Hanover: The Glass Is Three Quarters Full
Hanover: The Glass Is Three Quarters Full
We have once again prepared the property market report for the region and city of Hannover. The crisis has not left this basically stable location unscathed. The logistics sector received a gold star A. The trade fair city recorded declines in the office segment and - unsurprisingly - in the retail and hotel property business.
The starting position was more than comfortable: 2019 was a record year with an investment volume of around one billion euros in the Hannover Region, and the real estate industry was looking forward to 2020 with confidence. The first quarter of 2020 was also promising - as we know, things turned out differently. At around 710 million euros, the investment volume in 2020 is significantly below the long-term average of around 765 million euros per year.
However, even if the key figures of the Hannover property market in 2020 are worse overall than in 2019, with the exception of the hotel investment market, the submarkets have shown themselves to be comparatively robust - the glass is three quarters full in Hannover, so to speak. The region remains a sought-after and exciting development and investment location for all market players.
The logistics industry has been strongly challenged in this crisis, which is also evident when looking at the real estate market. The partial closure of brick-and-mortar retail initially led to a sharp short-term increase in demand for solutions to store goods that could not be delivered to retailers. At the same time, online retailers recorded a strong increase in orders. This development also resulted in an increased demand for storage space in Hannover Region, and the heavy strain on infrastructures in the courier, express and parcel services (CEP) sector continues to this day. For real estate and logistics infrastructures designed primarily for industrial logistics, the situation is indeed tense and has hit the automotive sector particularly hard. Nevertheless, project developers and companies were also active in this sector. In logistics and industrial real estate, record take-up of around 410,000 square metres of warehouse space was registered again in 2020 - an increase of eight percent or 30,000 square metres. Rents remained largely stable at 5.20 euros per square metre.
In the crisis, the logistics industry is not only proving strong and stabilising on the real estate market, but also illustrates its cross-sectoral importance for the regional economy, especially for the trade and industry sectors. The market players are therefore optimistic about 2021. The vacancy rate is lower than it has been for years and the letting prospects are without exception rated as good to very good.
Hanover's tourism has dramatically collapsed in 2020 - like everywhere else in Germany. With probably only about two million overnight stays in the city and surrounding area, tourism demand in the past year was at the level of the 1990s. Especially for the hotel businesses in the state capital, the situation is reflected in extremely low occupancy rates and sharply lower revenues with only about one million guests last year. Accordingly, the economic situation of many establishments is very tense, although so far none of the larger establishments has had to permanently cease operations. All regional market players expect that especially the hotel industry and thus the hotel property market will take the longest to overcome the consequences of the Corona crisis.
After a brief lull, which was probably due more to general uncertainty at the beginning of the first shutdown, the residential property market is proving to be crisis-proof and unimpressed by the effects of the Corona pandemic. While a stabilisation of purchase and rental prices was actually discernible before the crisis, especially with regard to high-priced offers, this impression is not confirmed by the end of 2020 from the perspective of the market players.
The Corona crisis is not currently leading to subdued demand and a decline in prices on the residential property market - on the contrary. In fact, an increased interest in housing can be observed. The vast majority of regional market players also do not currently see any negative influence of the pandemic on current and planned projects.
The annual balance sheet of the office property market shows a significant decline. Office take-up at the end of 2020 was around 145,000 square metres - a drop of around 27 per cent (53,000 square metres). Compared to the five-year average of around 160,000 square metres per year, take-up is thus slightly below average after two strong years. Top rents have also fallen and are now at 17 euros per square metre - a minus of one euro. In terms of investments, turnover fell by more than half compared to the previous record year.
The start of 2020 was positive, demand was good, to a large extent also from gastronomic concepts in classic retail locations. The closures that accompanied the shutdowns in spring and winter for retail and gastronomy have led to an unprecedented deterioration of the economic situation in retail and gastronomy in the classic retail locations of the city centres and surrounding municipalities as of March 2020. This also has noticeable and lasting consequences for the owners of the properties. How strong the negative effects will be and how long they will last can hardly be estimated at present and depends on the further course of the pandemic.
The difficult situation in retail and gastronomy is being countered with municipal aid as well as joint initiatives by the public sector and retail trade to open up new paths between customers and trade. In the medium term, concepts for a sustainable development of the city centre are to be developed and thus positive impulses for the real estate industry are to be achieved.
Note The updated and supplemented version of the Real Estate Market Report 2020 can be downloaded from the Economic Development website (in German language).
Contact persons: Anna Buchmann, Consultant at bulwiengesa, buchmann [at] bulwiengesa.de and Felix Werner, Consultant at bulwiengesa, werner [at] bulwiengesa.de