Commercial real estate market: office and logistics with strong year-end results

25.04.2023 - Region, city and real estate industry take stock for 2022 in the two most important regional commercial real estate submarkets, office and logistics.

In the third year marked by the coronavirus pandemic, the regional real estate market made a comeback in the office and logistics submarkets. This is the result of the assessment of the region and the state capital of Hannover for the past year 2022 together with the most important and market-shaping players in the regional real estate industry.

Initially starting 2022 more cautiously than expected, the office and logistics submarkets achieved very good sales in the second half of 2022. Nevertheless, the joy and relief is clouded - because the economic and macropolitical challenges in the upcoming year 2023 remain significant:

Inflation,
rising interest rates,
enormous increase in energy costs,
fragile supply chains and
the effects of the war in Ukraine.

The joint conclusion is therefore that the crisis-ridden environment hassignificantly slowed down the investment decisionsof players on both the supply and demand side in 2022, especially in the first half of the year.

However, salesthen picked up more dynamically than expected in the second half of the year, presumably driven by catch-up effects from the weak previous years and the expectation of even higher prices in the coming months.

The officemarket in particular experienced a comeback as a result and, with around 165,000 square meters of space taken up, is building on the strong years of 2018 and 2019. The market for logisticsand production propertiesset another record in 2022 with a good 420,000 square meters of take-up.

"The Hannover economic region is solidly positioned and is once again reacting robustly in a crisis situation. Hanover is considered a safe haven in these times. For the future, it is important that we continue to build on our strengths as a service and production location and develop attractive commercial space."

Ulf-Birger Franz, Head of Economic Affairs of the Hannover Region

"The effects of the pandemic are increasingly fading into the background, and in 2022 the commercial real estate market will also benefit from catch-up effects from the weaker previous years. Companies and investors clearly believe in Hannover as a location. Despite all the challenges, especially in the energy sector, we can look forward to the year 2023 with a positive attitude."

Anja Ritschel, Head of Economic and Environmental Affairs of the City of Hanover

Office space take-upat the end of 2022 was around 165,000 square meters - an increase of around 22 percent (30,000 square meters).

As a result, sales per unit areaare once again exactly in line with the five-year average (2018 to 2022).

The vacancyrate stood at 3.9% at the end of the year, remaining almost stable compared to 2021 (minus 0.1 percentage points). Demand is particularly strong for high-quality properties in very good locations; at the end of 2022, prime rents in the city center will once again be well above the coronavirus level at EUR 18.80 per square metre - an increase of 80 cents per square metre compared to 2021.

Prime rents are alsorising sharply on the outskirts of the city and on the arterial roads, to EUR 16.50 per square meter (plus 50 cents).

Users	Location	Size
State capital Hanover	Easter Road	11,000 square meters
supra-regional energy company	Podbielskistrasse	10,650 sqm
Eon	Fischerhof	10,000 square meters

The pressure on demand for logistics and industrial space in the Hannover Region will continue in 2022. The crises once again clearly show that supply chains in trade and industry need to be made more secure and crisis-proof.

The visible effects such as the increased demand for storage space, the growth and increased establishment of e-commerce and the heavy strain on logistics infrastructures in the courier, express and parcel services sector are currently continuing unabated.

High turnover in logistics and industrial properties

Hightake-up of around 420,000 square meters of warehousespace was recorded for logistics and industrial properties in 2022, with a further significant increase in take-up(up 25,000 square meters) - a new take-up record.

Primerents rose only slightly to EUR 5.50 per square meter (up 20 cents).

Users	Location	Size
Rossmann	Burgwedel	42,000 square meters
EF Logistics	Lehrte	17,000 square meters
Badger	Langenhagen	12,000 square meters

Current trends, data and facts on the regional real estate market are regularly compiled in the "Real Estate Market Report Project Group" under the leadership of the Hannover Region together with the state capital and currently a further 27 partners from the regional real estate industry. The project group has been advised by bulwiengesa AG for many years.

The 2022 annual report and continuously updated information on around 120 market-defining projects in the office, logistics, retail, residential and hotelsegmentsareavailable online at www.immobilienmarktbericht-hannover.de.ZurThe Real Estate Arena commercial real estate trade fair in Hanover (May 24-25, 2023) will once again focus on and update the three other major submarkets of retail, residential and hotel.