MIPIM Austria 2019

MIPIM 2019 – Special edition for a sustainable real estate industry

Construction is a local business Karl-Heinz Strauss

AUSTRIA‘s LEADING COMPANY

N°1 | EHL Investment Consulting Category: Companies national more than EUR 10 Mio. revenue www.ehl.at

www.ehl.at

P1 (Headline), Innsbruck

P2, Innsbruck

P3, Innsbruck

Haus am Schottentor, Vienna

Grounded perspectives “When taking on a new project it is particularly important for the PEMA Group to provide a contemporary and creative architectural solution that satisfies our high aesthetic demands. In our view, real estate development is successful if the completion or renovation of a building creates added value for the tenants, investors and citizens at the respective site. Our main objective is to create urbanistic added value for generations to come.”

Mag. Markus Schafferer, Founder and principal shareholder of the PEMA Group

PEMA Gruppe | Bruneckerstraße 1, 6020 Innsbruck | Stock im Eisen Platz 3, 1010 Wien | T +43 512 251276-10 | E office@pema.at

2019

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CONSTRUCTION IS A PEOPLE BUSINESS KARL-HEINZ STRAUSS

MIPIM

Column 8 19

EDITORIAL IMPRINT

Investing in Austria 20

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STABILITY AND SECURITY AS FACTORS FOR SUCCESS

Austria scores with macroeconomic stability, the education sector and its quality of life.

ATTRACTIVE MARKET DESPITE FALLING YIELDS Housing in the focus of national and international investors. However, yields will continue to fall in 2019.

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TREND TOWARDS SERVICED OFFICE SPACE

Vienna office market: The highest completion rate in more than ten years.

34 E-COMMERCE HAS DEFINITELY ARRIVED The fashion trade is being dismantled bit by bit by e-commerce.

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CHANGING FACE OF RETAIL TRADE

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HOUSING

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HOTEL. LOCAL PRIVATE INVESTORS SEIZE THEIR CHANCE

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LOGISTICS REAL ESTATE ON THE UPSWING

The most difficult segment of the Austrian real estate.

Investors’ Favourite": High demand price sensitivity - shortage of supply.”

Third strongest result in long-term comparison.

International developers have discovered the domestic logistics market.

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E-COMMERCE HAS ARRIVED

XX

HkjashD Kdlh sdasldkAdsad

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40

MISTER INVESTMENT

CHANGING FACE OF RETAIL TRADE

SPECIAL Positions & Opinions 10

CONSTRUCTION IS A PEOPLE BUSINESS

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MISTER INVESTMENT

Interview with Karl-Heinz Strauss Interview with Franz Pรถltl

44 RETAIL IS CHANGING

Comment to stories on pages 34 and 40

By Stefan Goigitzer

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WORDRAP

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IMMOVISION 2.019

Amongst real estate managers Highlights and trends

What are the best strategies?

E

ngaging the Future" - this is the motto of MIPIM 2019, which takes a look at the next 30 years of the real estate industry, with a special focus on the issues of sustainability. MIPIM 2019 will seek answers to key questions such as "What are the best strategies for long-term benefits?", "What are the fundamental strategies for ensuring the best quality of life?" and "What are the most environmentally friendly practices and how can we make the best use of available resources?� One of the decisive questions is how communities and housing can cope with the increasing pressure caused by the rising migration of rural populations to the cities. Housing has become one of THE topics of MIPIM. Only ten years ago, residential real estate was treated as a sideline point at MIPIM - today, this asset class is the main focus of interest.

A highlight of this year's MIPIM is the opening speech by former UN SecretaryGeneral Ban Ki-moon, who has been committed to sustainable development for years. One of the former UN Secretary-General's first major initiatives was the 2007 Climate Change Conference - a milestone on the road to greater sustainability.

Efficiency, resource conservation, environmental protection and digitisation are also among the top concerns in the construction industry, as PORR CEO

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Karl-Heinz Strauss reveals in the cover interview.

He led his company to the top 5 on the German market and successfully positioned the construction group as an innovative, reliable partner, but there are still many questions to be considered: What are his other plans? Is the growth too fast? You will find the answers in the big cover interview. In this issue once again, we deal with the development of the markets. We asked Franz PĂśltl what 2019 will bring? Are there still core real estate properties? Which asset class is in demand, which one will be sold most? You will find the answers to the questions and many other topics on the following pages.

And now the only thing that remains - we hope you enjoy reading them.

Philipp Kaufmann Herausgeber

Mag. Michael Neubauer Chefredakteur

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Positions & Opinions

Construction is a people business Home & project markets. "I believe that the Austrian construction industry - and PORR as the market leader - is taking on the role of a trailblazer in this area in the continental part of Europe,” says PORR CEO Karl-Heinz Strauss in this interview with ImmoFokus.. interviewed by:Michael Neubauer

You took on the leadership of PORR in 2010. Which international developments have occurred within the company since then and where do you see PORR in 10 year's time?

Karl-Heinz Strauss: What I found was a company that constituted an orchestra which was not quite in tune and was playing in a lot of concert halls it had no business playing in.

We have consequently looked very closely at the markets in which PORR can demonstrate its strengths. Since then we have developed into a leading construction company within our five home markets. We are the market leader in Austria, in the top 5 in Germany and Switzerland, and we are one of the leading companies in Poland and the Czech Republic.

In these markets, we offer everything that a construction company can offer - and PORR has a very broad portfolio.

We also focus on the so-called project markets, where we can exploit our expertise in

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tunnelling, infrastructure and railway construction. This has proven successful in Qatar, Romania, Slovakia, Norway and England. We have given up on all other markets in Eastern Europe - Russia, Ukraine, Bulgaria, Serbia, Croatia, Slovenia, Macedonia and Montenegro - in order to focus on the existing five home and attractive project markets. However, project markets are only attractive as long as PORR can acquire worthwhile orders in these regions. If this is no longer the case, we will withdraw . We always have two or three potential target markets with interesting projects on our radar.

Currently … … these are Sweden or Denmark, both heavily investing in infrastructure. We can play to our strength in railway construction with our patented "slab track". In the next ten years, we want to continue to strengthen our home markets, that is, to be even more diverse.

PORR is a construction company and we re-

main a construction company. And we build as much as we can ourselves. With this strategy, we want to dramatically increase our net value within our markets. However, this will only work if we also can hold onto the knowhow and invest in further training for our employees. The competence of our own people is irreplaceable. We have a variety of strategic partnerships - that's a part of business, but we're primarily focussed on the PORRians.

Let us briefly return to the home markets of Germany, Switzerland, Poland and the Czech Republic. Do the leaders of the respective national companies come from headquarters in Vienna or are you working with local partners? Are you focussed on organic growth or expansion through acquisitions and takeovers?

Two thirds are organic growth and one third is accounted for by additional purchases. We tend to acquire in the markets we enter for the first time or in order to obtain know-how that

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Fotos: Michael Hetzmannseder

Positions & Opinions

we do not yet have within the company. In Germany, for example, we secured a number of major acquisitions, which have developed positively from the very first minute and have meanwhile also secured us a leading position in the German market. In 2017 we took over Oevermann, a specialist company for the construction of roads, airports and logistics areas as well as the specialist foundation engineering company Franki Grundbau. With the acquisition of these two companies we have strengthened and enhanced our range as a full-service provider. But we are also active in other markets. Last year, we took over the Czech Alpine Bau CZ with around 450 employees and top specialists. The CEO spoke of a "bargain". The motive for the acquisition was to get new specialists and locations, among other things.

"Construction is a local business. Construction is a people business." That means we always ensure to have local management - our Polish team consists exclusively of Polish colleagues. We also rely on local experts in the Czech Republic and Slovakia. Places like Doha and Dubai are slightly different. There it is an international team. That's where people from

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all over the world come together. These markets lend themselves to this kind of concept.

It has always been that way and it will always be like this. There are international people who move from one project to the next. For example, one of them only builds bridges, no matter for which company. And wherever a big bridge is being built, he will be there. In our local markets we try to find local people who have to adhere to group guidelines, but the business decisions are made where business happens.

"It's always the same: if the price rises, the construction company is to blame."

Which country, which project is currently the most enjoyable for you, and which is making you frown?

At the moment, we are fortunate enough to be operating exclusively in growing markets.

Then again, we looked at the markets very carefully and positioned ourselves where the market is accommodating - either with competence or with growth. Actually, I can say with pride that all our markets are growing and performing well. Of course every market has its peculiarities and its issues. In Poland, the main issue is capacity and lack of raw materials. That's where we have to react. And PORR does that as a local, Polish company with local management. That's very important, I think. The other markets are currently also performing well.

The order books are full. Clients complain about high construction prices. The construction industry is using the current boom to demand higher prices. You probably have a different view?

It's always the same: if the price rises, the construction company is to blame. But take a look at Poland, for example, where the price for iron is 40 percent higher, the concrete

| BA12-14E |

price has increased by 23 percent. That is not in the influence of the construction company.

Subcontractors also have price increases, material and personnel issues. In Germany, there was a 6 percent minimum wage increase in 2018 from one day to the next. You try selling that to a customer. It's quite an art form to pass these price increases on to the market. If, for example, you look at subsidized housing construction in Vienna, then the costs have risen by just over 30 percent in the last seven years. However, we were only able to pass 14 or 15 percent on to our customer.

One control system for all building systems: Integrated, PC-based building automation from Beckhoff.

"All our markets are growing and performing well."

Increasing efficiency is the order of the day.

But let me briefly go back to prices again. In the ten years prior to 2017, prices were falling.

Now they are rising. As a general contractor we are also affected by these developments.

On the one hand, there is a personnel issue: "Do I have enough employees in the company? What about the capacities of the subcontractors? "These, of course, also demand their prices. Construction companies, on the whole, suffer the negative aspects of rising prices. Particularly a large general contractor such as PORR. As far as sustainability and conservation of resources are concerned, what impact does that have on pricing?

Well, there's simply no way around sustainability these days. We're trying - and PORR is a pioneer in this area. Whenever possible, we use recycled materials in both planning and construction. Infrastructure asphalt, for example, may contain as much as 50 percent of recycled asphalt.

Microsoft Technology Center, Cologne: Integrated building automation achieved using PC- and EtherCAT-based control from Beckhoff.

Austria, Salzburg Hall 10, Booth 0201

www.beckhoff.com/building With integrated building automation from Beckhoff you can implement a PC-based control solution that already meets the requirements of energy efficiency class A. All building systems are controlled with an integrated system. Functional changes and extensions are implemented based on software, and synergy effects are fully utilised. The result: up to 30Â % energy savings potential for new buildings and refurbishments.

Does that cost more in total?

It's definitely more economical, of course.

We already recycle a lot, whether it's wood or brick debris, and it can be used for all sorts of

Winter 2018

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Positions & Opinions

things, as aggregates or for cement production, for example. The cycling of materials will become much more pronounced and sustainable in the future.

Austria lags behind when it comes to digitization - think Building Information Modelling (BIM) -. Isn't there an enormous potential for savings here?

I believe that the Austrian construction industry - and again PORR as the market leader - is taking on the role of a trailblazer in this area in the continental part of Europe. We are only lagging behind Anglican, English, Nordic countries in this regard, because in these countries the public sector jumped onto the digital bandwagon much earlier. That's really the deciding factor. If the customer - as is now happening in Germany - says that from 2024 onwards, every order has to be tendered in the BIM standard, then the momentum gathers.

In Austria we are only at the beginning of this development. Ă–BB, ASFINAG and other contracting authorities have to adopt a pro-active

approach and introduce BIM as a mandatory standard.

However, Building Information Modelling and digitization are two separate things. Digitization means standardizing, harmonizing and automating processes. At PORR we are working towards paperless administration and construction sites. Conversely, Building Information Modelling is a standard planning framework. We plan using the BIM standard.

The basis of every calculation are these BIM models - no matter if it is 2D, 3D, 4D or 5D. The future project manager is already involved at the calculation stage. If we actually receive the order, this calculation automatically goes into so-called work preparation and shaping.

Purchasing, HR and logistics departments then access this data - "from order to pay".

These are the topics where digitization is happening. Digitization is about connecting all those involved, so they have the same information in the field in real time, enabling them to make the right decisions.

The right staff deployment and the right use of materials at the same time is no longer called BIM, but LEAN Design, Design to budget and then LEAN Construction. An approach in which all parties involved sit together at the table right from the outset and plan the project from start to finish. Together and not against each other. The principle of client on one side and contractor on the other is something we have to overcome. Achieving that will enable the construction industry to play to its strengths (considering the best bidder principle, under which it operates), utilising Design to budget and Lean Construction.

All of our 50,000 devices are also digitized and are controlled by telematic means. Data is available in real time. No service interval is missed. Every screw, every work order exists as digital data. Today, even though we have doubled the equipment, we work with the same crew as we did eight or nine years ago.

That, too, is a form of digitization. Well, we are not talking about digitization here, but we are really talking about standardization, We have just planned one of the largest office complexes in Germany for BMW, using LEAN Design and Lean Construction. We delivered great quality, on time and under budget. This has demonstrated what is possible if you know how.

Factbox KARL-HEINZ STRAUSS, MBA (CEO) BORN 1960, MARRIED, ONE DAUGHTER, ONE SON After graduating from the technical college of civil engineering, Karl-Heinz Strauss studied at Harvard University, at the Management Business School in St. Gallen and received his MBA from the IMADEC University in Vienna. Until 2000, he held various positions at Raiffeisen Zentralbank – including in the construction and real-estate divisions. He then founded Strauss & Partner Immobilien, whose best-known projects include the EURO PLAZA office park in Vienna. He took over as Chief Executive Officer of PORR in September 2010.

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How do you deal with with partners who are not yet BIM-enabled?

We continue working with them, in 2D. You have to accept that to a certain degree. You have to be careful about the digital issues and make it work for the people you have.

What is much more important and makes the difference: Our clients have to commission the planning in this standard. If you plan and commission it yourself, then the one who builds it will adopt it as a matter of course. It's not that hard, it works in England and in Northern Europe. You can not build a bridge if you are not BIM capable, and if you aren't then you need not bother picking up a tender in Norway. It's all planned in the BIM standard.

Legislators would need to decide that from 2020 or 2021 we will also work in the BIM standard. And not go down the route of one of the biggest contracting authorities,

which tendered a construction project on the East Highway along these lines: "We tender it in 2D, but if you realise it in the 3D-BIMStandard you will receive more points in the evaluation process." In a nutshell, they want to spend the same amount of money, but demand much more elaborate, improved planning. The client does not want to pay for that, instead putting it on the construction companies.

How do national and international business differ?

Every country uses different systems. Scandinavia, the English or Anglican region and Europe, for example, have changed their ways years ago – different sorts of contracts, no low-cost suppliers but best bidder, LEAN Construction, etc. - and you can feel that today.

PORR is also well represented. We have learnt a lot. Germany has taken an important step, namely that from 2024 the public hand may only tender bids in the BIM standard. I believe that in Austria it will become vital for these is-

sues to be addressed by the clients. But above all, the contracting authorities have to face up to the realities, ie they need proper budgets, the right amount of time to plan, and only when the planning is done should they tender – in the correct manner.

of the top three companies in tunnel construction in Europe is a good example of this.

That means: A departure from planning accompanying construction? >> Construction-accompanying planning is specific to Austria and Germany. Other systems have made better progress. Of course these countries do not have the high flexibility that the Austrian system offers.

In practice that means more detailed planning from the start.

What is key to the international success of PORR, what sets it apart from other internationally active construction companies?

First, PORR is an entrepreneurial company.

Decisions can be made very quickly. Second, we have 150 years of experience under our belt, with great tradition and technological innovation PORR is the leader with many patents and systems. What other construction companies do not have in comparison are our PORRians - totally motivated, long-time employees, highly competent and interested in the best solutions.

Absolutely. Finish planning - then start building. Every system has its advantages and disadvantages. However, the acquired and practised flexibility of the Austrian construction industry also explains its great international success, which is disproportionately large for such a small country. The fact that we are one

PORR is Austria's oldest listed company and was listed in the ATX for the first time last year. Satisfied with its performance?

We are very happy with the achievement. Unfortunately, the stock performance has developed in parallel with the construction sector and we are clearly beaten below our value. n

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16. – 17. MÄRZ 2019

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MIPIM 2019

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Positions & Opinions

Mister Investment Austria’s Leading Company. When a major real estate deal takes place in Vienna, it is highly probable that EHL Investment Consulting will have its fingers in the pie with Franz PÜltl at the head.

The interview was conducted by Michael Neubauer

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The investment market is highly competitive. Where is the USP of EHL Investment Consulting?

Franz Pöltl: That is undoubtedly the case. We are focused on long-term client relationships.

We have the trust of our clients - and are certainly here and there, perhaps even slightly faster than our competitors. Basically, it's the right thing to do. We are in a very competitive market. Unfortunately, it is still not the case that we win every pitch. But here too we have been able to increase the success rate enormously over the years because we have learned from the failures of the past and analysed where others were better and where we needed to catch up. There are many factors that determine success or failure, such as conditions, project assessments, presentation techniques and sales process strategy. The decisive factor, however, is to win the trust of the customer, to convince him that we will get the best result for him.

Ideally, you will also be recommended to new customers. In retrospect we have profited most from that ... The reference list of our satisfied customers has grown continuously.

Fotos: Michael Hetzmannseder

Do you have to deal differently with German investors than with Asian ones - do they tick differently? >> Completely differently. Negotiations and transactions with German clients are very straightforward and structured, which is why I find it very pleasant to work with German investors.

If there is an LOI, more than 90 percent of the time you reach the goal. With exotic investors, you don't know until the end whether the efforts will ultimately lead to success. The mentality of Asian investors is difficult to assess. They don't condemn if they let a deal go. German or Austrian institutional investors who have been on the market for more than ten years do not risk their standing so lightly.

Are there many - as you say exotic - investors trying to push their way into Austria? >> The "exotic" investors of today are perhaps the standard investors of tomorrow. In 2018, for example, it was difficult for Korean investors to find suitable products in Austria because the large-volume, long-term leased core properties that were still available in 2017 were missing.

Three-digit tickets? >> Three-digit and core product. There are of course triple digit products, but they are not

automatically core. Investors from the Asian sector are generally looking for real estate that is leased out on a long-term basis - we have a few customers who are very intensively looking for suitable properties. It should also be noted that Asian investors are taking a new approach.

Until recently, they used Anglo-Saxon and/or German asset managers. Now they are in the process of reworking the markets so that they can invest directly in the near future without having to involve anyone else. This also brings significant changes to Austrian developers and real estate agents. They will be dealing with potential business partners who are difficult for them to assess. As a result, our expertise will be even more in demand since EHL has already gained a lot of experience with Asian investors.

