north, Feuerbach and Zuffenhausen had another good year thanks to large contracts signed by Bosch and Porsche, which are headquartered there. In Bad Cannstatt a 6,000 square-metre transaction by Deutsche Telekom made a considerable impact. Thus the eastern area of Stuttgart, which also includes Wangen and Hedelngen, saw a 61 percent increase in ofce space over 2010. In contrast, LeinfeldenEchterdingen in the south experienced a decline in demand, as did Weilimdorf in the north.

10 11

RENTAL TAKE-UP OF OFFICE SPACE IN STUTTGART 2000 2011 IN SQ. M

205,000

180,000

159,000

149,000

152,000

145,000

2000

2001

2002

127,000

2003

2004

2005

2006

140,000

2007

169,000

2008

2009

171,000

2010

194,000

2011

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

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

2001 Central business district City centre Vaihingen/Mhringen Fasanenhof Feuerbach/Zuffenhausen Degerloch Weilimdorf Bad Cannstatt/Wangen Leinfelden-Echterdingen Total 25,350 25,710 50,550 2,700 16,700 5,800 13,150 5,000 14,040 159,000 2002 19,000 45,000 6,300 11,000 6,000 2,700 16,000 18,000 3,000 127,000 2003 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

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

285,000

INCREASED DEMAND FOR OFFICE SPACE IN MANY SECTORS.

The industry category played a signicant role in the 2011 ofce market. Transactions for a total of 45,000 square metres were concluded, including 32,000 square metres for Bosch alone. Of similar importance was the public sector, which had a demand of some 39,000 square metres. The reason here was that one ministry moved to a new location while others reorganised themselves on existing premises. As in previous years, however, the category with the highest demand was other ofce users, which included service providers like doctors, architects, engineers and retail companies. With around 115,200 square metres of ofce space they accounted for 40 percent of the total rental volume. Companies in the IT and telecommunications sector leased 27,400 square metres of ofce space, considerably less than in the previous year. As a result, their share of the total turnover came to only 10 percent. The consultants Users in the media/communication category reacted with stronger demand for ofce space as the economy picked up. Advertising and media agencies proted from greater willingness among businesses to spend money on advertising and marketing, and so increased the size of their premises, especially in the segment up to 500 square metres, bringing the total up to 10,900 square metres. This represented a 38 percent gain over the previous year. category, which accounted for 22,800 square metres of rented space, also showed a decline, but the drop was small and did not reect a downward trend. By contrast, demand by nancial service providers rose again, coming to 24,700 square metres, although their share of the total turnover remained unchanged. The preferred locations for ofce space among both nancial service providers and consultants were in the central business district and city centre.

TAKE-UP BY SECTORS IN %
2003 Media/communication Financial service providers Consultants Public sector Other Energy/industry IT/telecommunications Total 5.02 8.04 7.03 4.02 20.98 52.23 2.68 100 2004 4 34 5 9 29 9 10 100 2005 8 12 10 21 28 13 8 100 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

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

12 13

RENEWED INTEREST IN LARGE PREMISES.

Small premises are still the mainstay of Stuttgarts office market. Once again, most of the contracts signed were for surface areas up to 500 square metres. There were 249 transactions in this segment, 27 more than in 2010. The total for the office market as a whole was 361.
Of the transactions for less than 500 square metres, 142 were in the central business district and city centre. In Weilimdorf, almost all of the recorded transactions were in this segment. In all, 21 percent of the total rented volume was in this size range. But in 2011 there was also demand for premises larger than 5,000 square metres, with the main interest coming from the public sector and Robert Bosch GmbH. The largest contract of all, for 14,000 square metres, was signed by the state of Baden-Wrttemberg. Porsche AG expanded on its home turf, Zuffenhausen, with a transaction for 10,000 square metres. These developments led to a signicant overall increase in demand for spaces above 5,000 square metres. There were 12 signings as There were 24 signings in the range from 1,001 to 2,000 square metres, and 14 between 2,001 and 5,000 square metres. Among the major owner-occupiers, AOK, Ed. Zblin AG and Sparkassenakademie made an impact by erecting their own buildings, which together accounted for 31,000 square metres of space. Leases in the range from 501 to 1,000 square metres made up 16 percent of the rental turnover. There were 62 contracts, mainly for premises in the city centre and in Vaihingen to the south. This is well above the previous years gure of 46. compared to four the previous year. This segment accounted for 36 percent of the rental turnover.

