Commercial real estate market: office and logistics with strong annual results

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

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

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

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

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

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

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

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

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

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

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

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

As a result, take-up is once again exactly in line with the five-year average (2018 to 2022).

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

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

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

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

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

High turnover in logistics and industrial properties

High take-up of around 420,000 square meters of warehouse space was registered in logistics and industrial properties in 2022, with take-up rising significantly again (up 25,000 square meters) - a new take-up record.

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

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

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

The 2022 annual report and continuously updated information on around 120 market-defining projects in the office, logistics, retail, residential and hotel segments are available online at www.immobilienmarktbericht-hannover.de . At the Real Estate Arena commercial real estate trade fair in Hanover (24-25.5.2023), the three other major submarkets - retail, residential and hotel - will once again be given greater focus and updated.