MARKET REPORT INVESTMENT 2019 - WIRTSCHAFTSREFERAT DEPARTMENT FOR ECONOMIC AFFAIRS - STADT NÜRNBERG
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Wirtschaftsreferat
Department for Economic Affairs
lysis by
Market research and ana
Market report INV E S T M E N T 2019
market Report investment 2019
Editorial
Nuremberg is an excellent business location and place to live. Anyone who values a high qua-
lity of life and an exciting mix of the traditional and the contemporary will feel at home here.
Residents enjoy all the benefits of a modern city. Companies value the outstanding innovation
environment and excellent transport links. Economic output has increased steadily over the past
few years. Employment figures and population numbers have reached an all-time high and the
upward trend continues. The demand for land and property is correspondingly high.
There are many reasons in favour of Nuremberg as a location. Uninterrupted high demand,
particularly in the office and residential accommodation asset classes, means that supply is tight.
Low volatility and stable returns make Nuremberg an attractive location for investment.
This report is an impressive demonstration of the high level of investor interest in the Nuremberg
real estate market, as well as providing the market transparency necessary for a successful invest-
ment location. All data in this report were compiled and assessed by Küspert & Küspert Immobili-
enberatung GmbH & Co. KG and made available to the City of Nuremberg.
I hope that you find it an interesting read.
Dr. Michael Fraas
Deputy Mayor for Economic Affairs, City of Nuremberg
2
MOST IMPORTANT ASSET CLASS
Almost half of all transactions in office Transaction volumes
Transactions in the office segment featured heavily in (in Mio. EUR)
market activity, even more than in previous years. This
class of assets maintained its clear leading position and 1.200
set a new transaction record at some e 464 million. Many
investors spotted the favourable winds and realised pre- 1.000 1.079
1.009
vious years’ gains. Among the largest transactions were
“Innovum 212” in Fürther Straße, sold by UBS to Dream 800 868
830
Global, the Adcom-Center located close to the central
railway station, and an Officefirst package in Nordost-
600
park.
536
400
The performance of the retail property asset class was
the diametric opposite. While the excellent result in 2017
200
(e 313 million) was exaggerated by three exceptional one-
off transactions, the segment disappointed in 2018, with 2014 2015 2016 2017 2018
the e 63.4 million generated by the few listed sales co- 0
ming in below the multi-year average. Certainly, the low
level of supply is one reason, but the risks facing bricks
and mortar retailers are also a potential factor.
Demand for residential property for investment is unaba-
Transaction volumes according to classes
ted in Nuremberg. Low supply resulted in a 20% drop in
volumes compared with the previous year. Nevertheless,
of asset (Euro in percent, for the year 2018)
the market does not seem to have been swept clean, after
all sales in this segment totalled e 186 million, exceeding
the 2014 and 2015 figures by some 40% and matching the 6,3%
volume achieved in 2016. Office
7,6%
The small number of opportunities in the industry and Residential
logistics asset class ensured good volumes thanks to
higher prices. This was similar to what we observed in the 21,7% 45,9%
Land
undeveloped plots market. Plots of land represented the
second largest group in terms of transaction volume, at
Industry & Logistic
e 218 million, beating the previous record set in 2016 by
around 20%. 18,5%
Retail
3
SUPPLY AND DEMAND
The strong economic environment continues to lend Average yields* according to classes of asset
positive impetus to the development of Nuremberg’s
real estate sector. And while prices in the Big 7 rose
%
at a significantly greater rate than the achievable
8
rent incomes, the resulting compression in yields can
also be observed in most of the usage segments of 7
the Nuremberg market. The average yield on the
6
purchase of office properties fell just below the 5%
level for the first time. 5
4
However, the complete picture shows that while
many institutional investors focus on finding invest- 3
ment opportunities in Nuremberg as a B-City, thus
pushing up demand, the supply side’s price expec-
2014 2015 2016 2017 2018
tations in 2018 were a long way from all being met.
In B cities like Nuremberg in particular, investors are
looking beyond the pressure to invest and critically
assessing risk-return profiles and
value retention. Residential
Office
Therefore, while the general development in terms Retail (only office buildings in centre)
Industry & Logistic
of rising prices owing to a significant excess demand
can be generally confirmed, the specific options
* Gross initial yield (management and acquisition costs
available depend greatly on location and quality
not considered)
criteria, as well as the risk associated with the cor-
responding usage. The figure below provides an
overview of the development in average yields.
4
BUYER GROUPS
In terms of the structure of purchasers, for the second Buyer Groups
time in succession there has been a significant rise
in providers of open-end and closed-end real estate
(Euro in millions / proportion in percent)
funds. We think it is too early to say that the structure
is shifting away from project developers and construc-
tion customers, even though this group‘s share of the 0 100 200 300 400 500
market fell once again. This drop was rather down to
the relatively low supply in relation to project deve- Funds,
47.1%
lopment, which meant that the institutional customers open / closed
investing in existing properties could realise significant- Project developers / buil-
ly higher volumes again. A sale to the Bavarian govern- 19.0%
ding contractors
ment this year will seal an impressive owner-occupier
Private investors / family
deal. 10.8%
offices / foundations
Two further trends persisted in 2018. First, the propor- Owner-occupiers 17.4%
tion of the market attributable to private investors or
primarily family offices continued to grow. Two years Banks /
5.7%
ago, just 5.2% of total volume was generated by these insurance companies
customers, while last year this rose to almost 11%.