COMPARISON OF NEW CONTRACTS BY SIZE

103,200 51,500 59,500 44,500 49,000 41,900 32,000 21,500 35,900 40,000

2010 Total space 2010: 194,000 sq. m < 500 sq. m 501 1,000 sq. m 1,001 2,000 sq. m 2,001 5,000 sq. m > 5,000 sq. m

2011 Total space 2011: 285,000 sq. m

COMPARISON OF NEW CONTRACTS BY NUMBER

222 249

62

46

2010 24 14 15 14 12 Total number 2010: 301 4

2011 Total number 2011: 361

< 500 sq. m

501 1,000 sq. m

1,001 2,000 sq. m 2,001 5,000 sq. m

> 5,000 sq. m

Source for both charts: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

RENTAL RATES EXCEEDING PREVIOUS YEARS LEVEL.

The rental rates in Stuttgarts office market showed an encouraging trend. On 31 December 2011, the city average was 11.60 euros per square metre, 0.60 euros above the level a year before.
In the price segment up to 10.00 euros per square metre, a total of 149 leases were signed, 65 of which were for 8.00 euros or less per square metre. The latter, however, were mainly for older ofce properties with simple ttings and equipment, or for leases with a short duration. A large proportion of the total contracts, 141, were in the range from 10.01 to 13.00 euros per square metre. In the range from 13.01 to 15.00 euros per square metre, there were 46 signings, as compared to only 19 the previous year. In addition, there were 13 contracts between 15.01 and 17.00 euros per square metre and 12 for more than 17.00 euros per square metre. CENTRAL BUSINESS DISTRICT AND CITY CENTRE: PEAK RENTS ON THE RISE In Stuttgarts central business district the average rent stayed at the previous years level of 14.30 euros, whereas the weighted top rent showed a marked increase, from 17.50 euros to 18.80 euros per square metre. In a favourable development, there were about 12 transFAVOURABLE DEVELOPMENTS IN THE SOUTH, NORTH AND EAST Thanks to strong demand, the peak rent in southern Stuttgart rose to 13.30 euros per square metre, exceeding the previous years value. At the same time the average rent fell slightly to 10.20 euros per square metre, mainly owing to rent reductions necessary for older premises that had been vacant for some time. In northern Stuttgart, the average rent showed a gratifying increase, thanks especially to several major transactions in Feuerbach. Zuffenhausen and Weilimdorf, in contrast, continued to have low rent levels. In eastern Stuttgart, a new project contributed to a rise in both the peak rent and average rent. actions for premises in new buildings, where rents between 17.50 euros and 22.00 euros per square metre were achieved. The peak rent also rose in the city centre, and at years end was at 15.90 euros per square metre. The average rent, at 11.50 euros per square metre, remained at the level of the previous year.

PEAK AND AVERAGE CENTRAL BUSINESS DISTRICT RENTS 2000 2011 IN / SQ. M

18.41

18.00

17.89

17.50

17.50

18.00

17.50

17.00

16.87

17.00

14.90

15.34

Peak rents 14.80 14.50 14.50 14.50 14.50 14.30 14.30 2011

13.50

Average rents

2000

2001

2002

2003

2004

2005

2006

13.60

2007

2008

2009

13.60

2010

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

17.50

18.80

14 15

PEAK AND AVERAGE RENTS 2011 IN /SQ. M

18.80

14.30

15.90

11.50

11.90

11.00

13.30 9.00

9.60

10.20

Peak rents

Average rents

Central business district

City centre

Outlying districts to the north

Outlying districts to the east

Outlying districts to the south

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

XXX

MARKED DECLINE IN VACANT OFFICE SPACE.

