Real estate market report 2024: results with light and shade
Even though the real estate market nationwide continues to be characterized by uncertainty due to the overall economic situation, the current analysis of the regional real estate market gives cause for cautious optimism, with the recent slumps and negative trends weakening in almost all submarkets. There are signs of a trend reversal, particularly in the letting of office and retail properties, and tourism is also picking up sustainably and improving the starting situation for the hotel real estate market. These are the findings of this year's real estate market report. The results of the submarkets in brief:
Office real estate market
The office market in Hannover is showing the first signs of recovery after a sharp decline in 2023, when take-up fell by around 50 percent to 85,000 square meters. In the first half of 2024, 70,000 square meters of office space were already taken up.
Market participants expect this positive trend to continue for the rest of the year.
Prime rents in city center locations are rising to EUR 21.50 per square metre, with high-quality and integrated spaces in particular remaining in demand. However, the investment market for office properties remains cautious.
Retail trade
The Hannover Region continues to be one of the five retail locations with the highest turnover in Germany. For 2024, sales expectations for the region are around EUR 8.57 billion in the retail sector, an increase of more than EUR 400 million compared to the previous year. City center locations are recording rising visitor numbers and lettings, but at the same time bricks-and-mortar retailers are struggling with challenges such as a weak propensity to spend and their own shortage of skilled workers. Retail warehouse locations, particularly in the food retail sector, are developing stably regardless of this and remain the most popular retail properties among investors.
In general, the pressure on city centers is growing due to insolvencies and longer vacancies - new concepts are needed. Multifunctional uses such as hybrid models of housing, culture and gastronomy are being discussed as future strategies for city centers. The interim use project "aufhof" in the state capital demonstrates the success of such new approaches.
Hotel real estate market
Tourism in Hannover recovered strongly in 2023, with over 4 million overnight stays in the region and a new record of 2.36 million overnight stays in the state capital Hannover. Ten new hotels with a total of around 1,500 rooms have opened in Hanover since 2020. The average room occupancy rate was 58% and the average room rate rose to 104.80 euros. Despite this positive development, however, the hotel investment market has largely stood still since 2023. Factors such as a shortage of skilled workers and rising operating costs are putting additional pressure on the industry.
Residential real estate market
The residential real estate market in Hanover will continue to cool in 2024, with falling purchase prices and rising rents. While completions were at an all-time high in the previous year, the decline in building permits points to significantly lower completion figures in the coming years. Investors and project developers are currently taking a cautious approach in view of the large number of crises and risks, which is leading to delays in new projects.
Rising construction and financing costs as well as regulatory hurdles are weighing on the market. Rental prices are rising as potential buyers wait and remain on the market as tenants. However, the recent interest rate cuts from 2024 could contribute to a recovery, as real estate purchases will become more affordable again in the future.
Logistics real estate market
In 2023, the regional market for logistics and production properties recorded a year-on-year decline in take-up of one third to just under 280,000 sqm. Even the first half of 2024, with take-up of only around 100,000 sqm for the time being, does not indicate a possible short-term turnaround.
Despite the tense overall economic situation, around 440,000 square meters of new warehouse space is under construction or planned by 2026, and the demand for quickly available new logistics space will continue to shape the market in the medium term. Prime rents will rise to EUR 6.40 per square meter in 2024.
Hannover remains a stable and sought-after location for logistics and production.
Investment market
Transaction activity across all submarkets is currently characterized by a nationwide slump in demand. At around 25%, the decline in investment volume in Hanover in 2023 was more moderate than the national average. However, because the market had already leveled off at a lower level regionally, it cannot decouple itself from the general trend.
For the past year, the investment volume for commercial real estate in the Hannover Region amounted to a good €410 million. Based on the transactions completed by the end of the second quarter, it is unlikely that the market will pick up significantly in 2024. However, initial transactions in the third quarter point to a better result in the second half of the year.
A clear trend: sustainability and energy efficiency are becoming increasingly important, especially for new buildings in prime locations.
Real estate market report for download in three versions
The real estate market report is available this year at www.immobilienmarktbericht-hannover.de in various versions :
in a compact form with the most important data,in a detailed long version and withthe option of compiling the data individually according to your interests .
The website also provides overview maps of market-defining properties in all submarkets as well as information on selected current projects.
Real Estate Market Report Compact
To the real estate market report
Together with 29 partner companies from the real estate industry, Hannover Region compiles and prepares data, trends and market sentiment on all submarkets of the regional real estate industry every year. Current market data, assessments and will also be presented at the international commercial real estate trade fair EXPOREAL in Munich from October 7 to 9, 2024.