Plans for 2019? >> As far as we can judge at the moment, 2019 will once again be a very good real estate year.

Due to the lack of core products in the commercial sector, investors are focusing on the residential asset class - in all variations. The demographic developments are responsible for the security of this trend. The residential asset class had gained considerable momentum in 2018. Our advantage is that as a group we are perfectly positioned in the residential segment - not only in the investment business. Our residential team led by Sandra Bauernfeind knows which apartments are in demand and which floor plans are necessary to achieve the best prices. In addition, her team naturally keeps on top of the property market directions for the next few years and recognizes exactly where investment and development opportunities can be found. The EHL residential team sells or leases 1,000 apartments per year. They conduct up to 5,000 discussions with interested parties and are thus best able to assess housing projects and the rent prices that can be obtained. In addition to mediating, we often take over the administration for the investor as well. We can provide this all-around support thanks to the wide range of services we offer within the EHL Group. This clearly distinguishes us from our competitors.

Most office towers have recently been sold at top prices. Is this the end of the spiral or will prices continue to rise? Aren’t those towers just getting too expensive? The rents cannot keep up with the rising prices. >> In the office sector, we can see that the incentives are declining as the economy picks up. The

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Positions & Opinions

rental market has gained momentum considerably. There seems to be a buyer for every property in every condition. There is so much liquidity that actually all buildings find a buyer. By liquidity I don't mean the money that the European Central Bank is pumping into the market, but the liquidity that the investors generate by creating a frequent turnover of the properties.

In the past, real estate was bought and kept for 10 or 15 years. That is now the exception. The investors' strategy now is to switch ownership more frequently. This generates liquidity and more transactions.

But capital is fleeting. At the moment, real estate offers the best returns. But what if other investment fields emerge? The opportunistically-invested capital is gone again before you know it. >> This may be partly true, although those investors usually go through asset managers. I don't think they'll be gone so quickly. They may not buy more, but they won't fling the real estate onto the market right away either. But it is certainly true that the manageable performance of bonds and equities in recent years has led the large asset managers to increase their real estate quotas.

Is this a healthy development? >> You can see that one way or the other. This trend can also be observed outside the real estate industry. Furthermore, bonds and especially shares are traded more than in the past:

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I think the approach to buy and then wait 20 years is limited only to the wealthy private investors with the apartment buildings. Anyone who buys on account for third parties is required to check their assets and take advantage of every option available to realize gains in value.

It's no longer a strategy to have real estate on your books for 15 years, to revalue the index every year and then wake up at some point and see that you've missed out on opportunities and the real values no longer apply. In this respect, everyone is urged to constantly review their portfolios and to realize increases in value when the opportunity arises. Even if we hear from the one or the other fund manager who claims that it breaks his heart to have to sell.

Is there enough space for the last mile? >> Obviously it has to do with the reclassification of land, the price development of that land and the fact that many properties are being reclassified for residential use, or at least the owners are trying to do so. But I also believe that logistics developers will offer higher prices in the future in order to get to the necessary properties. In the city centers, there will also be multi-story logistics halls. To sum it up: at the moment, the time has not yet come to judge how profitable the online business really is, but it is gaining shares of the market. Only when the market is divided among a few big competitors will the business be profitable. At the moment, the only thing you can do is get more customers.

What about logistics real estate? >> Logistics real estate would be a top investment, but we don't have the products.

At the expense of the stationary retail trade? >> The pressure is clearly noticeable in the rental business. The tenant structure in the shopping centers is changing. Entertainment used to be considered really evil. Nobody wanted entertainment. Today it's the other way around: a large shopping center without entertainment and without a good food court is a no-go. All branches that offer highly standardized goods are affected by the online business. In the investment market, the pressure on the stationary retail trade is not yet as strong as in the rental market: But, of course, everyone is trying to determine what is the productivity, what is the turnover per square meter, what is the cost of sales burden - these are the decisive figures. We can already see that it is becoming increasingly difficult for smaller spe-

Why is that the case? >> At the moment I believe that it has to do with finding the appropriate land. I am convinced that the market will take off in the near future. An online business without logistics space, or without the proverbial last mile, will not work.

Is there too much competition from Slovakia? >> Maybe for standard logistics, but not for the last mile. Anyone who says they will deliver in an hour will not be able to deliver from Slovakia.

IMPRESSUM cialist stores with 2,000 to 3,000 square meters that are confined to a roundabout. They are under enormous pressure. Large, dominant centers will prevail, but those too will have to react constantly to new challenges.

How large is your Investment consulting team? >> My team consists of 10 staff members. You need good, qualified people, who are not easy to find. For the project business we are looking for employees who are ready to go the extra mile. If someone calls at six in the evening and says he still needs something today, then our people stay there and deal with it and send it out at nine or ten. I am aware that this is not something that can be taken for granted and, of course, it only works if the employees feel comfortable and can see long-term goals. I see our employees as the capital of our company.

We are not a capital-intensive industry. In the banking sector it used to be said that the bulk of the capital leaves the company in the evening with the elevator and it is uncertain whether it will come back in the morning: this is all the more significant for service providers. Our success lies in the relationship with our customers and the team.

What qualifications would I need to have in order to work in your team? >> Ideally, you should have a university degree, an interest in the real estate industry, enjoy dealing with people and the willingness to do more than the average. This also includes working a night shift if necessary or to leaving on an international business trip at short notice.

However, human qualities such as integrity, reliability, honesty and absolute discretion are at least as important as training and the "hard facts" with regard to the long-term customer relationships that I have already been mentioned several times. In exchange we offer an excellent working atmosphere, low fluctuation and long-term continuity, also in the personnel area, which is highly appreciated by both our employees and our customers.

Numbers and facts are one thing. What role does gut feeling play in this? >> The question is always, at what price can I buy or sell? This is 90 percent Excel and the last ten percent gut feeling - and ten percent can be a lot.

How good is your gut? >> I think it's grown in every way over the years n

Media

Medieneigentümer GNK Media House GmbH Breitwiesergutstraße 10 A-4020 Linz Tel. +43.1.813 03 46-0 office@media-house.at www.media-house.at Redaktionsanschrift Handelskai 94-96 A-1200 Wien Geschäftsführer Philipp Kaufmann & Michael Neubauer Chefredaktion

Michael Neubauer Verlagsleiter & Anzeigen Henrik Schaller Artdirector Jelio Anton Stefanov Grafik & Layout Jelio Anton Stefanov, Johanna Hinterdorfer, Annalena Hofinger & Lukas Brunmayr Lektorat Amelie Miller Autoren dieser Ausgabe Andreas Altstädter, Angelika Fleischl, Patrick Baldia, Philipp Kaufmann, Reinhard Krémer sowie die Kommentatoren.

Photos wenn nicht anders angegeben: GNK Media House / Katharina Schiffl, GNK Media House / Michael Hetzmannseder Druck Ferdinand Berger & Söhne GmbH DER IMMOFOKUS WENDET SICH IM SINNE DER GLEICHSTELLUNG GLEICHERMASSEN AN FRAUEN UND MÄNNER. AUS GRÜNDEN DER ÜBERSICHTLICHKEIT UND VERSTÄNDLICHKEIT KANN ES BEI DEN BEITRÄGEN VORKOMMEN, DASS NUR DIE MASKULINE ANSPRECHFORM VERWENDET WIRD. ImmoFokus ist Mitglied bei:

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Investing in Austria

Stability and security as factors for success In international competition. Austria scores with macroeconomic stability, the education sector and its quality of life, among other aspects. Nevertheless, there is still room for improvement. by:Ursula Rischanek

J

udging by the steadily rising number of overnight stays, Austria enjoys great popularity as a holiday destination.

However, the Alpine republic is also an extremely attractive business location for domestic and foreign companies. In the previous year alone, the state-owned business relocation agency ABA-Invest in Austria recorded 355 re-

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locations - the best result in the company's 37-year history. Economics Minister Margarete SchrambĂśck and ABA Managing Director RenĂŠ Siegl estimate the associated investments at around 735 million Euros and 2,888 jobs created.

Most of the newcomers came from Germany, Switzerland came in second, followed by Italy

and Hungary. But Spanish and British companies have also discovered the benefits of moving their business to Austria. For example, the investments of British companies in Austria have doubled from 2017 to 2018. The most popular destination among the newcomers to the Austrian economy was Vienna, where 182 companies settled. Lower Austria and Salz-

VIENNA AT NIGHT

burg ranked second and third, respectively. As in 2017, the information and communication technology (ICT) sector led the way accounting for 56 of the newly-established companies, and the business-related services sector, which attracted 55 companies, also stood out in 2018.

Location loyalty

Fotos: A. Karnholz, hurca

Domestic companies as well are also constantly confirming their commitment to Austria as a business location: Voest, for example, is investing around 350 million Euros in a new stainless steel plant in Kapfenberg, the first one in Europe in 40 years incidentally. Beginning in 2021, the fully-digitized plant will produce around 205,000 tonnes of the most demanding high-performance steel annually. In the long term the investment will secure more than 3000 highly-qualified jobs in the region.

In the nearby Leoben, the logistics company Knapp is also taking a further investment step: around 3.9 million Euros will be supplied for the expansion of the company building. The current workforce of 580 employees is to be increased to 1000 by 2025. Like these two

examples, numerous other companies, including many world market leaders and hidden champions, are remaining loyal to their homeland. There are various reasons for believing in Austria as a business location: One of the most important characteristics is that it is a quality location. Because the performance matches the requirements, the companies are also willing to accept the high labour costs. In addition, the Alpine republic still scores with its proximity to Central and Eastern Europe, as more than 360 Eastern European headquarters indicate. Other strengths include labour productivity well above the Eurozone average, low strike rates, political and legal stability and high living, social and environmental standards. The practice-oriented dual education system and a large number of universities and advanced technical colleges provide the highly sought-after, well-trained skilled workers. Stable energy supplies - also in the form of ecologically-sustainable energy - are also becoming increasingly significant. The rising consumer demand of private households, based on strong employment growth and

income tax relief, as well as increasing investments in equipment also confirm the strength of Austria as a business location.

Innovative Austria The same applies to the innovative strength of domestic companies, which is reflected in rising innovation expenditure and a correspondingly steady increase in the research quota.

The share of research expenditure in the gross domestic product is estimated to have risen from 3.16 to 3.19 per cent in the previous year.

This means that since 2014 the research ratio has already exceeded the EU target of three percent by 2020. A total of 12.3 billion Euros has been invested in research and development in 2018 - an increase of 5.6 percent compared to 2017. All this is also reflected in various location rankings: Austria, for example, ranks 22nd among 140 nations in the current World Economic Forum (WEF) ranking.

Still some catching up to do However, it’s not time to rest on one's laurels just yet, as there are some points in which

MIPIM 2019

21

Investing in Austria

Austria still has some catching up to do. High ancillary labour costs, the pension system, rigid working hours and the shortage of skilled workers are just some of the issues of concern. The same applies to regulations and bureaucracy. For example, it takes 21 days to set up a company in this country before all official procedures are completed.

In the WEF ranking, this means only 103rd place. Small countries such as Denmark and Estonia show that things can go much faster with three and a days of administration procedures each. Many indicators of the financial system are also below average, such as a negative assessment of market capitalisation or the availability of risk capital. The Alpine republic also has some catching up to do in terms of digitisation. In the current Digital Economy and Society Index (DESI) of the European Commission, Austria ranks tenth with a score of 0.57, just ahead of Germany, but Austria ranks among the top 5 in the field of e-government pioneers.

Nevertheless, the use of digital services and access to IT technologies are in need of improvement in this digital age. Furthermore,

access to broadband Internet is still below the EU and OECD average. In addition, according to the Organisation for Economic

Cooperation and Development (OECD), Austria still has one of the highest tax and duty ratios in the world with 41.8 percent, whereas the OECD average is 34.2 percent. However, as part of the planned tax reform, the government wants to reduce the tax rate to 40 percent and thus contribute to making the location even more attractive.

It has already done so in another area: firstly, with the new location development regulation (StEntG), which significantly accelerates the approval procedure for selected major projects of economic significance. On the other hand, it has also taken the step of entrusting the Chamber of Commerce with the management function. This is intended to solve investment blockades in projects that are in the special public interest, to structure the procedures better and thereby significantly streamline and simplify them. At the same time, abusive delays in proceedings are effectively eliminated - all with the aim of creating a well-functioning infrastructure and further increasing the competitiveness of the business location because the competition never sleeps. n

Austrian Economic Forecast (Real change in %)

2013

2014

GDP

0.0

Private consumption

0.8

Public consumption Gross fixed capital formation

2015

2016

2017

2018

2019

2020

0.7

1.1

2.0

2.6

2.7

1.6

1.5

1.1

2.4

2.5

4.2

3.8

3.0

2.0

-0.1

0.3

0.4

1.4

1.4

1.6

1.4

1.3

1.6

-0.4

2.3

4.3

3.9

3.4

2.1

1.6

Exports

0.6

2.9

3.5

2.7

4.7

4.2

2.7

2.3

Imports

0.7

3.0

3.6

3.4

5.1

2.5

2.3

2.3

CPI (change in %)

2.0

1.7

0.9

0.9

2.1

2.0

1.8

1.9

Unemployment rate (in %, nat. def.)

7.6

8.4

9.1

9.1

8.5

7.7

7.4

7.4

Unemployment rate (in %, Eurostat def.)

5.3

5.6

5.7

6.0

5.5

4.9

4.7

4.7

Current account balance (in % of GDP)

1.9

2.5

1.7

2.5

2.0

2.4

2.5

2.4

General Government balance (in % of GDP)

-2.0

-2.7

-1.0

-1.6

-0.8

-0.3

0.1

0.2

Public debt (in % of GDP)

81.3

84.0

84.8

83.0

78.3

74.8

72.2

69.7

Source: Bank Austria Economics & Market Analysis Austria - Source: Statistik Austria, WIFO, Thomson Reuters Datastream, EU Commission, UniCredit Research

22

ImmoFokus

Good Reason No.

55

Because we have been combining local know-how with international expertise for decades #99good reasons There is more than one reason to benefit from our expertise. +43 1 535 53 05 or www.colliers.at

MIPIM 2019

23

Investing in Austria

Attractive market despite falling yields Sustainable trend reversal. Housing in the focus of national and international investors. However, yields will continue to fall in 2019.

T

he year 2018 was marked by extraordinarily intensive activity," says EHL Managing Partner Franz Pöltl.

"The Austrian market continues to be attractive for both national and international investors and the current price level is acceptable despite falling yields.” One consequence of the lack of large-scale transactions is that even the very financially-strong investors are also active in the middle segment. "Many investors

prefer large-volume properties for reasons of transaction and cost efficiency, but in view of future fungibility, the majority of prospective buyers also like to invest in properties in the range between 30 and 100 million Euros. Last year a reasonable number of appealing investment properties were available in this segment, which were able to meet the requirements of the buyers in terms of returns and sustainability of earnings.”

Investment Market Office Austria

25,5

26,0

5,00% 4,50% 4,00%

< 3,50 %

3,50% 3,00%

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2011 2012 2013 2014 2015 2016 2017 2018

14,0

14,0

14,0

14,0

13,5

13,5

13,5

13,5

14,0

14,0

14,0

13,5

13,0

13,0

14

14,5

Gross rents Top rents in EURsqm /month

16

14,5

Office CBD top rents and top yields

12

25,5

26,0

26,0

26,0

26,0

26,0

26,0

27,0

5,50% 26,5

27,0

27,0

Gross rents Top rents in EURsqm /month 6,00%

23,0

22,0

30 28 26 24 22 20 18 16 14 12 10

26,0

Prime locations: top rents and top yields

10

8,00% 7,00% 6,00%

8 4,75 % 5,00%

6 4

4,00%

2 0

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2011 2012 2013 2014 2015 2016 2017 2018

Source: EHL Market Research | Q1 2019

24

"The result at the end of 2018 could have been similar to that of the previous year, but the limited range of products for international institutional investors slowed down the investment volume," explains Georg Fichtinger, Head of Investment Properties CBRE. In the previous year, the average transaction was 37 million Euros. In 2017, an average transaction was still worth 45 million Euros. The lack of large properties is also reflected in the number of large-volume transactions. There were only eight transactions in 2018 with the volume of over 100 million Euros. "In 2017 there were still 12 transactions of that volume," adds Fichtinger. In total, German investors accounted for around 29 percent of all transactions in Austria in the previous year and 16 percent of the buyers were international investors from other countries. In comparison to 2017, when there was a "total overhang" of foreign investors, this year 56 percent of domestic buyers were actively involved. According to Fichtinger, this is also due to a lack of products interesting for international investors. At around 31 percent, office

ImmoFokus

3,00%

"German investors in particular are increasingly interested in Austrian residential real estate."

Franz Pöltl, EHL Investment Consulting

Investment Market Retail Austria

Yields have fallen

Fotos: CBRE, EHL

German investors in particular are increasingly interested in Austrian residential real estate. On the one hand, this is due to the fact that new construction activity has picked up and there is a very attractive supply situation by international standards. On the other hand, the yields on commercial properties have fallen, so that residential properties now offer a similar yield level," says Fichtinger. "The Austrian real estate market is far ahead of the rest of Europe and, above all, the absolute first choice for the long-term, security-oriented buyers," confirms Franz Pöltl, Managing Partner of EHL Investment Consulting. "Rental levels are moderate by international standards, price levels are well secured due to long-term demographic developments and the present strong economy, making the current yields extremely attractive in these respects.” The Austrian market is primarily measured by the large international buyers in terms of alternative investment opportunities in German cities, and this comparison has very often been in favour of the Alpine republic most recently. "Austria is currently the better Germany in many respects," Pöltl sums up, stressing in particular the appeal of the capital city. "Vienna is the

105

120

120

105

105

105

105

100

100

100

100

60

5,00%

40

4,00 %

20 0

4,00% 3,00%

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2011 2012 2013 2014 2015 2016 2017 2018

12

15,0

15,0

15,0

15,0

15,0

15,0

15,0

15,0

15,0

15,0

14

15,0

16

15,0

Rents Top Rents in sqm/Euro/Month 15,0

Retail Parks Top rents/yields

15,0

properties were the traditionally strongest asset class in 2018. With 29 percent of the transaction volume and driven by the large-volume KIKA/ Leiner deal and the sale of the Danube portfolio consisting of several specialist retail centers, retail properties followed in second place. Institutional residential investments recorded the strongest growth in 2018, taking third place with just under 20 percent (6 percent in the previous year), followed by mixed-use properties with around 8 percent.