The supply of vacant office space declined significantly over the year. On 31 December 2011, some 424,000 square metres were unoccupied, including roughly 24,700 square metres of sub-let space. With the total ofce space being about 7.43 million square metres, this corresponds to a vacancy rate of just under 5.7 percent.
COMPLETION VOLUME IN SQ. M
312,000

Building completion 220,000

Pre-letting

160,000

145,000

130,000

143,500

131,500

115,600

80,000

68,500

104,900

51,400

49,000

57,000

109,500 40,000 42,400 45,900 41,200 22,000 2009 2010 22,200 2011 2012 41,500 2013 5 50,500

28,500

32,600

2001

2002

2003

2004

2005

2006

2007

23,400

2008

In 2011, new premises totalling almost 31,300 square metres were completed in Stuttgart and 14,600 square metres underwent core renovation. However, most of this space was already pre-let or quickly leased to new tenants. Moreover, a large amount of sub-let space in the central business district was taken off the market. These two factors, in conjunction with a surprisingly high rental

volume in some outlying areas, resulted in a shortage of premises in certain cases. In Stuttgarts central business district the available supply declined by about 12,500 square metres to about 60,600 square metres. The city centre saw an even sharper decrease: here the supply of ofce space with short-term availability dropped from about 116,900 square metres to 93,500 square metres.

16 17

VACANT OFFICE SPACE AS OF 31 DECEMBER 2011

Degerloch > 11,800 sq. m B Bad Cannstatt, Wangen etc. > 19,300 sq. m Wange e

3% 5%
Stuttgart city centre > 93,500 sq. m 0

F Feuerbach, Zuffenhausen > 22,500 sq. m

5 5%
Va Vaihingen > 27,800 sq. m a

22% (corresponds s to approx. 0 q ) 424,000 sq. m) 17% 7%

Leinfelden-Echterdingen > 73,500 sq. m

7%

100%

7%

Fasanenhof > 31,000 sq. m

10% 14%
M Mhr Mhr Mhringen > 41,900 sq. m

10% 0% 0%

Stuttgart central business district > 60,600 sq m s district district 0 sq.

Weilimdorf Weilimdor f Weilimdorf > 42,100 sq. m sq q

Source for both charts: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

In southern Stuttgart there were some conspicuous shifts: whereas the available supply was reduced by half in Vaihingen, Mhringen made considerable gains. In the north and east, there were no major changes because the good rental volume was balanced by new vacancies.

In 2012, some 47,500 square metres of ofce space will be completed. However, since almost 32,000 square metres of this is already pre-let, the ofce market will gain hardly any new premises. In 2013, the situation might improve somewhat because 110,000 square metres will be completed, of which about 50,500 square metres is currently pre-let.

NATIONWIDE UPTURN CONTINUING.

In 2011, the positive trend from the previous year continued: throughout Germany, the rental turnover in most office markets increased considerably. The supply of vacant office space declined at almost all locations.
The Big Seven showed a continued upward trend of 15 percent. In 2011, the rental turnover for Berlin, Dsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart came to a total of 3.28 million square metres. The boom was strongest in southern Germany, with Stuttgart posting an increase of about 47 percent over the previous year and Munich an increase of 45 percent. Dsseldorf and Frankfurt each showed declines in turnover of about 14 percent from the previous year. Most cities beneted from a positive trend in rental rates. Increases in rental volume, coupled with a decline in vacant ofce space, caused rates to rise at many locations or allowed them to stay at the previous years level. The peak rents in Berlin, Cologne, Munich and Stuttgart increased by 1.00 euro and more per square metre. Average rents held steady as well. As expected, vacancy rates in the Big Seven fell sharply from the levels of the previous year. The main factor here was increased demand for modern ofce space, plus the fact that premises in older buildings increasingly found tenants, albeit at much lower rates. Some areas are again experiencing a shortage of ofce space owing to a rather low completion rate for new premises. This improves the prospects for construction in 2012. Thanks to a positive economic forecast and steady demand, most locations can currently reckon with favourable conditions for the rapid implementation of new building projects.