Second, value add investors are continuing to increase
their purchasing activity, in part in the acquisition of
difficult objects that present corresponding potential
for adding value and enhancement with comprehensive
renovation projects.
SELLER GROUPS
All the same, 2018 was a very good selling year for project
Seller Groups
developers and building contractors. Commercial success in the
(Euro in millions / proportion in percent)
sale of upgraded plots and completed projects was a major
factor in the high 47% share of sales volume that is attributable
to project developers, and places this group at the top of the 0 100 200 300 400 500
leader board.
Funds,
27.9%
Together with real estate funds, project developers represent open / closed
some 75% of sales in 2018. Private investors and family offices Project developers / building
46.9%
formed the third largest group of providers, with 13% of the sa- contractors
les volume, while owner-occupiers in particular recorded hardly
Private investors / family
any sales. Too much surface area is currently “mission-critical” 12.8%
offices / foundations
owing to the current macroeconomic climate, as a consequence
of a trend towards securing long-term locations. Banks / 7.2%
insurance companies
Other 5.2%
5OUTCOME AND OUTLOOK
As two major deals worth a total of some € 400 million 1. The people we spoke to expect a slight rise in
did not come to fruition, no new transaction record interest rates in 2019 rather than an extension of
was set for the Nuremberg real estate investment mar- the zero interest-rate policy.
ket in 2018. Nevertheless, an above-average transaction 2. However, the anticipated impact on the real estate
volume of just over € 1 billion points to a lively market, investment market is particularly interesting, as
supported by positive economic conditions with strong respondents to our survey believe that an end to the
demand for attractive investment opportunities from a boom is only half as likely as an increase in interest
well-structured pool. rates or change in interest-rate policy. It therefore
seems unlikely that any potential policy reversal
As a B-City, Nuremberg benefits from particular in 2019 will have a major impact on the real estate
strengths with a more advantageous supply and de- sector.
mand structure than the Big 7 locations. However, the 3. Hardly any of the people we spoke to believed
pointers for the potential future development of the that prices would fall before 2020 either, anticipa-
market are not consistent. ting instead rising rents for apartments and not
expecting the market to cool down at all.
As expected, there was no increase in the base rate in
2018, making finance very cheap. On the other hand, With respect to yields, market participants have varied
geopolitical risks, the current yield curves and initial views. Only a small proportion of those interviewed
interest rate hikes in the USA are sending mixed signals think office yields will continue to fall with the majority
as far as the future of interest rates is concerned. Fur- expecting them to remain the same. Nobody thought
thermore, general economic expectations have recently that residential investment property yields would
been revised downwards in line with the latest growth compress further, rather that they would stagnate or
forecasts. “Concerns are mounting”, summarised Mar- possibly even climb.
tin Wansleben, Chief Executive of the Association of
German Chambers of Commerce and Industry (DIHK). In our opinion, 2019 will once again be an active year
But what is the mood on the Nuremberg real estate of transactions on a lively and largely balanced Nurem-
market? We have held personal discussions with the berg real estate market. There are still a number of lar-
players on this market to find out. ge properties on the market, and possible completions
on these deals in the near future could generate a high
transaction volume for 2019. It can also be expected
that the general economic development will have a
greater impact on the real estate market than any
potential change in interest rate policy.
PUBLICATION INFORMATION
Image credits: cover, page 2: konturlicht.de | page 3: Pegasus Capital All information in this report has been assembled by Küspert &
Partners GmbH | page 4: BEOS AG | page 7: Sparkasse Nürnberg Küspert and Sparkasse Nürnberg as general information for marketing
purposes. Küspert & Küspert and Sparkasse Nürnberg assume no gua-
Project team: Carolin Beirodt (head of project team), rantee or liability of any kind for the information provided and make
Jürgen Hausmann, Martin Schmidt no claim to its completeness or accuracy. Users of this report must
Scientific Advice: Dr. Jonas Hahn verify the correctness of the information on their own. Therefore, the
information is provided without any liability or guarantee.
Dates “Nuremberg in Figures 2019”: Stadt Nürnberg, Wirtschafsreferat
This report is copyrighted by Küspert & Küspert Immobilienberatung
Copyright © 2019 Küspert & Küspert Immobilienberatung GmbH & Co. KG GmbH & Co. KG. © 2019. All rights reserved.
6THE INVESTMENT MARKET IN FIGURES 2019 NUREMBERG IN FIGURES 2019
Inhabitants
Total transaction volume
in € million 535,000
1,009 Employees paying social insurance
contributions
Largest asset class
in € million
offices
311,000
464 ? Unemployment rate
5.1%
Average yield
Offices Disposable income per capita in €
4.9% 21,785
economy. @Wirtschaft_Nbg wirtschaftsblog.nuernberg.de
nuernberg.dePublisher City of Nuremberg – Department for Economic Affairs, Theresienstr. 9, Nuremberg Conception Küspert & Küspert Immobilienberatung GmbH & Co. KG, Nuremberg Design petitio GmbH Werbeagentur, Nuremberg Print City Druck Tischner & Hoppe GmbH, Nuremberg Market Report Investment 2019 Edition 500 As of February 2019
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