7,00% 6,00%

14,5

Georg Fichtinger, CBRE Austria

8,00%

80

14,0

"German investors in particular are increasingly interested in Austrian residential real estate."

100

100

125

120

120

140

130

Rents Top Rents in sqm/Euro/Month 130

Shopping Centres Top rents/yields

10

8,00% 7,00% 6,00%

8

4,75 %

6 4

5,00% 4,00%

2 0

3,00% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2011 2012 2013 2014 2015 2016 2017 2018

Source: EHL Market Research | Q1 2018

second largest German-speaking city, it is the fastest-growing metropolis in the Germanspeaking region in percentage terms and there is still no overheated rental market despite the economic boom. This means that further prospects are at least as good as in the German Big 5 (Berlin, Hamburg, Munich, Frankfurt, Cologne), but the yields are still about 25 to 50 basis points higher. For an investor who thinks decades ahead, this is a huge difference." So, it is not surprising that both megadeals exceeding the 500 million Euro mark have been done with German buyers (sale of the Austria Campus to PGIM Real Estate and of The Icon Vienna to Allianz).

Foreign institutional Investors Pöltl is convinced that the interest in residential real estate will continue due to the very good performance. "The forecast population growth as well as the ongoing urbanisation indicate an extremely sustainable investment

scenario for a long-term stable development, which appeals particularly to safety-oriented buyers. Vienna remains the most important market in this segment, but projects in the provincial capitals are also increasingly attracting investor interest. The only restriction: "These investors are concentrating exclusively on the new buildings, as these do not fall under the full scope of application of the current tenancy legislation.” With a volume of approximately 1.2 billion Euros, for the first time the same amount was invested in Austrian residential real estate as in office properties in 2018. Both asset classes accounted for approximately 30 percent of the transaction volume. Foreign institutional investors in particular were interested in residential real estate in Austria in 2018 and were responsible for around 69 percent of the residential investment volume. Investors no longer focused only on the central locations around the Vienna Inner City and the French BNP Paribas as well as the German

MIPIM 2019

25

Investing in Austria

Selected Top-Deals in Austria 2018 STATUS

PROPERTY

TYPE OF USE

Q1 2018

Lassallestrasse 1, 5

Office

111,550 sqm

Unicredit Bank Austria

Imfarr

Q4 2018

Media Quarter Marx 3

Office

25,400 sqm

Wirtschaftsagentur Wien / Privatinvestor

Amundi

Q2 2018

Adler&Ameise

Office

23,934 sqm

Wealthcap

TH Real Estate

Q3 2018

Business Boulevard Salzburg

Office

16,715 sqm

Triuva

Privatinvestoren

Q4 2018

Kolingasse 14-16

Office

16,389 sqm

Volksbank AG

ARE Austrian Real Estate

Q2 2018

Styria Center Graz

Office

15,052 sqm

Projektentwickler

Union Investment Privatinvestoren

GLA

BUYER

SELLER

Q3 2018

faBricks

Office

9,490 sqm

Erste Immobilien Kapitalanlage Gesellschaft

Q1 2018

Max Tower Graz

Office

6,200 sqm

Privatinvestor

Union Investment Immofonds I

Q2 2018

Competence Center

Office

5,813 sqm

Wealthcap

Deutsche Pensionskasse

Q1 2018

WE Anteil Wipplingerstrasse 35

Office

4,450 sqm

PGIM Real Estate

Hallmann Holding

Q2 2018

Biocenter

Office

4,351 sqm

Wealthcap

Deutsche Pensionskasse

Q2 2018

Kika/Leiner Portfolio

Retail

n.a.

Steinhoff Gruppe

Signa

Q1 2018

Einzelhandelsportfolio AT

Retail

7,0000 sqm

ADIA

BVK

Q4 2018

Donau Portfolio

Retail

51,100 sqm

Uniqa

Investorenkonsortium

Q2 2018

50% Anteil Weberzeile Ried

Retail

25,000 sqm

SES

TH Real Estate

Q1 2018

Geschäftshaus Mariahilferstrasse

Retail

16,000 sqm

M&A Real Consult

Imfarr

Q2 2018

K1 Kittsee

Retail

13,100 sqm

Privatinvestor

TH Real Estate

Q1 2018

Pittarello Vösendorf

Retail

10,000 sqm

Semper Constantia

Privatinvestoren

Q4 2018

Kärntner Straße 12, 1010 Wien

Retail

3,547 sqm

Privatinvestor

Private Investor

Q1 2018

Erdberger Lände 36-38, BT 1-5

Housing

25,592 sqm

Premium / ARE

Deutscher institutioneller Investor

Q3 2018

Dresdner Strasse 90

Development Housing

21,000 sqm

ARWAG/MIGRA

S+B Gruppe

Q3 2018

The Metropolitan Living

Development Housing

17,650 sqm

Invester United Benefits

STC Swiss Town Consult

Q3 2018

LW 280

Housing

10,300 sqm

Strabag

Buwog

Q3 2018

Franz Joseph

Housing

10,000 sqm

Moser Wohnbau / Bauwerk Wohnraum

Aberdeen Standard Investment

Q3 2018

Obere Donaustrasse 23-27 & 29

Development Hotel/Housing

40,000 sqm

Reitenburg GmbH

UBM Development

Q4 2018

Hilton Garden Inn

Hotel

174 Rooms

Immofinanz AG

Privatinvestor

Q1 2018

Logistik Portfolio Ö

Logistics/Industrial

98,500 sqm

Alpha Industrial

Frasers Property Investments

Q3 2018

Tec Center Lebring

Logistics/Industrial

28,000 sqm

Palmira

Europa Capital

Q3 2018

Post Areal

Gemischt genutzt

40,000 sqm

Soravia, Michel Tojner

Hasso Plattner, Denkmalneu-Gruppe

Source:EHL Market Research

26

ImmoFokus

Investment • Yield compressions are changing strategies the housing asset class is becoming more interesting • In addition to German buyers, interest from the Asian region is increasing • In the first half of 2018 retail dominated by two large-volume transactions: the Kika/Leiner portfolio and Mariahilfer Strasse 47

Union Investment, for example, also acquired properties in the outskirts of Vienna’s 21st and 22nd districts. Furthermore, Colognebased Art-Invest Real Estate contributed five out of ten components of the "Das Ensemble" project - a joint venture between Premium Immobilien AG and the federally-owned ARE Austrian Real Estate Development - for a special housing fund of an institutional investor in the 3rd district of Vienna. "The interest of German investors in Austrian residential real estate in particular has risen sharply in recent years. Last year, residential real estate accounted for more than half of the German investment volume in Austria," said Fichtinger.

"New residential construction in Vienna will continue to provide an attractive investment product in the coming years, which is why we

expect institutional investors to continue to invest heavily in 2019," maintains Fichtinger.

Some experts believe that residential investments could even overtake the office asset class in 2019. From a developer's point of view, it is much easier to sell to investors than to sell the condominiums individually. Investors are even willing to invest in apartments that will take up to three years to complete. A quarter of the investments flowed into these so-called "forward purchases" - and more and more often at a very early stage. In the past, a forward deal was concluded twelve months before completion; today, properties are sold two or even two and a half years earlier. "This would have been considered impossible three years ago," explains Fichtinger.

Industry and Logistics • Industry 4.0 is demanding flexibility and increased network readiness - also for properties • The availability of trained specialists is also an important issue in Austria • Online trade is also changing logistics the topic of city logistics will present new challenges for both the private sector and politics.

Retail • Area shrinks - sales volume rises: currently the best sales volume development since 2010 • Online competition leads to new strategies: “Retailtainment” to make stationary retailing interesting again • The Golden U remains the most attractive location in Vienna’s inner city, Rotenturmstrasse and Brandstätte are increasingly in demand • 30-40 international newcomers enter the market in 2018

However, great demand and high investment pressure has led to further price increases in all asset classes. Top yields in the office sector fell from 3.75 percent to below 3.5 percent in the course of 2018 and remain strained, with the result that top yields in the residential sector (3.25 percent) are already on a par with top yields in prime commercial properties. In the retail segment, prime yields remained stable at around 4 percent for shopping centers and 4.75 percent for specialty shopping centers due to the lack of sales of top properties. The outlook for 2019 is also extremely positive. On the one hand, the first quarter of 2019 is expected to see the completion of some major transactions that

Of f i ce • 300,000 square meters of new space in 2018 will bring the highest value in over 10 years • Letting performance and vacancy rates increase • The large supply of first, as well as second-time occupancy space increases the pressure on landlords

Housing • Excess demand leads to price increases, even in locations that have been less in demand so far • Demand remains high in the luxury segment - but requirements are also uncompromisingly high • Barrier-free construction and the singlehousehold trend are changing layout planning

have been postponed until this year. On the other hand, preparations are already underway for a large number of sales processes for marketable properties that are well absorbed by the market due to the investment-friendly capital market environment and the high demand from both institutional and private investors.

Yields will continue to fall at least in the first half of the year, after which a "lateral movement" is expected. "Despite the many new properties coming onto the market, we expect investor demand to far exceed supply in 2019 and that this will continue to be the limiting factor for volume development.” Pöltl expects a further increase in investors' involvement in alternative asset classes, for example, demand is very high in the area of logistics. "With the growing online trade, logistics investments are certainly particularly promising investments for the future; but above all in this segment, there are far too few properties on the market in Austria to even begin to meet demand.” n

MIPIM 2019

27

Investing in Austria

Trend towards serviced office space Boom. The Vienna office market in 2018 was characterised by the highest completion rate in more than ten years. A total of 260,000 square metres of high-quality office space came onto the market. In 2019 the figure will be just under 38,000. by:Michael Neubauer

T

he Vienna office market in 2018 was characterised by the highest completion rate for more than ten years. A total of 260,000 square meters of high-quality office space came onto the market, including major projects such as the Austria Campus (160,000 square meters) at Praterstern, The Icon Vienna (74,200 square meters) at the central railway station (Hauptbahnhof) and the ViE (13,800 square meters) in the Erdberger Lände.

"It may not be a record year, but it is a very favourable one," says Andreas Ridder, Managing Director CBRE Austria & CEE. This wave of completions was very well received by the market and some of the properties have a preutilisation ratio of up to 70 percent. "This is particularly remarkable since rents in these ultra-

modern new properties in low-rise buildings are up to 18.00 Euros per square meter, which is after all higher than the average rent of 14.80 Euros per square meter," says Stefan Wernhart, Managing Director of EHL Gewerbeimmobilien GmbH. It is a sign that companies have increasingly been on the lookout for high-quality first-time occupancy space in which the demands placed on modern work and organisational concepts can be ideally implemented.

Among the largest office projects that have provided important impulses are The Icon Vienna, Austria Campus, Messecarrée, QBC6 and ViE Erdberger Lände. Fast economic growth of the past two years has also had an increasingly positive effect on the demand from office tenants for new, higher-quality office spaces.

"Finally, we were able to meet the demand and offer attractive new locations and office space

to potential tenants. Because of the interesting properties, more large lettings were also possible than in previous years. As a result, nine large leases, each with more than 5,000 square meters, were signed," detailed Ridder. "Due to increased demand and attractive supply, top rents in good and average locations outside the CBD have risen by up to 9 percent compared with the previous year. At the end of last year, prime rents in top locations amounted to 25.50 Euro per square meter, in good locations to 18.50 Euros per square meter and in average locations to 15.50 Euros per square meter.

Vacancy rate up only slightly The robust market activity is also the reason why the vacancy rate rose only slightly to 5.3 percent despite the increased space production. In 2018, more large-volume lettings were

Vienna Office Market 2011 – 2019 Vacancy Rate (%) Forecast

2011 Source: EHL-Market Research | Ql 2019

28

ImmoFokus

2013

2014

2015

2016

270.000

260.000

7,00%

6,00% 38.000 *

60.000

200.000

130.000

220.000

260.000 180.000

210.000

2012

120.000

75,000 sqm

180.000

220.000

150,000 sqm

185.000

225,000 sqm

8,00%

320.000

300,000 sqm

185.000

*

150.000

Deliveries in sqm Take-up in sqm

5,00%

4,00% 2017

2018

2019

Projects & Completions 2019/2020 2019 PROPERTY

SIZE

LOCATION

Inno Plaza

11.000 sqm

1120, Pottendorfer Straße 23-25

Silo Plus

11.000 sqm

1230, Lemböckgasse 57-59

HoHo Wien

7.700 sqm

1220, Janis-Joplin-Promenade 26

Technologiezentrum Seestadt, BT2

7.100 sqm

1220, Christine-Touaillon-Str. 11

2020 PROPERTY

SIZE

LOCATION

QBC 1+2

34.000 sqm

1100, Wiedner Gürtel 5, Am Belvedere 10

Office Park 4

26.000 sqm

1300, Towerstraße

The Brick - Biotope Offices am Wienerberg

19.000 sqm

1100, Triester Straße 89-91

Haus am Schottentor*

14.500 sqm

1010, Schottengasse 6-8

myhive am Wienerberg, WBS 7-9*

10.000 sqm

1100, Wienerbergstraße 7-9

Rathausstraße 1**

9.000 sqm

1010, Rathausstraße 1

myhive Ungargasse*

7.000 sqm

1030, Ungargasse 37

Prater Glacis

4.000 sqm

1020, Perspektivstraße 4

"In new office buildings, the areas for Co-Working providers should be part of the planning concept, in order to be able to meet the changing requirements of the companies."

Stefan Wernhart, EHL Commercial Real Estate

Source: EHL Market Research | Q1 2019 This table only contains projects where the decision to build has already been made or construction has begun. *Refurbishment **owner-occupied

Fotos: EHL, CBRE

recorded than in previous years; the average of all lettings with more than 1,000 square meters was approximately 2,900 square meters in 2018. The increase in rentals over 10,000 square meters such as Austro Control with 12,700 square meters or Volksbank with 14,300 square meters in the East/Erdberg region can also be rated positively. The most mobile tenants in 2018 came from the service sector (approximately 32 percent) and from the public sector (approximately 22 percent). The most popular location in 2018 was the inner city, followed by Erdberg, Wienerberg and Donau City/Lassallestraße. With a share of more than 12 percent, leases to providers of serviced office space made a significant contribution to the positive result on the office market. Due to further expansion plans and new market entries, the trend towards serviced office space is expected to continue in 2019.

Co-Working Boom needs space Co-Working providers were a noticeably stronger driving force behind the letting

performance compared to last year and, with a share of approximately 13 percent of total take-up, have risen to become an important demand group - in 2016 the figure was only one percent. Between 2018 and

"Project-related work and fluctuating employee numbers are the reality for more and more companies."

2020 over 40,000 square meters of serviced office space should be opened since there is a huge demand. The largest providers are currently Regus, Spaces and weXelerate, but the US provider WeWork is also considering coming to Austria. Suppliers such as Talent Garden with approximately 4,900 square meters in the Liechtensteinstraße, Spaces with approximately 8,000 square meters in Square Plus and approximately 5,000 square meters in The Icon Vienna follow the trend towards more flexibility in the office market, according to Wernhart: "Project-related work and fluctuating employee numbers are becoming a reality for more and more companies. Therefore, it makes sense that in new office buildings the areas for Co-Working providers should be part of the planning concept, in order to be able to meet the changing requirements of the companies.” Wernhart predicts a year of consolidation on the Vienna office market in 2019. "Due to the production of new space of only 38,000 square meters this year, the

MIPIM 2019

29

Investing in Austria

PRAG

CZ

A22

Office Buildings 10.00 € - 14.00 € Office Towers 13.00 € - 17.50 €

U6

NORTH U4

Office Buildings 11.00 € - 14.00 €

WEST Office Buildings 11.00 € - 16.50 € Office Towers 14.00 € - 21.00 €

INNER DISTRICTS

U3

D

MÜNCHEN

A1

SALZBURG - LINZ

U4 Vienna Hauptbahnhof

U3

Office Buildings 11.00 € - 16.00 € Office Towers 13.00 € - 21.00 €

A23

SOUTH S1

U6 SALZBURG - LINZ A 1 / A 21 D Source: Modesta Real Estate | Büromarktbericht 2018

30

ImmoFokus

SLO

IT

A2 GRAZ A3 / A2

HU

U1

CZ

BRÜNN

S1

U1

Office Buildings 11.50 € - 14.50 €

NORTH-EAST

U2

CITY CENTER

Office Towers 13.00 € - 24.00 €

Office Buildings 12.25 € - 26.00 € Office Towers 15.00 € - 26.00 €

Office Buildings 10.00 € - 14.00 €

SOUTH EAST

Office Towers 13.00 € - 18.00 €

remaining first occupancy space of the 2018 wave of completions will be well absorbed by the market and the vacancy rate will fall again in the course of the first half of 2019 after the short-term increase in the fourth quarter of 2018.” Due to the lower supply of available first-occupancy space compared to the previous year, Wernhart expects an increase in the letting performance of highquality refurbished second occupancies in 2019. "Because of the very good rate of preutilisation of the completions from 2018 and the very good demand situation, the chances of landlords of high-quality refurbished second-occupancy units in 2019 to re-let them at attractive prices are better than they have been for a long time.”

"The letting opportunities of high-quality refurbished second leases at attractive prices are better for the landlords in 2019 than they have been for a long time."

Low completion rate 2019

SK

A4 BRATISLAVA Vienna International Airport

A4 / A6 BUDAPEST HU

The office market in Vienna should also develop well in 2019 - in line with the situation in Europe - but with less rental growth than last year. "The low completion rate of only approximately 38,000 square meters in 2019 could become a challenge for office tenants looking for large interconnected spaces. There will only be a slight let up here in 2020/2021 when larger office developments such as QBC 1 and

MIPIM 2019

31

Investing in Austria

2 or the Forum Donaustadt are ready to be occupied," said Ridder. After the record year 2018, the existing vacancies should fill up quickly this year with the completion of some major projects. Rising office rents are quite possible, especially if an international major tenant is looking for space. The yield for offices, like that for apartments, is just over three percent, while specialist shops have a yield of 5.5 percent. The new Buwog headquarters in Rathausstraße 1 will be completed in 2019. Silo Plus, HoHo, Haus am Schottentor, The Silo extension "Silo Plus" of Immorent in Liesing are on the list of Viennese office

real estate brokers for 2019, as are the HoHo in Seestadt (Cetus/ Kerbler Holding) and the InnoPlaza of the S+B Group in Meidling. The "Haus am Schottentor" should also be occupied next year, and the first expansion of the Seestadt Technology Centre should also be completed. Compared to 2018, which saw around 260,000 square meters of new space, this will be quite a turning point in the statistics; but if The Brick on the Wienerberg is completed in 2019 instead of 2020, then the completion statistics will show that around 25,000 square meters will move up from 2020 to 2019. n

"The low completion rate in 2019 will be a challenge for office tenants looking for large interconnected spaces."