18 19

2007 2008

COMPARISON OF VACANCY RATES IN GERMANY IN %

15.1 15.0 14.3 14.4

2009 2010 2011

13.9

10.3

11.5

11.8

10.3

10.3

9.8

9.6

9.7

8.9

9.1

9.4

8.3

8.3

8.9

8.2

8.2

8.4

8.4

9.8 7.2 6.7 7.5 8.1

7.9

7.7

6.4

6.2

6.1

6.5 2010 8.9 11.5 15.1 9.8 8.9 8.3 6.5

Frankfurt

Dsseldorf

Cologne

Munich

Berlin

Hamburg

Stuttgart

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

TURNOVER OF SPACE OF THE BIG SEVEN 2003 2011 IN SQ. M

820,000 853,000

765,000

Munich 540,000 590,000

510,000

480,000

580,000

620,000

Berlin Hamburg Frankfurt Dsseldorf 280,000 Stuttgart Cologne

180,000

149,000

152,000

145,000

2003

2004

2005

2006

140,000

2007

169,000

2008

2009

171,000

2010

194,000

2011

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

STUTTGART COMPARED TO OTHER GERMAN CITIES

Turnover of space in sq. m. 2011 Berlin Dsseldorf Frankfurt a. M. Hamburg Cologne Munich Stuttgart 572,000 365,000 410,000 515,000 280,000 853,000 285,000 2010 503,000 375,000 475,000 485,000 220,000 590,000 194,000 Peak rent in 2011 21.70 23.50 36.00 23.00 21.00 30.50 18.80 2010 20.50 23.50 35.60 23.00 20.00 28.00 17.50 Average rent in the central business district in 2011 16.00 17.00 21.50 13.50 11.00 14.20 14.30 2010 14.50 16.50 22.00 13.50 11.25 14.20 14.30 Vacancy rate in % 2011 8.4 11.8 14.4 8.1 8.2 7.7 5.7

Source: Research BANKHAUS ELLWANGER & GEIGER KG , figures as of 31 December 2011

5.7

CENTRAL STUTTGART: PERSISTENTLY STRONG DEMAND.

Demand for office space in Stuttgarts central business district and city centre received a new boost in 2011. There was an 18 percent increase in new leases over the previous years level of 165.
The state of Baden-Wrttemberg attracted attention by renting space in the Postquartier and the Knigin-Olga-Bau at Knigstrasse 9. Thanks to some major transactions, the rental volume increased by approximately 61,000 square metres compared to 2010. Whereas there was only one contract for more than 5,000 square metres in 2010, the year 2011 saw seven, with a total volume of about 62,000 square metres. Of this space, 25,700 square metres went to three owner-occupiers in the insurance industry. The segment up to 500 square metres also beneted from stronger demand. However, the 142 leases accounted for only about 21 percent of the premises, while the previous year had 137 leases in this segment, making up 33 percent. In 2010, 37 percent of the premises in the central business district were in the price segment up to 14.00 euros per square metre. In 2011, the gure rose to 49 percent, while 38 percent of the premises were in the range between 14.01 and 16.00 euros per square metre. The segment above 16.01 euros per square metre had a share of 13 perAlong with the persistently strong demand for ofce space, one can also observe an increase in tenants expectations. The need for high-quality or newly renovated premises is high, and the supply is limited. As a consequence, projects like the Blow Carr and the City Gate were, for the rst time ever, launched without waiting for the usual advance rental agreement ratio to be achieved. Even so, there will continue to be a scarcity of premises in the short term for 2012. The forecast is considerably better for 2013 and 2014, when new projects will be completed and the volume of available space will increase. Owing to the large number of new and ongoing projects, Stuttgarts central business district and city centre are taking on a much more modern appearance. cent, the same as in the previous year. In the city centre, 93 percent of the newly rented premises went for less than 14.00 euros per square metre, an increase of one percent over the year before. Eight percent of the city centre premises were rented in the range between 14.01 and 16.00 euros per square metre.

