More than Bremen Town Musicians

More than Bremen Town Musicians


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03.12.2020 Author/s: Felix Werner

A construction boom in the housing market, large office projects and remarkable developments in the retail sector - the Real Estate Market Report for Bremen Economic Development provides data and details on current developments and shows where potential lies in difficult times.

Many economic development agencies of cities, municipalities and regions, allow us to say in advance, regularly commission bulwiengesa. Our data-based assessments enable transparency and future-proof further development of the real estate location.

For Germany's smallest federal state, we have once again provided data, trends and forecasts on the office, retail and residential property market. Corona notwithstanding, there is significant growth in space in almost all sectors. Logistics properties are particularly in demand. We have summarised the most important results of the real estate market report for the blog.

Even the Town Musicians were drawn to the city on the Weser. The river shapes the cityscape as well as the business location.

The "two-city state of Bremen" with its major cities Bremen and Bremerhaven is characterised by port, trade and sea. The state is the second largest port location in Germany with around 1,300 companies and about 40,000 employees. The business location is also characterised by other strong sectors such as aerospace, the automotive and food industries, wind energy, freight transport, the IT sector, the university, the creative industries and retail. This results in a real estate market with growing space turnover.

Office properties

In the office property segment, the predicted 100,000 sqm take-up mark was broken last year. The Zech Group's own use of the Europahafenkopf (18,500 sqm MFG) was a key factor in this market. The first half of 2020 also got off to a strong start with take-up of 41,000 sqm.

The largest single project this year is the new Sparkasse Bremen building in the Technologiepark. In total, around 43,000 sqm of office space is expected to be completed this year. A new high in new office space could be achieved in 2021. Currently, almost 76,000 sqm are under construction.

Peripheral locations such as Überseestadt, the Technology Park as well as the city periphery are becoming increasingly important for the Bremen office property market. A new important player is the Tabakquartier.

Despite Corona, the estimated annual result 2020 for commercial take-up is at a high level of 75,000 - 90,000 sqm.

There has so far been no negative effect on prime office rents in Bremen. The highest rent level remains stable in all submarkets. In Überseestadt a top rent level of around 14 euros/sqm is being maintained. Only in the case of average rents is the more restrained demand as a result of the pandemic causing a slight decline to 11.50 euros. In the city, both prime rents and average rents remain stable at 13.10 euros/sqm and 8.70 euros/sqm respectively.

Outlook: It is still difficult to assess the impact of the Corona pandemic on Bremen's office property market - will hygiene concepts require additional space or will the demand for space decrease as a result of home offices? If companies go bankrupt, increased vacancies can be expected as a consequence. And certainly some companies will postpone their decisions about expansion or relocation.

Retail real estate

Bremen as a retail location, especially the city centre, benefits from the trend towards city tourism as well as from holidaymakers on the North Sea and Baltic Sea.

Project developments such as the City-Galerie, the Lebendiges Haus and the BALGEQUARTIER, which has already begun, give rise to expectations of urban renewal.

After Zech Bau SE (co-owner of the Karstadt property) acquired the multi-storey car park Mitte, the company is planning a project development around the LLOYD PASSAGE under the working title City-Galerie. In addition to the Karstadt property, this will also include the Galeria Kaufhof building. A comprehensive renovation is planned for the Lloydhof at Ansgarikirchhof. The conversion to a "Living House" started in spring 2020. While retail and gastronomy are to revitalise the surroundings on the ground floor, offices, flats and flats are planned for the remaining floors.

The BALGE QUARTER is being created around the Johann Jacobs Haus, the former headquarters of the Jacobs coffee company. The historic buildings Essighaus, Kontorhaus and Stadtwaage will be integrated into this development. Gastronomic offerings will complement this centrally located shopping location not far from the Weser.

Away from the main locations of Bremen's city centre, the city district locations complete the retail offer. Shopping centres such as Waterfront and Weserpark or retail parks such as Einkaufspark Duckwitz should be mentioned here.

Outlook: With the new development of the BALGE-Quartier and City-Galerie as well as the renovation of the Lloydhof at Ansgarikirchhof, attractive retail space will be developed in Bremen's city centre over the next few years. At the same time, letting is becoming much more difficult as a result of the Corona pandemic. The closure of two major department stores is also making the city centre less attractive as a whole. Numerous bankruptcies, also in the gastronomy sector, do the rest. The overall purchasing power could also be lower due to the overall economic situation. It is therefore foreseeable that the prime rent level will fall. However, the adjustment of rents and terms also offers opportunities for new concepts and offers.

Residential real estate

The construction boom in Bremen's housing market continues unabated. Bremen is growing, and has been doing so steadily since 2011. At the same time, the proportion of singles is rising, so the number of households is also increasing. City residential locations on the waterfront in Überseestadt and on Stadtwerder are popular, but traditional residential locations such as Schwachhausen, Horn-Lehe and Oberneuland are still in high demand.

Larger projects under construction, such as the Mühlenviertel in Horn-Lehe with around 340 residential units, Ellener Hof in Osterholz (approx. 500 units) or Schuppen Drei in Überseestadt (approx. 500 units) are stimulating the market. In addition, the Neue Hulsberg quarter with around 1,000 residential units in an integrated city centre location and the garden city Werdersee with around 600 residential units, which are expected to be developed by 2024.

Purchase prices for condominiums in modern new construction projects rose again in 2019 by an average of 5.3% compared to the previous year. On average, they reached 4,000 euros/sqm, with a peak of 5,100 euros/sqm - although significantly more was also paid for individual properties. Purchase prices are again rising more strongly than rents. The reason for this is the continuing high investment pressure.

The top rents for new buildings in Bremen were 14 euros/sqm at the end of 2019. However, significantly higher rents were also achieved for first-time occupancy. On average, rents in new buildings were around 11.50 euros/sqm - an increase of 2.7% compared to 2018.

Purchase prices increased by 37.9 % on average and by 27.5 % at the peak in the same period. As a multiplier for multi-family houses in new construction, the factors reached 24 at the peak and 20.5 on average in 2019. This is also an increase.

Outlook: The impact of the Corona pandemic is not expected to leave the residential real estate market unscathed. Various forecast models expect rents and purchase prices for residential property in Bremen to stagnate for the time being until 2021 due to the economic effects of the Corona pandemic.

 

Note: You can download the complete Bremen 2020 Real Estate Market Report from the website of Wirtschaftsförderung Bremen GmbH (in German language).

Contact person: Felix Werner, Head of Studies at bulwiengesa, werner [at] bulwiengesa.de ()