Andreas Ridder, CBRE Austria & CEE

Selected Lettings 2018 TENANT

SIZE

PROPERTY

Volksbank

14.300 sqm

1030, Dietrichgasse 17-25

Austro Control

12.700 sqm

1030, Austro Tower, Schnirchgasse 17

Asfinag

9.400 sqm

1030, Austro Tower, Schnirchgasse 17

Spaces

8.700 sqm

1010, Haus am Schottentor, Schottengasse 6-8

Spaces

8.000 sqm

1190, Square Plus, Leopold-Ungar-Platz 2-3

RHI

7.600 sqm

1120, Euro Plaza 6, Kranichberggasse 6

Wiener Wohnen

6.500 sqm

1030, Erdbergstraße 200

Spaces

5.000 sqm

1100, Euro Plaza 6, Gertrude-Fröhlich-SandnerStraße 3

Talent Garden

4.900 sqm

1090, Liechtensteinstraße 111-115

Rewe

4.200 sqm

1120, Euro Plaza 4, Am Euro Platz 2

A1 Telekom

4.000 sqm

1220, Andromeda Tower, Donau-City-Straße 6

Uniqa

3.800 sqm

1020, Aspernbrückengasse 2

Kammer und Akademie der Wirtschaftstreuhänder

3.700 sqm

1100, QBC 2a, Wiedner Gürtel 5/Am Belvedere 10

Daikin Airconditioning

2.500 sqm

1230, Silo Plus, Lemböckgasse 57-59

Rexel Austria

2.400 sqm

1020, Austria Campus, Walcherstraße 1

Source: EHL Market Research | Q12019

TAKE-UP - BY OFFICE SUBMARKET 1%

6%

10 %

13 % 18 %

16 %

Rentals from 1,000 m² taken into account Source: EHL Market Research / Q1 2019

32

ImmoFokus

1% 3%

Neu Marx | Erdberg

7% 29 %

BY SECTOR

Wienerberg | Southern Region Inner City and directly adjacent locations

Public sector 5% 6%

25%

Lassallestraße | Messe | Prater

12%

Serviced office IT | High-Tech Banks and insurances

Central Station | Quartier Belvedere

Retail and services

North Region

Construction, real estate

Vienna DC Western Region

17% 16%

15%

Law firms and consultants Educational and training facilities Pharma and health

Analysis Submarkets Vienna Q4/2018 SUBMARKET NAME

ACTIVE PROPERTIES TOTAL SPACE IN SQM

ACTIVE PROPERTIES TOTAL SPACE IN SQM CLASS A

ACTIVE PROPERTIES TOTAL SPACE IN SQM CLASS B

VACANCY RATE IN %

TAKE-UP

Inner Districts - CBD

2,263.090

1,009.213

1,253.877

3,5%

31.686

Donaucity

528.936

278.834

250.102

2,5%

8.077

Prater/Lasallestraße

722.793

621.405

101.388

6,8%

15.930

Erdberg - St. Marx (East)

668.326

552.707

115.619

7,3%

6.850

Central Station

529.566

386.265

143.301

8,7%

7.200

Wienerberg (South)

535.629

300.248

235.381

8,4%

5.740

North

454.042

237.017

217.025

10,0%

1792

West

255.989

140.693

115.296

6,6%

873

82.800

46.000

36.800

2,2%

2629

6,041.171

3,572.382

2.468.789

5,7%

80.777

AirportCity Total Source: Vienna Research Forum

Vienna: Results of the 4th quarter

I

n the fourth quarter of 2018 take-up on the Vienna office market totaled approx. 80,800 square meter - around 38 percent more than in the fourth quarter of 2017 and 117 percent more than in the third quarter of 2018. This is what the results of the Vienna Research Forum (VRF) show after evaluating the current key data of the Vienna office market.

The VRF only takes into account modern office space built since 1990 or completely renovated and office space which meets certain quality criteria such as indoor climate, elevators or IT standards. According to the Vienna Research Forum, the largest take-up (pre-letting) was the lease of approx. 14,250 square meter in the Inner Districts - CBD submarket. This corresponds to approx. 18 percent of the total take-up on the Vienna office market in the fourth quarter.

Further large-scale lettings were also registered in the Inner Districts - CBD submarket with

Factbox • Take-up in the fourth quarter at approx.

80,800 square meter • Largest rental accounts for nearly 18 percent of the total take-up • Vacancy rate amounts to 5.7 percent • Take-up in 2018 totaled 225,100 square meter

approx. 8,700 square meter (pre-letting) and in the Donaucity submarket with approx. 4,000 sqm. A total of 78 lettings were recorded in the fourth quarter - 36 more than in the previous quarter and one less than in the fourth quarter of 2017. A closer look at take-up based on type of rental shows that 84 percent account for new leases and 16 percent for pre-lets*

Increase of vacancy rate to 5.7 percent in 4th quarter In the fourth quarter of 2018, the vacancy rate in the VRF portfolio of modern office buildings in Vienna amounted to 5.7 percent, which is an increase over the previous quarter (4.8 percent) and 0.3 percent higher than in the same period of the previous year (Q4 2017). The submarket with the lowest vacancy rate was the Airport City Vienna with 2.2 percent and the submarket with the highest rate was North with 10.0 percent.

For the first time in September 2016, the VRF

collected the total stock of modern office space for Vienna which it updated at the end of the fourth quarter of 2018: it amounts to 6,041,171 square meter **, of which 59 percent belong to class A and 41 percent to class B real estate according to VRF standard. In the fourth quarter of 2018 the projects Austria Campus (still without construction part 1) in the Prater Lassallestraße submarket, and The Icon Vienna and G5 in the Central station submarket were included in the portfolio.

In addition, after a further inspection of the CBD submarket, projects were added to the portfolio or surfaces adjusted. The total takeup in the VRF market for 2018, including subsequently recorded take-up, amounted to 225,100 square meter. n * The take-up registered by VRF only refers to new leases and pre-lets, renewals of rental agreements are not included. **The stock of office space can change from quarter to quarter due to regular adaptations of unclassified objects, conversions and completions.

About the Vienna Research Forum The Vienna Research Forum initiator is the Association for quality promotion in the real estate sector (immQu) with the leading Vienna commercial real estate companies, CBRE, Colliers International, Immobilienmakler, EHL Immobilien, ORAG Immobilien, OTTO Immobilien and Spiegelfeld International. They provide anonymously and independently of each other key parameters, such as take-up, vacancy rates, completions, to the VRF database. The data is then published quarterly to provide a comparative analysis which helps investors and companies.

MIPIM 2019

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Investing in Austria

E-commerce has definitely arrived Structural effects. City center prime locations remain in demand, but there are hardly any customers for the vacant Class B and Class C locations in the meantime. "The last stronghold of the Austrian cities, the fashion trade, is being dismantled bit by bit by e-commerce," says the Standort + Markt Managing Partner Hannes Lindner. by:Andreas Altstädter

34

ImmoFokus

Does the vigorous demand for stationary space mean that e-commerce does not afflict the stationary retail in Austria after all?

Unfortunately not. The truth will only be revealed when the change in the structure of the sector is analysed in detail: One of the main reasons for visiting the city, namely the fashion stores in the city centers, is steadily losing significance. "How high the decrease in turnover actually is as a result of the e-commerce campaign is not being openly discussed in the industry. What is clear, however, is that the fashion trade is quite obviously reevaluating the stationary space and successively distancing itself from it," Lindner is convinced. The last stronghold of the Austrian cities, the fashion trade, is being

dismantled by e-commerce bit by bit. "With an e-commerce share of almost 20 percent, fashion is one of the three most important purchasing groups in online shopping and indicates growth rates of almost 10 percent.

Of course, we also see this in the shop sales," confirms Rainer Will, Managing Director of the Handelsverband. In addition to clothing, books and electrical appliances are among the largest segments in home shopping.

Change of the space use mix The shift of retail sales to the web will continue to increase, at least in the medium term.

"E-Commerce is the driving force behind the current growth in retail sales. Online business is currently growing 10 times faster

Foto: Pavel Losevsky

D

igital change has propelled online retailers such as Amazon and Alibaba into the ranks of the world's most successful companies. In Austria, however, stationary retailing (still) dominates. Still. "Thanks to the economic boom. Although retail space growth is declining from year to year and was only at 1 percent recently, at least there is still growth," emphasizes Hannes Lindner, Managing Director of Standort + Markt, who has evaluated the structural effects of e-commerce on stationary retail in a study. For this purpose, the retail space in the 15 most prominent Austrian cities was examined. The view of the provinces includes the nine provincial capitals and six other cities with large populations.

Resourceful Strategic Creative

www.chsh.com CHSH

Austria

Belarus

Bulgaria

Czech Republic

Hungary

Romania

Slovak Republic

MIPIM 2019

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Investing in Austria

than stationary retail. Stagnation is not foreseeable, on the contrary: "In the future at least every third Euro generated in non-food retailing will be online,â&#x20AC;? Will is convinced of that. Currently, the online share of the total retail trade-relevant expenditure is around 8 to 10 percent, with online shopping being a question of age. The younger the consumers, the more frequently they shop online - preferably on their smartphones.

E-commerce drives vacancy dynamics forward

"The answer lies in digitization of the space and strategic linking of online shopping with the store branches."

In the course of e-commerce growth, one asks the question which uses - instead of fashion - have become more firmly anchored in the spatial structure of cities? For one, there are the leisure-oriented service providers such as fitness centers and casinos, whose share of space (2.5 percent) in the cities is still rather low despite considerable increases in the past four years (+25 percent).

Rainer Will, Trade Association Austria

In terms of space, however, restaurants are much more important, because they account for 13.1 percent of the city shop spaces and have increased by 7 percent in terms of space within four years. These two sectors have absorbed at least apart of the former fashion shop areas.

While the vacancy rate in the 15-City Sample Study in 2013 was still at 4.0 percent, it has since climbed continuously to 5.9 percent.

It is astonishing that the total shop space of the 15-City Sample Study has increased by 2.5 percent in the same period. Furthermore: "In the smaller district capitals, the vacancy rate is already at 13.5 percent." Here the consumer is driven into online shopping. This is due to many factors, including changes in consumer behavior, but also to the lack of digital infrastructure in many places - keyword 5G," explains Will.

Despite e-commerce, Class A locations remain in demand However, there is still a more or less brisk demand for space, especially for Class A locations, although it can be observed that Class B and Class C locations are being replaced by Class A locations in the course of improvement measures for branch networks.

In the meantime, there are hardly any customers for the Class B and Class C spaces and they remain vacant. Even the much-quoted hype in the catering trade obviously does

DEVELOPMENT OF RETAIL AND SHOP AREAS OF THE 15 CITIES' SAMPLE 100 % 90 % 80 %

4,0 % 2,0 %

4,5 % 2,0 %

17,9 % 2,4 %

17,9 % 2,4 %

17,9 % 2,5 %

12,3 %

12,9 %

12,9 %

13,0 %

13,1 %

6,7 %

6,7 %

6,7 %

6,7 %

5,8 %

70 % 17,9 %

17,9 %

17,9 %

60 % 50 %

17,9 %

17,9 %

8,7 %

8,7 %

8,7 %

8,7 %

3,7 %

9,0 %

3,7 %

3,7 %

3,7 %

3,2 %

35,5 %

34,7 %

34,4 %

33,9 %

33,2 %

40 % 30 % 20 %

Vacancy becoming a topic Fitness Center, Casino!

Gastronomy slowly increasing Home Accessories!

Vacancy Other Leisure Areas Gastronomy Services Other Selection Needs Home Furnishings Electrical and Household Goods Clothing and Footwear Short-term Needs Electronics - change completed Fashion is under heavy pressure

10 % 0%

36

9,3 %

9,3 %

9,3 %

9,3 %

9,4 %

2013/14

2014/15

2015/16

2016/17

2017/18

ImmoFokus

Local supply remains constant

DEVELOPMENT OF RETAIL AND SHOP AREAS OF THE 15 CITIES' SAMPLE

5.520 4.644

4.696

4.734

5.448 4.587

5.236

4.500 4.412

Thousand m*

5.000

5.584

5.500

5.639

6.000

2015/16

2016/17

2017/18

Shop areas of the "Big 15" increased by 7.7% in 5 years

Retail areas of the â&#x20AC;&#x153;Big 15â&#x20AC;? increased by + 7.3% in 5 years

4.000

3.500

3.000 2013/14

2014/15

Retail sale area in square meters Total shop area in square meters

not need the available space - the restaurant trade is also increasingly focusing on Class A locations. In the end this might lead to a situation in which a shop space in a certain location can realistically no longer be put to use. This scenario means either leasing the shop space for a different use outside the "consumer" area (e.g. as offices or doctors' surgeries) or the space remains empty.

Former shop spaces that are no longer used or can potentially be used as such, lead to a decline in available shop spaces. A development that will probably be observed more frequently in the urban landscape in the near future.

Does creating more retail space still make sense today?

The answer here is a clear "yes". "The demand for high-quality shop space in prime locations is still high, and in addition, due to the economic situation, there is still sufficient

liquidity to be invested in modern, highquality shop space," explains Lindner. Some locations, including weak Class B and Class C locations, will probably have to be abandoned in the course of modernizing the commercial landscape, which will have a notable impact on the value of real estate.

"How high the decrease in turnover actually is as a result of the e-commerce campaign is not being openly discussed in the industry."

Hannes Lindner, Location & Market

Many medium-sized retailers are justifiably asking themselves whether their business model is still attractive for the target group of online enthusiasts under the age of 30. "The answer lies in the digitalisation of the space and in the strategic linking of online shopping and store branches. Of course, shops in less frequented Class B and Class C locations are increasingly being replaced by web shops, but business always takes place where the people are. Now the politicians must also ensure that taxes are levied where consumers are. That's what we understand by FairCommerce," is Will's optimistic conclusion. n

MIPIM 2019

37

Investing in Austria

E-Commerce Austria 2018 The "E-Commerce Study Austria 2018: Home Shopping Consumer Behavior " by the Austrian Trade Association and the "Mail Order and E-Commerce" platform in cooperation with the Austrian Institute for SME Research shows a 2 percent increase in the number of buyers for 2018 and a 4 percent increase in expenditure in home shopping (classic mail order + e-commerce), a change in purchasing behavior and a massive increase of 20 percent in smartphone shopping.

According to the study, almost five million Austrians made home shopping purchases locally and abroad during the 2018 analysis period, spending a total of around 7.9 billion Euros. This corresponds to more than one-tenth of retail-relevant consumer spending. The top product groups are clothing (1.8 billion Euros), electrical appliances (1.1 billion Euros) and books (0.7 billion Euros).

Online shopping is growing dynamically, as does outflow abroad More than 90 percent of home shopping spending is already done online (7.2 billion Euros), which corresponds to an increase of 6 percent over the same period last year. However, 57 percent of consumers now buy from foreign online merchants, and loyalty to domestic providers continues to decline. Spending in the traditional mail order business has also declined, with a minus of 12 percent or 100 million Euros.

Smartphone Shopping & Voice Commerce on the advance The dynamics of online shopping are even surpassed by the boom in smartphone shopping. A quarter of Austria already buys on the Internet using the smartphone, spending currently stands at 640 million Euros. The megatrend Voice Commerce has just began in Austria. Nevertheless: 3 percent or 200,000 Austrians already use Internet-based personal assistants such as Amazon Echo or Google Home, and 0.2 percent have already made purchases using them.

+300 million Euros =4%

+100,000 =2%

5.0 million Home Shoppers = 67 % of Austrians (from age 15) ONLINE SHOPPING • Internet Retail • Internet via Smartphone

11 % 7.9 billion Euros spent shopping locally & abroad

+400 million Euros =6%

+200,000 =5%

4.3 million Online Shoppersr = 57 % of Austrians (from age 15)

10 % 7.2 billion Euros spent shopping at home or abroad

of total, retail-relevant consumer spending

HOME SHOPPING • Mail Order • Internet Retail • Internet via Smartphone

of total, retail-relevant consumer spending

E-Commerce Study Austria 2018 | Home Shopping Consumer Behavior

+300,000 = 20 %

1.8 million Smartphone Shoppers = 24 % of Austrians (from age 15) 38

ImmoFokus

+110 million Euros = 20 %

640 million

Euro spent shopping at home or abroad

1%

of total, retail-relevant consumer spending

SMARTPHONE SHOPPING • Internet via Smartphone

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MIPIM 2019

39

Investing in Austria

Changing Face of Retail Trade Transformation. The market for retail properties is currently the most difficult segment of the Austrian real estate market. Nevertheless, some positive signs could recently be noted. The decline in floor space has slowed down lately. by:Andreas Altstädter

The stock of shopping space in Austria is growing moderately, with around 43,000 square meters of new shopping space having been

Trend 1 SITE OPTIMIZATION AND AREA REDUCTIONS The High Street reacts to Amazon & Co. While online shares have reached one third of the market volume in some sectors, expansion in stationary retail trade has become extremely restrained. Site optimization and area reductions have come to the forefront.

40

ImmoFokus

built in 2018 - primarily extensions of existing shopping centers. In line with the trend, great importance was attached to food & beverages and entertainment in the course of the expansions. All in all, Mr. and Mrs. Austria have around 13.7 million square meters of shopping space at their disposal, still a top European figure. At the end of the year, the top rent in the retail sector was 310 Euros per square meter and was achieved in the inner city of Vienna.

The dominant topic is the continued disproportionate development of e-commerce, in particular that of Amazon. Although the traditional shops remain the most important sales channel, their function is expanding. They have a positive influence on the development of online sales in a region (a "halo effect"). In addition, they will be upgraded for convenient processing of "Click & Collect" orders. Retailers tend to focus on fewer locations, but on larger areas to showcase their companies and brands.

"Retailers are becoming more selective, taking a closer look at the space and considering market entries as well exits very carefully," says Wölfler, pointing out the 25 new entries in Austria in 2018 (compared to 32 in 2017) - including brands such as Apple, Decathlon, Manufactum, & other stores like Le Creuset and Hema. Bitzer assesses the prospects as overall positive, "Vienna in particular is an excellent retail location in the medium and long term due to its rapidly growing population, its high economic power

"In 2018 the total selling space declined by just over 1.9 per cent, by 2017 it had already been 6 per cent."