20 21

NORTHERN STUTTGART: MIXED TRENDS.

FEUERBACH/ZUFFENHAUSEN The recovery in the automotive and component supply industries continued in 2011, and this had a considerable impact in Feuerbach/Zuffenhausen. Large-scale users like Bosch and Porsche were responsible for a major part of the rental turnover. However, the strongest demand was in the segment up to 500 square metres, which accounted for 68 percent of the leases. Even so, the unusually high turnover of 2010 could not quite be matched. The gure for 2011 was 24,800 square metres, 3,700 less than in 2010. Averaged over ten years, the turnover for this area was 14,000 square metres, or just 56 percent of the result achieved in 2011, so there is good reason to be satised. Most of the premises, 72 percent, were in the range from 8.01 to 10.00 euros per square metre. The range from 11.01 to 12.00 euros per square metre accounted for 27 percent, all of which were in the immediate vicinity of Heilbronner Strasse. In the period up to 2013, new and modern ofce premises can only be expected from the OASIS II project. Here 50 percent of the space has already been let in advance, a positive signal that permitted construction to begin. The total rental turnover came to approximately 5,500 square metres, or 48 percent of the previous years mark. The results for 2011 are thus at the level of 2007 and 2009. The ten-year average of 7,800 square metres was not however achieved. The trend in this location is towards smaller premises. Only one lease was signed for more than 1,000 square metres, and most, 61 percent, were in the segment below 500 square metres. WEILIMDORF In 2012 there were 15 leases, a gratifying 50 percent increase over the previous year. Nevertheless, the turnover of 2010, which included two large transactions, was not matched. In view of the high vacancy rate, which will rise even more with the departure of the headquarters of Ernst & Young, the newly achieved continuity in demand can be seen for now as a positive sign. But Weilimdorf will need to make systematic efforts to market itself as a business location.

EASTERN STUTTGART: UNTAPPED POTENTIAL.

BAD CANNSTATT/WANGEN/HEDELFINGEN Modern office premises are currently not easy to find in eastern Stuttgart. For this reason, planners of new projects have good chances of pre-letting their premises. In addition, the market in this area benets from excellent access to the public transportation network. This factor, along with the outstanding retail infrastructure, can be crucial for attracting and winning over additional users. Last year, the turnover of ofce space already came to 13,400 square metres, a 38 percent increase over 2010. As in previous years, tenants were most easily found for low-cost premises, the Kodak Areal being an important example. In this same area, however, a telecommunications company also signed a lease for a project comprising 6,000 square metres at a price of 12.50 euros per square metre. Development has now resumed at Neckarpark, a new mixed-use residential and ofce district on the site of the former goods station. The coming year could bring visible results, since it is possible that a number of plans will now be implemented. The number of completed transactions rose to 18, continuing the upward trend of recent years. The total rental volume in 2011, 13,400 square metres, was about 13 percent above the ten-year average of 11,700 square metres. The segment up to 500 square metres accounted for 31 percent of the rented premises. In the range between 2,000 and 3,000 square metres there was one large lease, which accounted for 18 percent of the total, while another lease for 6,000 square metres accounted for 45 percent. Rates of up to 8.00 euros per square metre were obtained for 44 percent of the premises, and 50 percent went for 10.01 to 13.00 euros per square metre.

22 23

SOUTHERN STUTTGART: TOP LOCATION, SUNNY OUTLOOK.