Fotos: Michael Nagl, CBRE, Alexander Schleissing

A

ustria also started from an extremely high level and was rather oversupplied with retail space compared with rest of Europe as a whole," explains EHL retail trade expert Jörg Bitzer. "The consolidation is therefore good for the market in any case.” The low production of new floor space and the increased alternative use of the ground floors are exerting additional pressure on the market. The retail market is the one that is developing and changing most dynamically due to the rapidly changing shopping behaviour of the consumers. "There is no way that things will get boring in the retail sector,” says Walter Wölfler, Head of Retail Austria & CEE CBRE.

MILLENIUM CITY

and booming tourism, and is one of the most sought-after expansion destinations of global chains. Of course, newcomers initially only need limited space, but if the start is followed by an Austria-wide roll-out, these new players will very quickly become noteworthy clients demanding further locations.â&#x20AC;?

Enough shopping space in Austria The decline in floor space will also continue at a moderate rate in 2019. In the meantime, Austria is only number five in the EU in terms of sales area/population, an important key figure, since a few years ago, it was still at the top of the rank.

"There is certainly enough shopping space

"There is no way that things will get boring in the retail sector."

Walter WĂślfler, CBRE Austria

in Austria overall, but not always in the right place," says Bitzer. "Particularly where there is still strong demand from Austrian and international chains, such as in the city of Salzburg, there is hardly any chance of obtaining permits.

On the other hand, in Burgenland, which is already very well supplied with shopping centers and specialist retail centers, further reclassifications for retail space are obviously quite easy to acquire."

In the top Viennese locations on Kohlmarkt and Graben, no new space can be conjured up - nevertheless, demand here would be higher than in any other domestic retail location. As a re-

MIPIM 2019

41

Investing in Austria Trend 2 THE BIG NAMES ARE MISSING According to a recent annual survey conducted by RegioData Research on more than 800 chain stores and franchise systems, approx. 460 Austrian retail and commercial companies are planning to expand this year. This figure is about 15% down from the previous year and about 40% less than 5 years ago. A few years ago the big chain stores trading in clothes, shoes, furniture, etc. were looking for new locations. In the meantime this role has been taken over by smaller companies.

Food retailers represent the exception – in this sector expansion remains vigorous.

Trend 3 SUPPLY OF SPACE EXCEEDS DEMAND If one balances the expansion requirements for 2019 against the anticipated branch closures, then this year (for the first time in ten years) will see more abandoned sites than new openings for retail and commercial services (system gastronomy, banks, travel agencies, hairdressers, etc.). A decade ago, this was down to the impact of the economic crisis - now it is online trading that leads to closures.

Consequently, this trend does not apply to sectors that are not or little affected by online retailing: food retailers, chemists and system gastronomy.

Trend 4 THE HIGH-FLYING SECTOR: SYSTEM GASTRONOMY The system gastronomy sector is seeking the majority of sites. Since both Austrians and tourists are spending more and more money on eating out year upon year, the potential as well as the possibility of expansion strongly increase. But even here it's no longer only the big players, but many new, small companies that are testing their fortunes with innovative concepts. A total of 76 different gastronomic concepts are looking for new locations this year.

sult, prime rents in the city center were able to maintain their high level, while investors in virtually all other locations had to accept price reductions for new and subsequent-rental properties recently. With a stable 400 Euros per square meter in the luxury locations in the first district, Vienna remained one of the ten most expensive high-street locations in the world in 2018.

Bitzer expects the trend of retail space in large shopping centers to be partially replaced by gastronomy, entertainment and services to increase. "One used to assume that a shopping

"In 2018, around 43,000 square meters of new shopping space was built - primarily as extensions of existing shopping centers."

Rents in shopping centres & retail parks / Q4/18 NET RENT EURO/SQM/M Prime location

ImmoFokus

TREND 40 - 120

stable

SCS, Donauzentrum, Auhof Center etc.

Secondary location

15 - 40

slightly decreasing

District centres

8 - 12

slightly decreasing

Retail parks

8 -13

stable

Q 19, Lugner City, BahnhofCity Wien West

Source: EHL Market Research, Q1 2019

Rents in top shopping streets / Q4/18 SHOPPING STREET

NET RENT EURO/SQM/M

Kohlmarkt

250 - 400

Graben

190 - 300

Kärntner Straße

110 - 300

Innere Mariahilfer Straße

30 - 110

Rotenturmstraße

30 - 120

Favoritenstraße

15 - 55

Neubaugasse

15 - 55

Landstraßer Hauptstraße

10 - 50

Meidlinger Hauptstraße

10 - 30

Source: EHL Market Research, Q1 2019

42

center without a strong anchor tenant, such as one from the electronics sector had a problem.

Today an attractive selection of restaurants has become a must-have. In the coming years innovative entertainment offers will become vital. Unique experience, variety and individualisation are the trends of the future, which developers and operators have to face in order to make the stationary retail trade attractive in the long run.” These would include the integration of interactive locations such as language schools and sports facilities, but also greater regionalisation and individualisation both in design and in variety of shops. n

I M M O

Trend 6

SHOPPING CENTER

CLOTHING RETAILERS LEAD WITH EXPANSIONORIENTED DISTRIBUTION LINES Shopping Center Vienna 2018 …

PROPERTY

GLA

Donauzentrum

1220, Wagramer Straße 81

123,900 sqm

Auhofcenter

1140, Albert Schweitzer Gasse 6

54,000 sqm

Millennium City

1200, Handelskai 94-96

Huma Eleven

1110, Landwehrstraße 6

50,000 sqm

Lugner City

1150, Gablenzgasse 5-13

38,300 sqm

Shopping Center Nord

1210, Ignaz Köck Straße 1

32,000 sqm

Gerngross City Center

1070, Mariahilfer Straße 42-48

Wien Mitte - The Mall

1030, Landstraßer Hauptstraße 1C

Stadion Center

1020, Olympiaplatz 2

BahnhofCity Wien Hauptbahnhof

1100, Am Hauptbahnhof 1

23,000 sqm

Riverside

1230, Breitenfurter Straße 372

22,000 sqm

Zentrum Simmering

1110, Simmeringer Hauptstraße 96a

BahnhofCity Wien West

1150, Europaplatz 3

Kaufpark Alt Erlaa

1230, Anton Baumgartner Straße 44

18,900 sqm

Gasometer City

1110, Guglgasse 6-14

18,000 sqm

City Gate

1210, Wagramer Straße 195

17,500 sqm

Columbus Center

1100, Columbusplatz 7-8

17,300 sqm

Trillerpark

1210, Trillergasse 4

15,500 sqm

51,800 sqm

31,000 sqm 28,900 sqm 27,700 sqm

21,000 sqm 20,000 sqm

Even though the stationary clothing trade is severely affected by the online trading of "pure players" such as Amazon, Zalando, Universal, Otto, etc., more than 100 sales lines are planning to expand this year (as opposed to 162 in 2017). This development does, however, not feature the big, popular chain stores, but rather very small, specialized labels or discount-oriented traders (like Kik and Takko).

Trend 7 EXPANSION ALMOST EXCLUSIVELY IN MALLS AND THE HIGH STREET 93 percent of all expanding companies are seeking sites within a shopping centre or an inner-city high street - only the best locations are attractive, while anywhere else is barely worth a mention. Additionally, 35% of the examined sales lines are looking for locations with less than 200 sqm of retail space, a significantly higher percentage than only a few years ago.

Shopping centers with more than 15,000 sqm of retail space are listed Source: EHL Market Research, Q1 2019

Trend 8 Trend 5

FOOD RETAILERS ARE UNIMPRESSED

FRANCHISE ON THE RISE After branch systems or marketing organizations and groups (such as Intersport, Red Zac, Garant Furniture, RingSchuh) have shaped the retail landscape over the last decades, it is franchise systems that are now becoming increasingly important.

Within the clothing and gastronomy sectors in particular, the number of sites operated by franchisees is constantly increasing. This is true both for large companies such as New Yorker, Mango, Tom Tailor, McDonald's, Burger King or Starbucks, but also for many small, new companies that are relying on this form of distribution.

"Austria has a surplus of retail space."

Jörg Bitzer, EHL Commercial Real Estate

The changes currently taking place in the retail sector have left food retailers completely unimpressed: the market leaders as well as the small, specialized companies are expanding (and have been for years), be it cash-and-carries, supermarkets, discounters or bakeries. Hardly surprising, considering that the market volume in the food trade has been rising above inflation for many years, the environmentally and health-conscious consumers are buying more expensive products and the food trade seems to be feeling immune to the internet. The same applies to the drugstores.

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About Stefan Goigitzer is one of Coore’s managing partners and is responsible for retail and retail investment. He is a qualified real estate fiduciary and has been in the industry for 25 years.

Active management is the order of the day Comment: Stefan Goigitzer

n Although stationary retailing was able to record an increase in 2018, above all thanks to significant growth in the DIY/home improvement supplies and sporting goods sectors, the growth rates of 2017 could not be achieved. Both the textile trade and the leather and footwear sectors suffered a considerable decline. This deficit is not surprising, since these two segments are in strong competition with online trade. Expectations are that the stationary textile trade will continue to come under pressure, notwithstanding this segment's efforts of streamlining concepts and increasing efficiency. The merging of online and stationary trading is still on the rise, multichannel being the word de jour.

But what does that mean for the retail sector and the high streets in the federal capital? In the last 10 years, rents have risen steadily, particularly in Vienna. The increases reached levels that required peak sales in order to afford these rents. This development seems to have ground to a halt for the time being. Does this mean the end for our beloved shopping streets in the long run? Certainly not!

But we are noticing that, in many cases, retailer are struggling to pay the (too) high rents. Tenants are therefore no longer willing to make long-term commitments – something that other sectors have experi-

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enced for a long time already. In future, retail leases will become shortterm, more flexible and sales-dependent. The active management of retail spaces is the order of the day. Large shopping centres find it easier to adapt to new circumstances and to respond accordingly due to their active space management, however, they do not have the natural footfall of an inner-city high street. But why shouldn't real estate owners on a shopping street hand over their retail space to an operator who looks after advertising, marketing and an attractive tenant mix that guarantees the sustainable stability of the street? Such a concept would benefit mainly smaller shopping streets. The major shopping streets in Vienna's Inner City – Graben, Kärntner Straße and Kohlmarkt - on the other hand, greatly benefit from tourists. It is, however, worth noting that even here rents can no longer be achieved easily and smaller-scale concepts are on the rise.

No question: retail is changing. But was this not always the case? A look back proves that this is not a new development. From the small grocery store to the supermarket, from the tailor around the corner to the multinational textile chain. Retail has always adapted and will continue to do so. Despite online trading: Our shopping streets will continue to be heavily frequented, will generate good sales and will not deteriorate into outsized packing stations.

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Positions & Options

Wordrap - amongst real estate managers "Engaging the Future,” the central topic of MIPIM 2019, will take a look at the next 30 years of tthe real estate industry. Ecological sustainability is a focal issue. High energy costs, climate change and new government regulations are changing the traditional platforms and practices of the industry. There will also be debates on how disruptive technologies such as virtual reality, artificial intelligence and big data will optimize real estate business management and profitability in the digital age.

ImmoFocus has been talking to the leading real estate managers.

THE QUESTIONS

Virtual reality, augmented reality, big data, blockchain? Which technologies will change the real estate industry in the long term?

An endless real estate cycle? Is time running out on the real estate clock? Is it already 5 to 12? Or will it carry on for a while?

I am convinced that BigData will probably bring about the biggest changes in the real estate industry. Just a small example of this: Until now, the catchment area of shopping malls has been surveyed by means of concentric circles and it has been assumed that people in more distant circles will shop less often. Today, we have a product called Calibrate, which, based on mobile data, can pinpoint the exact shopping habits of people from a certain residential area of workplace. Furthermore, self-driving cars will probably have a tremendous impact on particular location qualities, but also on the need for parking spaces. No stone will be left standing – literally.

We believe that the current cycle is slowly coming to an end; for example, we do not expect any significant increases in value. On the other hand, we do not expect prices to fall sharply in the foreseeable future either. This is mainly due to the interest rate expectations: these will probably no longer rise significantly, leaving with this very unusual "low interest rate landscape", which has – of course - been responsible for the property boom of recent years.

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2 Andreas Ridder, CBRE Austria & CEE

The speed of technological development is increasing disproportionately, proptech is the concept of the hour and new companies offering solutions in this area are appearing on the market in large numbers. For some years, we have been using smartphones and loading apps onto our devices.

We use some applications regularly and over a longer period of time, while many do not deliver the expected added value and are deleted again. The same is true of services offered for the real estate industry (and this also applies to all other sectors of the economy): we are in a state of transformation, of invention, of trail-and-error. What is certain is that the industry will change significantly over the next few years - and as a service provider we will have to change with it. Nevertheless, we are convinced that the professional, personal service will continue to have its place in the future.

Technological aids such as VR will support and facilitate, but not completely replace the work of the real estate agent.

Thomas Belina, Colliers International

2

Would say we are in about the ninth hour on the real estate clock - and if we look at the real estate market retrospectively, we have been there for about 3 years. We believe this will remain unchanged for the next 1 to 2 years, as we continue to expect low interest rates, ongoing strong demand and sufficient liquidity in the market for the time being.

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Positions & Options

Within the real estate industry longevity is a key feature as opposed to the digital world, which is rather short-term or fast-moving. In order to unite these two worlds in a meaningful way, it is necessary to carefully evaluate which technology can be used to an advantage and to keep an eye on future prospects. In general, the real estate industry can not escape the digitization trend. For example, virtual reality is playing an increasingly important role in commercial realisation as the topic of Big Data in the asset management of retail space.

There is no one singular real estate cycle. You always have to look at every single market even within a region or country - and every asset class separately. Overall, we are currently experiencing a boom in several markets and there are some indicators that suggest this will continue for a while. The real estate markets are booming, interest rates are still at a very low level and there is a lot of money in the markets. For the real estate industry these are very good conditions. Some markets have already become too expensive for us to acquire properties there, but with the right know-how and corresponding market expertise you can still find real estate with the potential for increased value.

2 Ernst Vejdovszky, S IMMO

The digitization of the real estate industry will intensify massively in the coming years. In the further development and marketing of the AirportCity Vienna, we already use Virtual Reality in order to provide our customers with a realistic impression of the Office Park 4 under construction at an early stage. But augmented reality will also play a major role in the usage pattern of our tenants as well as passengers in the coming years.

2 Wolfgang Scheibenpflug, Vienna International Airport

We are clearly in a late-stage economic phase, with factors such as central bank interest rate policy and political developments playing a key role and consequently requiring intense scrutiny.

The big challenges of the coming years will be blockchain and how we deal with the ever larger amounts of data that are being evaluated and processed. Especially in the area of property management, the requirements and possibilities are increase exponentially. All technical systems, machines, entire buildings and their users will probably be connected, communicate and interact with each other in the future. Virtual and augmented reality are also developing rapidly. Potential users can see and understand things in the real estate construction phase without actually being there. Artificial intelligence also allows chat bots to serve customers faster and more efficiently around the clock. All in all, there is great technological momentum which will change dimensions in the years to come.

The decline in real estate yields, especially in the last two years, is motivating many market participants to keep a close eye on the continuous development of both prices and yields. None of us have found a definite answer to this question, but if you look at the causes for the strong demand, like interest rates, high liquidity, new investors from exotic countries, etc., then the next 18 months â&#x20AC;&#x201C; at least â&#x20AC;&#x201C; will not bring any real change to the market. Our perceptions among customers also suggest that there will be no significant trend reversal in the medium term.

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2 Michael Ehlmaier, EHL

While virtual reality and augmented reality provide positive support for object presentations, but I don't see the disruptive potential as much as with big data and blockchain. Big data has been used by many professionals in the branch for a long time and has already changed some of the processes that are customary on the market. When it comes to blockchain the industry as a whole is only just beginning and there is no doubt that first movers have a great opportunity not only to sustainably change the market but above all to play a decisive role in shaping it.

2 Richard Lemon, Danube Property Consulting

It’s been 5 to 12 for over for two minutes and until the clock strikes 12, developers in particular still have time to bring their sheep in out of the rain. The increase in the key interest rate is coming noticeably closer and in the medium term, a level will be reached that will change the investment behavior of institutional investors and thus also be of great relevance for the real estate market.

Virtual Reality, Augmented Reality and BigData have been defining features for customers and service providers in the real estate industry in recent years and have already fundamentally changed our business. Virtually complete smartphones coverage and the upcoming 5G standard will further increase the pace of change! Let us cross the bridge when we get there!

We seem to have been at the eleventh hour for a couple of years now and will continue to be there for a few more, depending on the sector in question. Stable and, in international comparison, conservative markets such as Vienna still show no overvaluation and therefore no potential for correction. Price development is, however, slowing down and excess supply is limited to certain market segments.

2 Otto Eugen Otto Real Estate

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Eiffel Palace, Budapest Landmark building in CBD Budapest, designed by Gustave Eiffel and fully redeveloped into a state of the art A class office building, rentable area: ca. 15,300 m2, fully let. Acquired by DEREIF SICAV-FIS, a DEVK Group fund – financed by Erste Group.

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© Horizon Development Kft

Positions & Options

The digitization of the real estate industry is already a reality and we are in the middle of fundamental change. Artificial intelligence and smart buildings are concepts that are playing an increasingly important role in the elevator industry. On the one hand, there is demand to connect existing systems and creating added value for customers and users by means of data analysis tools, by further increasing the comfort, safety and availability of our systems. On the other hand, new technologies allow the development of tools and concepts that were previously unreasonable or simply impossible. Smart building access, smartphone operation, digital blackboard, re a few concepts that come to mind. However, what we should not lose sight of are the needs of the user. We have to give them the chance to see the benefits of new technologies and not to overload them with complicated processes. In the long run, however, I'm convinced that everything that makes life easier will prevail.

The economic drivers are intact and there continued investor interest in real estate. Despite these stable conditions for the Austrian real estate market, this cycle will also come to an end at some point. Regardless of the level of interest rates or the current high, we are pondering the question of how the needs of property users are evolving. How do we live and work, how do we shop and how do we organise our leisure time tomorrow? These questions are what drives us as a manufacturer and defines our offers for new construction and modernization.

2

Gernot SchĂśbitz, KONE

Only technologies that yield significant benefits and are easy to use will prevail in the long term. For example, we have been using Virtual and Augmented Reality for a while in order to present projects to interested parties even before the start of construction or in the shell construction phase. The possibilities are manifold, from planning to management and trading we still have a lot of digital potential. However, the protection of personal rights â&#x20AC;&#x201C; think GDPR â&#x20AC;&#x201C; is a limiting factor that can not yet be fully assessed.