DEGERLOCH After experiencing a setback in 2010, Degerloch reaped the benets of its attractive location: the rental volume rose by 90 percent to a total of 4,000 square metres. With the exception of 1,300 square metres, there was no space available from new construction, so the turnover was achieved almost exclusively in existing buildings. The COMPAS Commerce Park and the area directly around Albplatz accounted for 70 percent of the turnover, and the Trnke industrial estate for 30 percent. Premises in the segment up to 500 square metres dominated the transactions; 53 percent of the leases were in this category. One lease was signed in the range between 501 and 1,000 square metres, and one in the range between 1,001 and 2,000 square metres. Airport City, which is currently under construction, is The price segment between 10.01 and 12.00 euros per square metre accounted for 41 percent of the rental transactions. Whereas 32 percent were in the range between 12.01 and 13.00 euros per square metre, only 15 percent were in the range between 13.01 and 15.00 euros. The segment below 10.00 euros per square metre had 12 percent. New ofce space is being created in the COMPAS ofce complex in response to persistently strong demand on Albplatz. This complex will provide the market with approximately 13,000 square metres of new space by 2014. generating much excitement. The rst prominent user is Ernst & Young, which expects to complete its new building by 2015. Airport City has a capacity of 250,000 square metres of office and service space. If users come to appreciate the advantages of this site, it may become an important new ofce location at the airport. 60 percent of the premises were in the rent segment below 9.00 euros per square metre, and 37 percent were in the range between 9.01 and 10.00 euros per square metre. The range from 10.01 to 11.00 euros per square metre had few leases, and that up to 12.00 euros per square metre had 13 percent. LEINFELDEN-ECHTERDINGEN Leinfelden-Echterdingen showed low turnover in ofce space and poor demand: the rental volume fell by 38 percent and there were only 21 new leases, a decline of 33 percent. Of the leases, 58 percent were in the segment up to 500 square metres and 16 percent in the range from 501 to 1,000 square metres. One was signed in the segment up to 2,000 square metres.

FASANENHOF Fasanenhof can look back on a decade of strong uctuations in letting. In the past two years however, demand has improved and the 12,500 square metres of rented space achieved in 2011 was the best result since 2004. The urban railway, which is now in service, has added to the attractiveness of this location. In 2011, 18 leases were signed, a gain of 80 percent over the previous year. Of these, 23 percent were in the segment up to 500 square metres and 17 percent were in the range between 501 and 1,000 square metres. There were two leases in the segment from 1,001 to 2,000 square metres. A large rental transaction by Bosch, amounting to 4,000 square metres of ofce space, had a strong impact on the nal result. Rates up to 9.00 euros per square metre were paid for 23 percent of the premises, and the segment between 9.01 and 10.00 euros accounted for 67 percent. One lease was signed for 10.50 euros per square metre. The Vaihingen/Mhringen industrial estate accounted for 78 percent of the leases. Seven percent were in the segment up to 500 square metres, 19 percent were in the range from 501 to 1,000 square metres, and 18 percent were in the range from 1,001 to 5,000 square metres. Two leases were signed in the segment from 5,001 to 10,000 square metres, and another for roughly 12,000 square metres. For 21 percent of the premises, the rates were in the range up to 9.00 euros per square metre. For 28 percent they were in the range from 9.01 to 10.00 euros per square metre, and for 49 percent they were in the range from 10.01 to 11.00 euros per square metre. There were two leases, together totalling about 600 square metres, in the range between 13.60 and 16.90 euros per square metre, signed for premises in the Colorado building. STEP, which is continuing to develop, accounted last year for 16 percent of the leases in the combined area of Vaihingen/Mhringen and STEP. Fewer new leases were signed than in the previous year, but this is because there were almost no vacant premises in STEP. An increase in the rental volume cannot be expected until marketing VAIHINGEN/MHRINGEN AND STEP In 2011, Vaihingen/Mhringen and the Stuttgart Engineering Park (STEP) once again performed outstandingly, and again the crucial factors were their proximity to the motorway, excellent infrastructure connections and an interesting user environment. Ofce space totalling 56,300 square metres was let, an increase of 114 percent. This record result for the area was the consequence of major transactions with automotive suppliers, software developers and construction companies, among other users. begins for the new buildings STEP 7.1 and STEP 7.2. Of the new signings, 63 percent were in the range between 11.50 and 12.00 euros per square metre and 18 percent in the range between 12.01 and 13.00 euros per square metre.