2 Andreas Quint, CA Real Estate

We do not expect a decline of the good market situation in Central and Eastern Europe any time soon. Our existing portfolio is fully let, demand and price levels are high to stable. We see no signs of a cycle change, rather the beginning of stabilization at a high level.

Currently, numerous digitization trends are gathering strength. Which of these prevail only time will tell. However, one thing is already clear: Living no longer stops at the front door of the apartment and one's own four walls. The digital network of the object, property management, residents and the neighbourhood will be an integral part of our business in the future. The digital infrastructure of a particular borough will also play a decisive role in the creation of the 'living experience'. Innovative apps - such as "puck. - invite the good spirit into the house "- will significantly advance digitization.

An end to the real estate cycle is certainly not on the horizon, due to the high demand, which in turn is caused by a lack of investment opportunities in other resilient asset classes, and continuing low interest rates. It is expected that at this level, we will essentially see a sideways market movement over the next few years. In particular, the economic conditions, the unforeseeable consequences of BREXIT, the protectionist customs and foreign policy of Donald Trump and the associated need for secure investment forms, will ensure that demand in all major real estate asset classes continues to be buoyant.

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2 Daniel Jelitzka, JP Real Estate

Anton Bondi de Antoni, Bondi Consult

We are currently confronted with an abundance of new digital and virtual processes, all of which will have an influence on the further development of real estate. This concerns the planning as well as the operation (facility management). The project development, the feeling for trends and requirements cannot be replaced by any of these procedures. In the field of planning, far-reaching changes/improvements are to be expected (key word BIM, etc.), while in the field of real estate operation a very high degree of technological implementation already exists and efforts will have to be made to make the procedures easily comprehensible and applicable for the user (and not only for the specialist) in order to be able to draw general benefits from the major changes.

2

There are already indications that the pace is slowing down and that the speed of development is diminishing significantly. This certainly has something to do with the absurd low returns that are currently offered on the market.... and for lack of alternatives, also being accepted. The prospect of even a slight correction in interest rates can be a huge stumbling block. We are actually two minutes to twelve, but as long as there is so much money in the market and supply is scarce, a continuation of this rally at the high level is to be expected at least for the next two years. However, a further drop in yields is no longer to be expected.

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We believe.

We enable.

Marriott Hotel, Warsaw Multi-use real estate property, including the country’s biggest 5-star hotel with 523 guest rooms and more than 25,000 m² of exclusive inner-city offices and retail areas in an outstanding downtown location. Owned and managed by Golden Star Estate – financed by Erste Group.

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Positions & Options

We see digitization as an important factor in increasing our customer service. This means a comprehensive transformation of our business processes as well as our entire customer communication. Against this background we have redesigned our customer relationship management (CRM), to name one example. This involved the digitization of the leasing process, as well as central handling and processing of customer inquiries and contact data. The myhive app further increases the level of service we provide, giving us direct feedback and offering additional services to our tenants.

I perceive the real estate cycle to be at an advanced stage, especially with regard to the German market. It is crucial for us to be well-prepared for any market environment - and we are. Over the past few years, we have invested in the quality of our services, significantly increased the occupancy rate, reduced financing costs and achieved a sound liquidity situation. At the beginning of the year, IMMOFINANZ also received an investment grade rating - another seal of approval for our strategy and the strength of our financial profile. As a result, we are in a position to take advantage of sudden opportunities in a changing market environment.

2 Oliver Schumy, Immofinanz

Virtual reality, augmented reality: I think that both techniques have a significant influence on the real estate industry, because they affect consumer behaviour, keyword here is online shopping and therefore the classic retail spaces are reduced or changed towards product placements and showrooms, but no more shopping, this is done online. This will also change the tenant structures.

The Amazons of this world are already investing massively in logistics because this segment will grow while the retail spaces, which are not local suppliers, will tend to reduce. Hotels are already virtually visited and evaluated today. The acquisition and leasing of properties as well as their setup will also be made much easier in the future via augmented reality. The future tenant/buyer/user can quickly receive important preliminary information. Big data: Data on the asset, its components and condition and the associated user behaviour/user data will in future contribute significantly to the optimization of running costs/operating costs as well as enhance the architecture and space planning. Blockchain: This technology will significantly facilitate and accelerate transactions, whether asset transfers or funds/banking, over the entire life cycle of the property, including construction phase/development. The documentation quality and its sustainability will remain high and always available. Related services that are associated with transactions today, such as contract preparation, valuations, etc. will become much easier whereby the need for soft skills and expert knowledge will not disappear, since these cannot be replaced.

Which technologies will change the real estate economy sustainably?

Building materials: New, lighter building materials that meet all the necessary requirements, concrete and steel will become too expensive because itâ&#x20AC;&#x2122;s energy-intensive and the carbon footprint is too high. Building services: Energy-autonomous smart buildings, from photovoltaics, water storage, cooling, combined heat and power generation, power storage starting with multipurpose usability, supporting flexibility over a lifetime. High Speed Internet 5G and so on: Mobile jobs will reduce the space requirement in the shared office to 80% because home office possibilities etc. support this.

Online commerce, with the implications mentioned above.

Wolfgang Hausner, Erste Group Immorent

2

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Austria: Price peak has been reached, but liquidity remains, as zero interest rates are likely for the next few years, therefore no exit of the investors to alternative investment fields. Yields, therefore, remain constant over the medium term â&#x20AC;&#x201C; so it is still 10 to 12 in that sense. In my personal opinion it will remain so for another 3 years. CEE: Balkan region for local investors, no boom, Romania and Poland still in the plus zone, Hungary currently in recovery, Slovakia growing (logistics and trade), Czech Republic slight growth.

The use of virtual and augmented reality in the real estate industry is only just beginning. But it has great potential, especially in the planning and viewing of properties. The change can be seen in the large number of start-ups offering new technical solutions and innovative business models.

Prices on the real estate market have risen rapidly. The fear of a bubble is largely unfounded, as there is a high level of equity investment. The boom will continue in attractive cities, although at a slower pace than before. Investors should therefore become more selective in 2019.

2 Markus Arnold, Arnold Real Estate

Societal change and new technologies are, naturally, having a massive impact on the real estate industry. Digitization is taking place in almost all areas of life, and we are currently intensively involved in product development. The topic of digital buildings is becoming more and more important - from the digital twin from the point of view of BIM, to the use of buildings in terms of a fully digitalised building, especially in the commercial sector. Virtual Reality and Augmented Reality will soon be indispensable in sales terms.

2 Walter Hammertinger, IC Development

The high rate of innovation that currently exists in various economic markets means that other asset classes are rapidly leading to a new upturn in the real estate industry. There are currently no sustainable signs, neither in the interest rate nor in the demand market, that indicate an end of the cycle.

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We enable.

City Center one, Zagreb Two large shopping centres in Zagreb, “City Center one East” and “City Center one West”. Leasable area of more than 95,000 m², fully let. Acquired by a joint venture between Hystead Limited (90%) and CC Real (10%) – financed by Erste Group.

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Positions & Options Digitization is affecting our everyday lives more and more. Within the real estate industry the pace of development has also picked up recently, after many real estate companies deemed the impact of digitization on their business as low only a few years ago. At SIGNA, we see digitization as an opportunity and want to become a pioneer and driver of digital services and new business models.

We monitor future trends and are integrating innovative products into SIGNA's value chain. SIGNA has been utilising Virtual Reality tours for its office properties under construction since 2015. With the help of Oculus glasses in situ, or randomly via tablet and smartphone, interested parties can get a clear picture of what the finished object will look like. This technology makes the property tangible, illustrates the layout and conveys a feeling for the space, thus creating clarity for the customer very early in the decision-making process and thus accelerating it. In housing sales, digital and virtual realities of the property are becoming increasingly important for future owners. New technologies - such as HTC VIVE â&#x20AC;&#x201C; are allowing them to move freely and independently within the rooms.

This is particularly interesting for the housing sector, since this where we primarily address private customers. Another option is the ability to stroll through the future property at a leisurely pace using a gamepad. Soon it will be possible for the client to select possible floor and tile options within this virtual environment by using the configurator. It makes decisions easier and gives the customer a real idea of what their new home will look like. The customer demands more and more individuality from the real estate and construction industry. Tools like Virtual Reality aid this enormously and customer feedback is very positive. However, no amount of digital technology can ever replace the personal advice of an agent. Innovations such as smart data, blockchain or even building information modelling pose no threat to established business models, but their added value can lead to greater transparency, planning security, speed and savings. In general, it's not just about discovering new things, but more about constantly reflecting on the viability of one's business model. Only agile and innovative companies anticipate future markets and changing customer needs and thus manage to survive in a volatile environment.

Christoph Stadlhuber, Signa Holding

2

The real estate cycle is dependent on interest rate development. We are currently in a prolonged period of low interest rates, which will continue this year. In the foreseeable future we expect only moderately rising interest rates. The economy is doing well, the inflow of people into the cities is still strong. For this reason, we do not expect an abrupt end to the current real estate cycle. On the contrary, the demand of institutional investors for high-quality neighbourhood developments in good urban locations, as provided by us, is unwavering.

All these technologies will influence and change the real estate industry. For example, virtual object visits with the help of virtual reality and augmented reality technologies or big data applications, such as smart metering in the energy industry, data analysis, etc., as well as smart living functions. From a legal point of view, the possible effects of blockchain technology are the most difficult to assess because legal framework conditions and formal requirements would also have to be adapted.

The position of the hands on the real estate clock depends not in the least on the asset class under consideration, although in our opinion the clock has not yet reached a level of the proverbial 11th hour in any class. Residential real estate, including micro-apartments, continues to be the most promising as far as we can see. Therefore, as long as the low interest rate phase continues, things will continue to move along.

Manfred Ton, CHSH Cerha Hempel Spiegelfeld Hlawati

2

Peter Vcelouch CHSH Cerha Hempel Spiegelfeld Hlawati

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12-15 March 2019 Palais des Festivals, Cannes, France

Engaging the Future The real estate industry has a whole new cycle to work with over the next 30 years, fostering a lasting, positive impact in each and every built environment.

• How to choose the best strategies that benefit over the longer term?

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• How to commit responsible practices and employ existing resources optimally?

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MIPIM 2019

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Investing in Austria

Housing: Investors’ Favourite Gaining momentum. Austria's real estate market is booming at a high level. In other words: "High demand price sensitivity - shortage of supply.” International institutional investors are buying despite falling yields.

T "The increase in the number of inhabitants is somewhat lower at the moment than in the years 2015 to 2017, but the currently low interest rate level continues to ensure that demand is well above supply."

Michael Ehlmaier, EHL

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he housing market is booming – very much so - especially in the nation’s capital. The number of completions in 2018 rose again compared to last year to around 11,500 units, continuing the upward trend seen since 2013.

This was mainly due to a whole series of notable major projects in the urban expansion areas. These included Hoch33 (1100 Vienna, 341 units, Erste Group), 5in22 (1220 Vienna, 265 units, SIGNA) and the construction activities of various property developers in the Seestadt Aspern. Although the increase in construction activity cannot fully compensate for the accumulated housing shortage in recent years (due to increased population growth), it nevertheless led to a moderate increase in rents and housing prices. In the quantitatively important medium-price segment, rents increased by around 5 percent on a Vienna-wide average, with some housing prices rising by up to 6 percent.

After several years characterised by a significant increase in supply on the Vienna housing market, 2019 could bring an end to or at least a significant reduction in the dynamic, although the demand for residential space remains very high and the price level is correspondingly attractive for housing providers. The impending slack is triggered by political and judicial decisions that have a significant impact on the framework conditions for landowners, property developers and landlords. But more about this later.

Building regulations are cause for concern "The increase in the number of inhabitants is somewhat lower at the moment than in the years 2015 to 2017, but the currently low interest rate level continues to ensure that demand is well above supply," says Michael Ehlmaier, Managing Partner of EHL. Even more important, however, are the changes on the supply

side, confirms Sandra Bauernfeind, Managing Partner of EHL Living. The current completion boom in privately-financed apartments will be dampened in the short term by the sharp rise in construction prices, and in the medium term the new building regulations will lead to declines. "If a property was bought at a fair price in view of the expected rededication changes and suddenly a higher portion of subsidised dwellings is mandatory, then the whole calculation no longer adds up. At present, many property developers are trying to find viable solutions by negotiating with the city, but this inevitably leads to delays and urgently needed apartments will come onto the market later," explains Bauernfeind.

Construction costs are driving prices up The development of prices for building land and the ever-increasing construction costs are the biggest problems facing housing developers in Vienna. The amendment to the building regulations announced in autumn 2018 provides for a two-thirds share of subsidised apartments in buildings on rededicated properties. It remains to be seen whether this will lead to a reduction in basic costs.

Fotos: EHL, Buwog, Cityfoto

Andreas Holler, Managing Director of BUWOG Group responsible for development, explains that although price-dampening effects are possible in the medium term, the amendment could also contribute to a shortage of supply in the short term. "Landowners whose properties are already dedicated to residential construction see an opportunity to raise prices once again because the new building regulations mean that areas still to be redeveloped in favour of the subsidised residential building will only be available to a lesser extent for privately-financed residential construction. On the other hand, potential sellers of land that has

"Early changes in the demolition regulations unsettle developers." not yet been converted would rather postpone its sale for the time being rather than possibly sell it cheaper under the changed framework conditions.

In locations closer to the centre, the uncertainty of property developers following the early introduction of restrictive demolition regulations has led to a sharp slump in the development of new construction projects.

A ruling by the Supreme Court, which has led to drastic restrictions on the permissible location surcharges on regulated rents, has also had a negative impact on the supply of apartments. "With the current strictlyregulated rents, often the basic running costs

can no longer be covered and therefore many owners of the old traditional apartment buildings leave the dwellings empty.â&#x20AC;? This development has no effect on the current supply of apartments because the planning and construction period is several years. "If we now have a larger gap in property purchases by property developers and rededications to building land, this will be reflected in the housing market in the coming years in the form of declining completion figures.

At the moment, the partly drastic rise in construction prices and capacity bottlenecks have made themselves felt. "As one of the largest clients in residential construction and with consistently large-volume projects, BUWOG still has manageable and solvable problems," says Holler.

"But with smaller projects the price increases are particularly high and therefore more and more projects ready for construction are postponed because the realization is simply not worthwhile with the current costs. Some smaller developers, who want to build despite the high prices, sometimes don't even get more offers.â&#x20AC;? Holler predicts that the gap between supply and demand on the Viennese housing market will close much more slowly than the current boom in completi-

Factbox The development ranges from an inexpensive value of 1,550 Euros per square metre in Eisenstadt for a used condominium to 3,790 Euros per square metre in Vienna. The average price per square metre for a new building ranges from 3,154 euros in Klagenfurt to 6,401 Euros in Salzburg. It is astonishing that the new apartments in St. PĂślten and Eisenstadt are still below the statistical average limit.

As in the previous year, the average prices are still the highest in Salzburg, Innsbruck and Vienna according to the available land registry information. However, the second largest urban center after Vienna, Graz, is still a surprisingly cheap place to buy property. The average price in Linz is 219,000 Euros for an apartment compared with 180,000 Euros in Graz if one considers the average values of used and new apartments as a whole. Salzburg, on the other hand, is 287,000 Euros, Bregenz as high as 316,000 Euros, which is even more than Vienna at 293,000 Euros.

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Investing in Austria

Vienna in the coming years. 1,729 apartments are currently under construction, 688 apartments will start construction in 2019. With more than 800 apartments in seven projects in 2019, BUWOG is about to experience one of the most active completion years.

Smaller still is hardly possible

"New construction building will be dominated by numerous privately-financed major projects in 2019.

"Smaller still is hardly possible without considerably downgrading housing quality" Sandra Bauernfeind, EHL Living

ons might suggest. "Although we are unlikely to see such a dramatic undersupply in the coming years as between 2015 and 2017, it will still take quite some time before sufficient apartments are built to meet the rising demand and reduce the backlog from previous years.

The BUWOG Group will also continue to expand its strong new building performance in

Meanwhile, the possibilities of offsetting rising square metre prices and rents by reducing the size of apartments appear to be exhausted. "Smaller still is no longer an option without considerably downgrading housing quality. But there will be no trend reversal towards larger apartments as long as prices remain high," says Bauernfeind.

Although owned apartments are becoming smaller, they are becoming better and better equipped. This is also reflected in the construction and renovation costs. A few years ago, it was possible to thoroughly renovate an older apartment for 600 Euros net per square metre. Today the standard price has changed to about 1,000 Euro per square meter. Primarily responsible for this is the increased demand for quality materials, but also the fact that more and more technology is moving into our living spaces. A central air-conditioning system, which can also be used to heat in the transition periods, is a sought-after extra as the summer temperatures continue to rise. Flat or hidden LED lighting, wireless WLAN in all rooms, bus systems connecting

PREFIX 2010-2018 TOTAL

5 4

4,9

4,1

5,6 4,6 3,4

4,6

2,8 2,4

2 0

2,5

2,4 2,1

0,7

1,2

3,9 2,6

4,5 3,9

1,3

0,6 -0,3

-1

-0,2

-0,3

-0,1

-1

-2

-2,3

-3 2010

2011

Source : RE/MAX

58

Offer

5,7

3 1

District development The development of neighbourhoods where not only residential buildings but also infrastructure facilities such as schools and kindergartens, local suppliers and commercial properties are integrated into the planning is also becoming increasingly important.

"Simply said, the developer is not looking for a good location for his residential buildings only, but also making sure that an average location could become a very good location," explains Andreas Holler, Managing Director responsible for development of BUWOG Group GmbH. What the city of Vienna is demonstrating on a grand scale with the Seestadt Aspern, private developers are implementing on a smaller scale in other districts. These include, for example, the major BUWOG project "Rivus" in BreitenfurterstraĂ&#x;e (1230 Vienna), where around 800 apartments and, among other facilities, a school are being built in several construction phases. The development

Demand

6,3

7 6

Price

building services and alarm systems are also often desired. Apartments with an unobstructed view are becoming especially popular.

With modern technology such as soundproof windows in combination with modern living space ventilation, it is possible to eliminate location disadvantages due to traffic noise emissions. This creates new living opportunities in less popular (noisy) locations - and prices are also rising in this segment.

ImmoFokus

2012

2013

2014

2015

2016

2017

2018

"Even with the recent change of our legal form from AG to GmbH, BUWOG continues to focus its development activities in Vienna."

Andreas Holler, BUWOG Group

of the right bank of the Danube, for which BUWOG together with IES Immobilien will realize a major project with an important message in the form of the MARINA TOWER, also falls into this category.

to build upwards," says Holler. "In any case, we don't have to worry about the demand for apartments with a view over the entire the city."

The number of completions will not be significantly affected yet in 2019 by the changes in framework conditions mentioned above. Bauernfeind expects the number of completions to stabilise at a high level of around 11,500 units and the increase in rents and housing prices will most likely not be significantly higher than the inflation rate. "New construction in 2019 will continue to be dominated by numerous

The MARINA TOWER stands for a second major trend in Viennese residential construction, namely that of residential towers. With this and other objects, several towers with a height of more than 100 meters will come onto the market in the coming years. "If the building land is scarce and expensive, we'll just have

"Restrictions on location premiums lead to more vacancies and change from rental to sale"

AN OVERVIEW OF THE AVERAGE PRICE RANGE ON OWNED APARTMENTS FOR 2018 IN THE STATE CAPITALS 50% of apartment transactions were within the price range of …

(25% cost more, 25% cost less)

New

Median

Used

purchase price in Euros per m² 3.790

Vienna

4.432 3.084

Bregenz

4.497 4.125

Innsbruck

5.424 2.411

Graz

3.407 3.648

Salzburg

6.401

St. Pölten

1.818 1.655

Klagenfurt

3.154 2.963

Linz

3.887 Eisenstadt

1.000

1.550

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

5.500

6.000

6.500

7.000

7.500

Source: Purchase agreements according to the land registry, evaluated by IMMOunited together with RE/MAX

MIPIM 2019

59

Investing in Austria

privately-financed major projects. Housing will not become cheaper, but apartment seekers can choose from a wide variety of very different high-quality projects." "Even with the recent change of our legal form from AG

to GmbH, BUWOG continues to focus its development activities in Vienna. As one of the fastest-growing cities in the German-speaking region, there is enormous development potential here, which we intend to exploit further

in the coming years with even stronger new construction activities," says Daniel Riedl, CEO of Vonovia SE responsible for the entire BUWOG business in Austria and BUWOG development in Germany.The main focus

VIENNA AT A GLANCE THE MAP OF VIENNA provides an overview of the city districts.

T H E M A P O F V I E N N A provides an overview of the city districts.

For better orientation, the map also shows underground metro Flines or better orientation, the mapMetro alsolines, shows underground metro and major roads / motorways. that are planned and major roads/motorways.

M etro lines that are planned or lines or currently under construction, are shown as broken lines. currently under construction are shown as broken lines.

PLANNED EXTENSION OF U2 METRO LINE PLANNED EXTENSION OF U5 METRO LINE CURRENT ROUTE OF U2 METRO LINE, TO BECOME U5 METRO LINE

21 .

A22

19.

U Leopoldau

U Floridsdorf

S2

U Heiligenstadt

17.

14.

16.

20.

18.

U Spittelau

9.

U Elterleinplatz **

1.

U Ottakring

8. U Stephansplatz 7.

U Westbahnhof

U HĂźtteldorf

15.

A1

13.

12 .

U Seestadt

6.

5.

22.

2.

U Karlsplatz

4.

3.

U Simmering

U Wienerberg **

11 .

23.

U Siebenhirten

**

In planning

A21

Source: EHL BUWOG - First Vienna Residential Market Report | 2019

60

ImmoFokus

A4

10.

A23

U Oberlaa

S1 VIENNA AIRPORT

in the future will be increasingly on rental apartments. "After years of building mainly condominiums in Vienna, there is a lot of catching up to do with rental apartments and we are adapting our development focus to the

current market conditions," explains Riedl.

"In the medium term, the new construction of rental apartments will account for about 40 percent of our output.” Present BUWOG rental apartment projects include the Nord-

bahnhof II in Vorgartenstrasse with 168 WBI rental apartments and ERnteLAA in Liesing with 191 residential units, 160 of which are also part of the Wiener Wohnbauinitiative (city housing project). n

THE TABLE contains all key data and facts regarding population, income, property prices, and rents. The quoted prices are not asking or advertised prices but the prices that were actually paid upon signing of the contract.

HE SECTIONS BELOW provide more detailed information on the individual districts, including key demographic data, statistics, and special features within the districts.

Districts

Residents

Income*

Sale Prices on Conclusion FIRST OCCUPANCY

1010 Vienna · Innere Stadt

OTHER

Rents on Conclusion FIRST OCCUPANCY

OTHER

16,450

34,482 €

18,600 €

11,200 €

n/a**

n/a**

105,574

21,527 €

5,200 €

3,800 €

12.10 €

10.20 €

1030 Vienna · Landstrasse

90,712

24,525 €

5,300 €

3,800 €

12.20 €

10.70 €

1040 Vienna · Wieden

33,319

25,325 €

5,400 €

3,900 €

13.00 €

11.20 €

1050 Vienna · Margareten

55,640

20,056 €

n/a***

3,700 €

11.80 €

10.60 €

1060 Vienna · Mariahilf

32,069

23,570 €

5,300 €

3,850 €

13.00 €

11.00 €

1070 Vienna · Neubau

32,467

24,654 €

5,750 €

4,400 €

13.00 €

11.00 €

1080 Vienna · Josefstadt

25,662

24,464 €

n/a***

4,500 €

13.00 €

11.30 €

1090 Vienna · Alsergrund

42,547

24,091 €

5,750 €

4,300 €

13 .10 €

11.20 €

1100 Vienna · Favoriten

201,882

19,122 €

4,150 €

2,700 €

10.90 €

9.10 €

1110 Vienna · Simmering

101,420

20,568 €

3,600 €

2,300 €

10.00 €

8.90 €

1120 Vienna · Meidling

97,624

20,083 €

4,150 €

3,100 €

11.20 €

10.00 €

1130 Vienna · Hietzing

54,265

29,357 €

5,700 €

4,150 €

12.80 €

11.00 €

1140 Vienna · Penzing

92,752

23,726 €

4,300 €

3,100 €

11.30 €

10.30 €

1020 Vienna · Leopoldstadt

1150 Vienna · Rudolfsheim

79,029

17,893 €

4,150 €

2,850 €

11.20 €

10.10 €

104,627

19,860 €

4,200 €

2,850 €

11.20 €

10.20 €

1170 Vienna · Hernals

57,546

21,091 €

n/a***

3,000 €

11.30 €

10.00 €

1180 Vienna · Währing

51,647

25,560 €

5,550 €

3,800 €

12.60 €

10.80 €

1190 Vienna · Döbling

72,650

26,728 €

6,200 €

4,200 €

13.00 €

10.90 €

1160 Vienna · Ottakring

1200 Vienna · Brigittenau

87,239

18,738 €

4,150 €

2,700 €

10.70 €

9.90 €

1210 Vienna · Floridsdorf

162,779

22,338 €

4,050 €

2,750 €

10.80 €

9.70 €

1220 Vienna · Donaustadt

187,007

24,427 €

4,200 €

2,700 €

11.20 €

10.00 €

1230 Vienna · Liesing

103,869

25,209 €

3,750 €

2,850 €

10.50 €

9.80 €

* Source: Statistics Austria, wage tax statistics for 2016, average annual net income for employees in total, in euros, valid as of December 2017 ** The report assumes residential rents that are not subject to the full scope of the Austrian Tenancy Act. The sample from the First District was too small to deliver any valid information, and has been omitted in the rent levels statistic. *** The sample observed was too small to deliver reliable and accurate information.

Source: EHL BUWOG - First Vienna Residential Market Report | 2019

MIPIM 2019

61

Investing in Austria

Local private investors seize their chance Mainly Austrian private investors. After an above-average first half of the year, with a transaction volume of more than 230 million euro, the second half of the year lagged a little behind the first. Across the entire year, a transaction volume of about 420 million euro was achieved, which - in terms of volume - represents the third strongest result in long-term comparison. It is worth noting that in the past year, mainly Austrian private investors have emerged as buyers.

T

he trend of fewer but larger transactions during the first half of the year continued in the second half of 2018. Overall, there were only about half the number of transactions compared to 2017, but the volume was significantly larger.

Simon Kronberger, Associate Director at Christie & Co, said, "At a total volume of € 420 million, the third-strongest annual result since records began has been achieved, following two previous record years. Surprisingly, volumes in the second half of the year were slightly lower compared to those of the first six months.” Previous years had seen a large amount of transactions, which meant that at the beginning of 2018, especially

in the cities, comparatively few hotels were on the market. However, some transactions, which had already begun in 2017, were moved to 2018.

These included the 400-room Motel One at Westbahnhof, which was sold to the Real I.S. as part of a mixed-use property. In addition, Christie & Co was able to facilitate the sale of the Gartenhotel Altmannsdorf and the 7 Days Premium Hotel Vienna, carried out on behalf of the SPÖ.

Reopen as "Max Brown Hotel" In Vienna, the Falkensteiner Schottenfeld was also sold, which closed its doors in October 2018 and is scheduled reopen in May 2019 as the "Max Brown Hotel". Towards the end

of 2018, a conference hotel with around 200 rooms in one the most important business locations in Vienna was sold to a private investor. More than 40 percent of the total volume, more than 170 million euro, was spent in the capital city of Vienna. In the remaining provinces it was comparatively quiet in 2018 - at the beginning of the year 50 percent of the shares of the 175-room Hotel Park Inn Linz were sold

by UBM to the co-owner, List Group. There were also individual transactions in Salzburg, where all the hotels were part of a mixed-use property. In addition, the Romantik Hotel Post in Villach with 64 rooms was sold in the middle of the year and Christie & Co also sold

Selected Hotel Transactions Austria 2018 LOCATION

HOTEL

SELLER

BUYER

Heiligenblut

Hotel Post

50

Hunguest Hotels

Private Investor Hungary

Heiligenblut

Hotel Heiligenblut

113

Hunguest Hotels

Private Investor Hungary

Kitzbühel

Grand Tirolia

81

Beneco Privatstiftung

Private Investor

Linz

park inn Linz (50%)

175

UBM

List Group

Obertauern

Hotel Petersbühel

Wien

Falkensteiner Schottenfeld

Wien

Hotel zur Staatsoper

Wien

Motel One Westbahnhof

Wien

Gartenhotel Altmannsdorf

Wien

7 Days Premium Hotel Vienna

Wien Bruck an der Mur Source: Christie & Co Research

62

ImmoFokus

ROOMS

82

Private

Valamar

144

FMTG

Confidential

22

Private

Privat

Acron Helvetia II Immobilien AG

Real I.S.

95

SPÖ/Renner Institut

UM Bau

95

SPÖ/Renner Institut

Private Investor

Romantik Hotel Post

64

Private

Private Investor

Hotel Landskron

44

HB1 Hotels

Private Investor

400

the 44-room Hotel Landskron in Bruck an der Mur to a private Austrian investor. The year saw heightened activity within the leisure hotel industry. A the beginning of the year, the Grand Tirolia Hotel with its 81 rooms in the well-known ski resort of Kitzbühel was sold by the Beneco Private Foundation to a private Austrian investor. This is now the first hotel of the young Hilton brand "Curio Collection" in Austria. The two Hunguest Hotels in Heiligenblut (Hotel Heiligenblut with 113 rooms and Hotel Post with 50 rooms) found a new owner in a private investor from Hungary.

is accounted for by private Austrian buyers.

In addition, the List Group took over the park inn Linz completely, and the Gartenhotel Altmannsdorf in the Viennese district of Meidling was secured by UM Bau. Across all types of investors, 60 percent of the total volume went

to Austrians, followed by investors from the Germany, who are responsible for major takeovers, such as the Motel One at the Westbahnhof and some leisure hotels as well as buyers such as the Croatian Valamar Group and a private Hungarian investor. n

Valamar Group acquired its first property in Austria A further 100 million euro were realised in sales of leisure hotels, ranging from Lech and Zürs, across Obertauern, Bad Gastein and Sölden, to Galtür and Tamsweg. Here, in addition to private investors, the Croatian Valamar Group acquired its first property in Austria. "The type and origin of the investors is particularly interesting this year. Although we have facilitated some of these transactions, we are surprised that private Austrian individuals are making up such a significant share of buyers this year, with 60 percent of all individual transactions," Kronberger notes. When measured in terms of transaction volume, almost half of the total of 420 million euro (a little over 200 million euro)

"Overall, there were only about half the number of transactions compared to 2017, but the volume was significantly larger."

Simon Kronberger, Christie & Co

MIPIM 2019

63

Investing in Austria

Logistics real estate on the upswing Demand continues to be very high. International developers have discovered the domestic logistics market for themselves. One of the driving forces is the growing online trade. What’s more, this is also changing the logistics real estate market.

by Ursula Rischanek

A

ustria as a logistics location had received good grades last year: the Alpine republic ranked fourth in the World Bank's highly regarded international Logistics Performance Index (LPI). Since 2007, Austria was once again ranked top five in 2018 and most recently before that, it ranked seventh. The reasons for this advance are the know-how of the companies, a high level of training among the staff and the well-developed infrastructure. Arguments that outweigh the high labour costs.

Some newcomers to the market It’s no surprise that international developers are increasingly interested in the domestic

"The layout of our modern logistics halls is as if tailor-made for the requirements of Post Systemlogistik."

Christian Vogt, DLH Austria

64

ImmoFokus

logistics market. One example is DLH Real Estate Austria, a subsidiary of the Zech Group from Bremen, which specialises in the development and implementation of logistics properties and is building the "Industrial Campus Vienna East" in Enzersdorf an der Fischa in Lower Austria. According to their own estimation, it is the largest logistics park in Austria. The existing space is to be expanded by a further 40,000 square meters by autumn. The company claims that the final planning for the construction of three additional halls with an area of 17,000 square meters is currently underway and talks are also being held with a company interested in the realisation of a further 21,000 square meters of logistics space. In addition, they recently received an enquiry for a new project with a total area of 27,000 square meters. In the end the total area of new logistics space should be 160,000 square meters.

As a first step, Post Systemlogistik rent a hall with 6,300 square meters of storage space at the ‘Industrial Campus Vienna East’ and subsequently a second, congruent hall directly adjacent to it. The Post subsidiary will also move into a 300 square meters office space.

"Post Systemlogistik has been looking for a location that combines ideal transport connections with modern in-house logistics for some time now. The site in Enzersdorf an der Fischa is proving to be an excellent property that meets our requirements", says Wolfgang Einer, Head of Logistics Services at Österreichische Post, which the subsidiary "Post

Systemlogistik" is also part of. "The layout of our modern logistics halls is as if tailor-made for the requirements of Post Systemlogistik", says Christian Vogt, Country Manager DLH Austria.

Speaking in favour of this location is the fact that Vienna International Airport is in the immediate vicinity, the city centre of Vienna and the Post logistics centre in Inzersdorf are just 30 minutes away. The new parcel centre in Hagenbrunn, which will go into operation in mid-2019, can also be reached in just 60 minutes. In addition, the location to the east of the capital provides ideal connections to the neighbouring countries Slovakia, the Czech Republic and Hungary.

Hamburg-based Garbe Industrial Real Estate has also entered the Austrian market. The ground-breaking ceremony for a 20,500 square meter logistics center in Steyr (Upper Austria) began in December last year and the completion is scheduled for August 2019.

Industrie-Logistik-Linz will then provide contract logistics services there on behalf of BMW Motorenwerk in Steyr. Garbe Industrial is investing around 18 million Euros in the project. The building will be equipped with 10 rear-unloading doors and 6 sectional doors for side unloading. In addition, there will be about 550 square meters for offices and socialising areas. The 42,000 square meter site is not only in the immediate vicinity of the BMW Group Motorenwerks Steyr, it is also close to the production site of the commercial vehicle manufacturer MAN Truck & Bus. "The Austrian market for logistics

real estate has a relevant size. Companies are increasingly discovering that rent can be a more attractive option than making their own investments. Following acquisitions, we now want to have a stronger presence in this market with developments,â&#x20AC;? said Jan Dietrich Hempel, CEO of Garbe Logistic.

Belgian VGP is also showing its presence in Austria: at the end of last year, the Group acquired a leased warehouse building in the Styrian provincial capital of Graz. The warehouse, with around 17,000 square meters of rentable space, is presently being used by the automobile manufacturer of Magna Steyr. In addition to the existing property, VGP also has the opportunity to develop a further 45,000 square meters of rentable space for future customers.

Already in July 2018, the iLogistics Center was put into operation to expand the cargopartner logistics company's business location in Fischamend, also in Lower Austria. With a total area of 12,250 square meters, the logistics center located in the immediate vicinity of Vienna Schwechat Airport, offers 24,500 pallet storage spaces as well as a small parts

"The Austrian market for logistics real estate has a relevant size.

Companies are increasingly discovering that rent can be a more attractive option than making their own investments."

Jan Dietrich Hempel, Garbe Logistic

warehouse with 32,000 containers. Speaking of the airport, there is around 40,000 square meters of logistics space available in the Airport City itself.

Amazon in Lower Austria The distribution center of the Internet giant Amazon in GroĂ&#x;ebersdorf, Lower Austria, has also been in operation since October 2018. In the warehouse of around 9,800 square meters near the Eibesbrunn motorway junction, parcels from other European Amazon logistics centers are now being processed for delivery to local customers.

The latter two projects also represent two strong trends: on the one hand, the growth of online trade leading to increasing demand for logistics space and on the other hand, in addition to the storage space for pallets, there is an increasing demand for small parts warehouses as a result of the growing practice of shopping from home. This is not only where the goods are stored, but also where the parcels are packed.

Hotspots Vienna, Linz, Graz In addition, another fact has become very clear: the hotspots of the Austrian logistics market continue to include Vienna and its surroundings as well as Linz and Graz. According to data of RE/MAX Commercial, the demand of logistics specialists, who want to settle in the greater Wiener Neustadt area, continues to be very high. The result is rising land prices: according to RE/MAX a price of 170 and 250 Euros per square meter are already being paid around Wiener Neustadt.

A similarly high demand is driving the prices upwards within the range south of Vienna, for example in Himberg. The current price for a square meter there is approximately 150 Euros. In the greater Linz area, the land prices meant for logistics development - depending upon proximity to the main transportation routes - run between 100 and 130 Euros and rising according to RE/MAX. The commercial real estate specialist CBRE expects that the already fierce competition for land reserves on the outskirts of the city will continue to grow since the international participants have entered onto the parcel logistics market. Based on the good economic situation and the increasing on-line trade, the

"Post Systemlogistik has been looking for a location that combines ideal transport connections with modern in-house logistics for some time now."