24 25

OVERVIEW OF THE STUTTGART OFFICE MARKET.

Turnover of ofce space in 2011
< 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

> 40,000 sq. m Industrial /ofce locations

A 81 towards Singen

Bad Cannstatt Feuerbach Northern Stuttgart Central Stuttgart Western Stuttgart Southern Stuttgart Eastern Stuttgart

Vaihingen
A 8 towards Karlsruhe

Motorway intersection Stuttgart

A 81

A 8 towards Munich

26 27

STUTTGARTS OFFICE MARKET STRONGER THAN EVER.

In 2011, the office market in Stuttgart delivered its best performance of all time. The momentum from this success can be expected to carry through the coming year, leading once again to strong turnover results.
In view of the current demand in the market for ofce space, which extends over all size segments and business sectors, the coming year could well see a turnover level of 200,000 square metres. The economy has recovered following a period of consolidation. New companies are being founded and the automotive industry, which is so important for Baden-Wrttemberg, is giving positive signals. OPPORTUNITIES FOR NEW PROJECTS The demand predicted for 2012 stands in contrast to a continued short supply, especially in the central business district and city centre. This shortage is now even spreading to the southern areas of the city. Given this situation, 2012 holds especially good prospects for projects that have received building permits but have been waiting for some time in the drawer. For some areas of the city, improved development will however depend more than ever on government and property owners joining forces. FOCUS ON QUALITY The trend continues towards buildings with high-quality fittings and equipment that are in keeping with the demands of the modern workplace. The development of rental rates has demonstrated that users are more than ready to pay for quality. It has also been observed that up-to-date premises stay on the market for a much shorter time. The demand for high-quality ofce space can be expected to continue. However, few newly built premises will come onto the market in 2012, presenting excellent opportunities for owners who plan to raise the quality of their property to modern standards. This applies to areas like Weilimdorf and Leinfelden/Oberaichen, which have had vacancy problems for years owing to deficiencies in infrastructure, often being unable to compete with areas that are better developed.

YOUR CONTACT PARTNERS.

ELLWANGER & GEIGER Privatbankiers is the ideal partner for marketing your office properties. Our many years of experience and unique range of services enable us to move the market and proactively identify 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 21 48 297 or Fax +49 (0) 711 21 48 290. On the Internet: www.privatbank.de www.bueroflaeche-stuttgart.de

Ulrich Nestel Head of Ofce Letting and Retail Projects, Stuttgart Phone +49 (0) 711 2148 291 Ulrich.Nestel@privatbank.de

Sebastian Degen Consultant Ofce Letting Phone +49 (0) 711 2148 166 Sebastian.Degen@privatbank.de

Helga Schner Market Research and Ofce Letting Phone +49 (0) 711 2148 269 Helga.Schoener@privatbank.de

DISCLAIMER:
Although this study has been prepared with all due care, ELLWANGER & GEIGER Privatbankiers accepts no liability for the correctness of the assessments presented. We are sure that you will understand this.

ILLUSTRATIONS:
Manfred Storck: Pages 2, 3 Stuttgart Marketing GmbH: Page 8

Matthias Hgele Consultant Ofce Letting Phone +49 (0) 711 2148 292 Matthias.Haegele@privatbank.de

Alice Disam Assistant Ofce Letting Phone +49 (0) 711 2148 297 Alice.Disam@privatbank.de

28 29

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BANKHAUS ELLWANGER & GEIGER KG Real Estate Brsenplatz 1, 70174 Stuttgart, Germany Phone +49 (0) 711/2148 297, Fax +49 (0) 711/2148 290 www.privatbank.de