Wolfgang Einer, Logistic Services Ă&#x2013;sterreichische Post

high demand by international developers will continue. CBRE outlines the trends for 2019 in the Austrian real estate market, saying that the increasing completion volume of thirdparty project developments and the growing interest in sale and lease-back transactions will lead to higher investment activity in the domestic industrial and logistics market in 2019. The present conversion potential of existing Class B and Class C properties will therefore continue to gain importance in the future.

Trend towards city logistics City logistics, better known as stations on the way between the large logistics centers on the outskirts of the city and the consumers is also becoming an increasingly important topic. Delivery services, but not only those, are renting empty shops in the cities or setting up containers from which the goods are either distributed further or collected by the customers. In Austria, for example, DPD operates hubs in such a way in Vienna, Linz and Salzburg. But it is not only the delivery staff who are interested in inner-city logistics space. More and more commercial enterprises, in fact not only the huge online retailers such as Zalando or Amazon, are stirring up the market conditions and setting up their own logistics structures. n

MIPIM 2019

65

Positions & Options

ImmoVision 2.019 Highlights and trends. This is what industry professionals have to say about the property trends of 2019.

Which trends will move Austria in 2019? ImmoFokus asked market participants with a record of sustained success about it. interviewed by Michael Neubauer

Roman Ascherov (AIRA Development Group), Thomas Belina (Colliers International), Michael Ehlmaier (EHL), Heinz

Fletzberger, Heinz (SĂ&#x153;BA), Gerald Gollenz (WKO Steiermark), Manfred Kunisch (TPA), Roland Pichler (DWK), Dietmar Reindl (Im-

mofinanz), Michael Schmidt (3SI), Gerhard Schuster (Aspern) and Georg Spiegelfeld (Spiegelfeld Real Estate) n

THE QUESTIONS

Will the conditions for the real estate industry improve or worsen? Are you beginning the New Year with an optimistic or a pessimistic outlook?

What will be the asset class of the year 2019?

Have we reached historic highs in real estate prices? Is there still no end to the real estate cycle in sight?

4

Which three topics will influence the real estate industry most?

5

Your plans and goals for your company in 2019?

66

ImmoFokus

Due to the high demand for apartments in Vienna, intensive construction activity is necessary.

However, the apartments must remain financially viable, because the banks require a high equity ratio for financing.

We are optimistic about the new year since we have a number of interesting projects in the pipeline.

Our innovative architectural style gives us a decisive competitive advantage.

2 3

Investor real estate

There is still a great demand, which in turn means that prices are rising. However, you have to be careful not to overvalue the properties to avoid the risk of a real estate bubble.

As property developers, we are called upon to build affordable apartments. In Austria, residential property is still affordable by international standards. Due to low interest rates, it is still attractive to invest in real estate.

Roman Ascherov, AIRA Development

4

5

The digitization or connecting of new building technology systems. The consolidation of economic areas is also an issue as well as innovative construction.

We want to continue building "affordable" housing, which also means remaining close to our customers. Personal contact with the customers is very important to us because trust and credibility are decisive factors here. Our goal is also a continued healthy growth of our company.

In principle, I assume that the general conditions will be similar to those of recent years. The low interest rate environment and pressure to invest make me feel positive that 2019 will also be a good investment year. On the other hand, the amendment to the building regulation will continue to generate much discussion in the coming years and planned project developments will have to be revised.

We continue to see strong demand for investments in all asset classes - in contrast to that, supply in most asset classes in the core area is very limited. We assume that housing will continue to gain a share in the market. There is currently a demand for many residential construction projects in the pipeline from institutional investors as well.

Although we have seen a levelling-out of yield developments in the last 12 to 18 months investors are becoming more cautious, an end to the cycle is not really in sight. The latest developments in core office real estate show that it is difficult to forecast top yields or top pric-

Amendment to the building regulations with the 2/3 regulation regarding subsidised residential construction, e-commerce vs. stationary retail, e-commerce and the requirements for logistics properties (City Logistics, last-mile-delivery).

We are currently working on numerous exciting projects in various areas - we are therefore very confident that the current year will also be very positive for Colliers International in Austria.

2

3

4

Thomas Belina, Colliers International

5

MIPIM 2019

67

Positions & Options According to the latest statements by the ECB, interest rates will remain at their current level for the foreseeable future, so we are very optimistic as far as the price trends and stable value of real estate are concerned. Furthermore, the rental markets - both in the commercial and the residential sector - are also performing very well, resulting from Austria's good overall economic development.

On the other hand, we also see some challenges for the real estate sector with regard to the land property situation, the development of construction prices and the occasional lengthy approval procedures. On the whole, however, we are very confident about the development of the industry.

2

3 Michael Ehlmaier, EHL

4

5

68

ImmoFokus

The residential asset class will continue to be the fastest-growing sector in the real estate industry this year, driven by demographic developments and the progress of urbanization.

From our point of view, there is still scope, even if limited, for further price dynamics. Over the medium term, we expect prices to move sideways. As long as other asset classes, in particular government bonds, perform comparatively poorly, we do not expect an abrupt end to the real estate cycle.

Land prices, construction costs and of course interest rates, accompanied by economic growth, demographic trends and legal and political stability, form the foundation for the development and stability of the real estate industry.

In 2019 we will continue to do everything in our power to achieve our ultimate goal of customer satisfaction. In addition - as in previous years - we will prepare our company for the current challenges posed by digitization and adjust it in such a way that our customers may continue to expect the best range of services from us in the future.

www.immofokus.at

The Magazine for Innovation, Benchmarks, Trends in the World of Real Estate.

MIPIM 2019

69

Positions & Options In recent years, the overall conditions for the Austrian real estate market have been excellent for investors. Low interest rates and high demand led to above-average returns in many asset classes.

It is not clear how sensitive the real estate market will be to rising interest rates, especially with the currently high land and construction costs. The economic parameters will remain sound, even if interest rates see a moderate rise in the second half of the year, as I believe they will. I expect this even with a weakening economy. Topics like Brexit or trade conflicts are less likely to affect the local real estate market than other markets or industries. As far as the legal framework is concerned, the Viennese real estate market, for example, is characterized by new building regulations. It is completely unclear, in my estimation, how the market and price development will react in the medium term, particularly to the new category "subsidized housing". I believe it is equally uncertain if the desired effect of affordable housing will arrive at the estimated scale and how the city of Vienna will cope with the resulting financial requirements.

Incidentally, we have been waiting for a reform of the tenancy law for years. The process was to be kickstarted by a tenancy convention, which was announced quite a while ago now. The urgent need to simplify tenancy legislation is illustrated by recent Supreme Court rulings on the surcharge situation and the resulting uncertainty in the housing market. A comprehensive reform of tax legislation has been announced for 2020. Whether this will actually materialise and which impact it will have on the real estate sector remains to be seen. In any case, I have not completely lost my faith in an improvement of the legal framework for the real estate market â&#x20AC;&#x201C; yet.

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I don't think that there can be this "one" asset class while the old classics continue to be on the radar of investors. Yields in the office, retail or hospitality sectors are in decline, but still have an appeal with a good micro-location and implementation. I am expecting a short-term increase in demand for logistical properties.

Foreign investors in particular are introducing new asset classes such as student halls of residence, serviced apartments or data centres to the Austrian market. Since some of these projects are already under development, these asset classes will continue to establish and grow.

The housing market and the demand for affordable housing will, however, remain the firm focus of public interest and political discussion.

Manfred Kunisch, TPA

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Demand in the housing market will continue to exceed the new supply of space, which, like many of the analysts, leads me to expect a moderate increase in prices for the coming year. In the medium term I am curious as to how the construction costs will develop. With the currently high costs, it is becoming apparent with some of our real estate developers that housing projects are no longer started at any price.

The question of affordable housing will continue to adopt an ever dominant role in the future. This is evident in issues such as the surprisingly high proportion of mandatory dedication of subsidized housing in the new Viennese Building Code.

With regard to commercial real estate, excess supply is unlikely for the Viennese market, although demand may decline in the case of an economic downturn. In general, constant prices are probably the more likely outcome.

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ImmoFokus

It would be all too easy to call on â&#x20AC;&#x153;modernâ&#x20AC;? topics, like digitization or data protection. If, however, the question is one of the topics with the strongest influence, then for me this is still the future development of interest rates and market liquidity in combination with high construction costs and land values.

Having achieved of one of our major long-term goals - a TPA location in Linz and the associated expansion of our business activities in the west - we are currently very happy. The expansion in Central and Southeastern Europe, with a new location in Montenegro, brings us another step closer to our corporate goal of sustained growth for and with our customers. This year, we are also celebrating our 40th anniversary - a small, specialized law firm has become an internationally operating, successful corporate group. We want to continue this

Basically I am entering the new year very positively, because the demand for living spaces has remained unchanged and the marketing of our projects is going very well. Of course, the last few months have seen the emergence of difficult conditions (e.g. land and construction costs). We have already adjusted our business for these issues. We are eagerly and confidently awaiting the political intervention (e.g. the Vienna building regulations).

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Roland Pichler, DWK

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Housing will, of course, continue to be the asset class of the year. But specialized properties will also establish themselves more and more.

The prices for condominiums and rental apartments have been rising for some time, but recently at a very moderate level. This is more like stagnation or value adjustment. In my opinion, this will also soon be the case in the investor market. I don't see a price decline or downward trend at the moment. Nevertheless, we are keeping a close eye on the market and its saturation since the situation can change quickly if the supply is too high, especially in moderate locations.

Lack of resources, digitalization, financial requirements.

In the current year we want to complete around 400 apartments and hand them over to our customers. Then we intend to build a further 400 apartments. Since we are pursuing a moderate growth course, we want to increase our acquisition performance and fully exploit our advantages of the enormous financial strength of the Group. The expansion of our activities into other provinces is also connected with this.

IMMOFINANZ is optimistic about the new year. In January we received an investment grade rating, making us the first Austrian property company to issue a rated bond with a volume of 500 million Euros. This is an important seal of quality for our company. Our properties are very clearly positioned in our three brands myhive, STOP SHOP and VIVO! and we have plans for further growth.

Retail parks. A few years ago, this asset class was not particularly interesting for many investors. We have entered this segment at exactly the right time and with our 80 locations in nine countries, we are already the leading player in this segment. The concept is successful with its decentralization and an attractive range for price-conscious convenience shoppers. Online retailing is also not an issue in the low-cost product classes. Further growth is planned.

That would be desirable, but a cycle also comes to an end once in a while. We consider this real estate cycle to be at an advanced stage, especially compared to the German market. It is important to us that we are very well equipped for any market environment: Over the past few years, we have invested in the quality of our product range, significantly increased the occupancy rate and created a very comfortable liquidity situation. This puts us in a good position to successfully exploit opportunities in a changing market environment.

More flexibility in office environments, digitization and finding new commercially-viable projects.

In 2019, we will focus even more intensively on the wishes and needs of our customers. This pays off with a high occupancy rate and desirable results. In addition, it provides the basis for sustainable growth with new projects in our three brands.

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Dietmar Reindl, Immofinanz

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MIPIM 2019

71

Positions & Options We are very optimistic about the new year and have already concluded successful transactions, both in terms of acquisitions and sales. Although the environment is currently very mixed, especially in the rental housing sector - see the new area surcharge map, the discussion that limited rental agreements might cease, etc. - we believe in the apartment building as an asset class and will continue to expand in this area.

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3 Michael Schmidt, 3SI

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Residential real estate by a long stretch â&#x20AC;&#x201C; it is also the safest form of investment for us and will, in the long term, always remain the safest asset class, even though we are faced with lower yields than we might achieve with, for example, office real estate. But residential properties are the safer bet in the long run.

No, an end is not in sight, because in the urban area, where mot of expansion is happening, there isn't much scope for new housing. But we do think that the growth of the last three years is now beginning to slow a bit.

Population growth, rising interest rates and, naturally, political guidelines and laws.

Our aim is to break the 100 million investment limit in acquisitions for the first time in 2019.

Conversely, this means that we are currently in search of apartment buildings and properties in Vienna even more than usual! Therefore we extend an invitation to offer us any

As a boundless optimist, I am convinced that the conditions for the real estate industry will improve - perhaps things will change in the New Year, but that will do us good, make us more creative and dynamic.

Retail parks. A few years ago, this asset class was not particularly interesting for many investors. We have entered this segment at exactly the right time and with our 80 locations in nine countries, we are already the leading player in this segment. The concept is successful with its decentralization and an attractive range for price-conscious convenience shoppers. Online retailing is also not an issue in the low-cost product classes. Further growth is planned.

That would be desirable, but a cycle also comes to an end once in a while. We consider this real estate cycle to be at an advanced stage, especially compared to the German market. It is important to us that we are very well equipped for any market environment: Over the past few years, we have invested in the quality of our product range, significantly increased the occupancy rate and created a very comfortable liquidity situation. This puts us in a good position to successfully exploit opportunities in a changing market environment.

More flexibility in office environments, digitization and finding new commercially-viable projects.

In 2019, we will focus even more intensively on the wishes and needs of our customers. This pays off with a high occupancy rate and desirable results. In addition, it provides the basis for sustainable growth with new projects in our three brands.

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ImmoFokus

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Georg Spiegelfeld, Spiegelfeld Real Estate

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I assume that the general conditions will remain the same as in 2018.

That is why there is optimism regarding the continuous level of interest rates and demand for residential real estate from owner-occupiers as well as private and institutional investors.

Unfortunately, I do not currently see any reduction in construction and property costs.

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Heinz Fletzberger, SĂ&#x153;BA

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Residential property was, is and will remain the top asset class of the year!

We have been speculating about this for some time now and yet the prices are still rising. As long as the interest rates do not increase, prices will continue to rise, but only very slowly and in smaller steps. Compared with the rest of Europe, however, this is not surprising, as we are still in the middle rage there.

The further development of construction and property costs and possible political influences (e.g. the issue of property reclassifications by the Viennese city government).

SĂ&#x153;BA currently has around 300,000 m² of usable space or 5,000 apartments with a total volume of over 1 billion under construction or development and would like to continue growing steadily in order to expand its share of the privately-financed housing market in Austria.

2019 will certainly be an exciting year in terms of how the politicians tackle those sensitive issues.

The government's program includes tax incentives, the implementation of which is more than necessary and highly urgent. A new tenancy law would have been more important yesterday than tomorrow. All these changes would contribute to boosting the economy and construction of the urgently needed housing in the cities. Rent ceilings are absolutely the wrong way to go. I am basically an optimistic person, always trying to see the good even in politicians and therefore expect a positive development again in 2019. As always, the real estate industry will accept the challenges and master them with flying colors.

Residential construction will obviously remain the number 1 asset class, even if other projects such as senior citizens' residences will become relevant again.

In the metropolitan centers there will always be projects that are upwards orientated in terms of price, but in principle you can already see that across the entire land a level has been reached that is also limited. I don't see any more big upwards leaps.

Digitalization is certainly one of the biggest challenges. For property developers the laws and standards must finally be harmonized and for brokers the marketplace initiated by the trade association will be the major topic in the real estate industry, I am sure of that.

The first half of the year will be dedicated to the organization of the Bundestag 2019, which will take place in Graz from 13 to 14 June. We are already inviting the real estate brokers of the entire country to visit us, because already now I can promise you great locations and a great program. The preparations for this are in full swing. The real estate fair "Lebensraum 2019" in March will again be a highlight of the Styrian real estate market. The training and further education as well as our networking events continue to be at the top of our agenda and the "Real Estate Brokers in the Public Sector" project, which has been running since 2012, will also be stepped up again in 2019.

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Gerald Gollenz, Austrian Economic Chambers

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MIPIM 2019

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Positions & Options As a development company for aspern Seestadt Vienna, we are entering the year 2019 with great optimism. This year, various very attractive office offers will be launched in our Seeparkquartier business hotspot - while Vienna as a whole will record one of the lowest completion rates for office properties in recent years. In this area as well we have very good starting conditions for the new quarter, the quality of which is also reflected in the new usage mix.

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Gerhard Schuster, aspern

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In the Seeparkquartier in aspern Seestadt, this will be the privately-financed rental and owned apartments that are being built in a pedestrian zone in a prime location with underground connections and access to the lake. These properties benefit not only from the top location, but also from the mix of high-quality office spaces, shops on the ground floors, restaurants and leisure facilities.

That depends on the asset class. In the case of purely residential land, it is highly probable that prices will no longer rise appreciably.

First of all, it is definitely digitization and here I can see some key aspects that we are working on intensively in the Seestadt area. With the DBS Club we are also dealing with "Digital Building Solutions" that take the entire cycle from financing to planning, construction and operation into account. Furthermore, smart home solutions are increasingly in demand from users and make a lot of sense from our urban development perspective â&#x20AC;&#x201C; at best, they not only provide comfort for the individual but also contribute to resource conservation and our sustainability goals. This is a key research aspect of Aspern Smart City Research (ASCR), for example. Projects that are working on supplying energy at the local neighborhood level are also along the same line. Locally generated and used energy in a small-scale association is an incredibly exciting topic in new development areas. Secondly, especially in Vienna the Smart City will continue to carry a lot of weight. We in the Seestadt see ourselves as the Urban Lab of the Smart City Vienna and are working on the topic far beyond its digital aspects. This begins with mobility and open space planning that contribute to "urban resilience" and extends to our innovation of the "managed shopping street" as a control element for all local supply within easy reach in a city. Last but not least, it is and remains the good usage mix that enhances real estate and urban districts. This makes aspern Seestadt extremely successful even by international standards.

In 2019 we will get the final development phase of the Seeparkquartier off the ground. A number of the 14 projects will be completed this year and by 2020 the quarter should be largely completed so that by 2021 we can finish the surfaces, plant the green areas and set up the outside furnishings.

Just as important for us is the beginning of the building construction in the Quartier Am Seebogen, north of the lake. This will again be very diverse, industry will play a major role, but also new social infrastructure with kindergartens, the second school campus of the Seestadt and exciting cultural offerings. We must therefore prepare the infrastructure in spring 2019, for which the planning work has been in full swing since last autumn. Starting in 2019, the Seestadt will also noticeably position itself as a hub for digitization processes by linking the many players and projects even more closely than before. These include Pilotfabrik 4.0 at the TU Vienna, the Austrian Center for Digital Production (CDP) and shortly the Manufacturing Innovation Hub of the European Institute of Innovation and Technology (EIT) at the Technologiezentrum. And we will be even more active in our efforts to promote further flagship projects in the area of Smart City Solutions - the framework conditions could not be better than in our case.

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