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Country Facts

10/2015

Austria‘s real estate market – too small for the premier league?

2 I Real Estate Country Facts 10/2015

Real Estate Country Facts

Imprint: Publisher and media owner: UniCredit Bank Austria AG http://www.bankaustria.atEditor: Bank Austria Real Estate Consulting & Investment, Karla Schestauber, Tel. +43 (0)50505-54784Layout: www.horvath.co.at

Date: 18. September 2015

A joint publication of Bank Austria Real Estate, Economics & Market Analysis Austria and Immobilien Rating GmbH (IRG)

Imprint and disclosure pursuant to Sections 24 and 25 of the Austrian Media Act can be found under http://www.bankaustria.at/en/ legal-information-imprint.jsp

Legal notice – please read this important information: This publication is neither a marketing communication nor a financial analysis. It contains information on general economic data, real estate market data and related assessments of real estate market developments. Despite careful research and the use of reliable sources, we cannot assume any responsibility for the completeness, correctness, up-to-dateness and accuracy of information contained in this publication.

The publication has not been prepared in compliance with the legal provisions governing the independence of financial analyses, and it is not subject to the ban on trading subsequent to the distribution of financial analyses.

This information should not be interpreted as a recommendation to buy or sell financial instruments, or as a solicitation of an offer to buy or sell financial instruments. This publication serves information purposes only and does not replace specific advice taking into account the investor’s individual personal circumstances (e.g. risk tolerance, knowledge and experience, investment objectives and financial circumstances).

Past performance is not a guide to future performance. Please note that the value of an investment and the return on it may rise and fall, and that every investment involves a degree of risk.

The information in this publication contains assessments of short-term market developments. We have obtained value data and other information from sources which we deem reliable. Our information and assessments may change without notice.

Real Estate Country Facts 10/2015 I 3

In the low-interest-rate environment of recent years, real estate has become established as an important asset class. Investors on the lookout for a return on their investments can no longer avoid considering real estate. Although the yields to be achieved have already decreased significantly because of the strong demand, the spread to bond yields continues to be attractive. As long

as it remains that way and the risk environment, including any government regulatory measures for the real estate markets, does not substantially deteriorate, investor interest should also remain high.

In Europe, according to figures from JLL, the volume of investment in commercial real estate rose to EUR 124 billion in HY1 2015, slightly above the outstanding result for the same period last year. In 2015, and helped by the forecast of a slight improvement in the economy, Europe is well on the way to exceeding the excellent results achieved in 2014.

The volume of transactions in commercial real estate in Austria last year reached a record value of up to EUR 3 billion, depending on the source. However, there was a drop in activity in HY1 2015 – going against the European trend. According to data from CBRE, only just under EUR 1 billion was invested compared with EUR 1.3 billion in HY1 2014. Nevertheless, with well filled pipelines helped by modestly improving economic growth, the chances are still good that last year’s volume will at least be maintained or might even be exceeded. This would bring growth on the Austrian market into line with the European market once more.

Is the Austrian real estate market too small for the premier league?

Prime yields in Austria have also declined sharply. At the mid-year point in 2015, the office sector reached the 4.5 % mark, while shopping centres slipped to just short of 5 %, and retail parks to just under 6 %. So while Austria cannot keep pace with the premier league – the top yield for offices in London’s West End, for example, is 3.50 % – it can certainly play in one of the top leagues in terms of yield, even if not in volume.

There is no bottleneck in real estate financing in Austria. Banks finance both real estate investments and developments, and credit structures for individual asset classes have again become more competitive, with competition in the market for housing developments for sell-off being particularly fierce.

We are proud to have built up many years of expertise in the commercial real estate finance sector. In particular, this also includes an understanding of the highly cyclical nature of real estate and the risks that arise late in the cycle. We are, of course, still very happy to support real estate professionals with sound projects, whether for financing or to hedge interest rate risks.

Kind regards

Karla Schestauber



The economic situation in Austria: All good things are worth waiting for

Slow recovery in Austria …The basic conditions for economic development in Austria in 2014 were not much more cheering than the year before be-cause of the weak expansion of global trade and the rise in geo-political tensions. In summer 2014 the Eurozone economy lost some momentum, with negative reports coming out of the cen-tral member states, while on the European periphery develop-ment was more favourable. The easing tailwind from the growth markets and the conflict with Russia in the Ukraine shattered Austrian hopes of perceptible economic growth. The absence of stronger growth impulses from exports, as well as persistently weak domestic demand and above all companies’ reluctance to invest put the brakes on the Austrian economy. In 2014 economic growth reached just 0.4 percent, only margin-ally higher than the 0.3 percent recorded in 2013. As a result, the economic lead over the Eurozone that had been the norm for many years was lost.

Economic activity in Austria was also very sluggish in HY1 2015. Early in the new year, however, an increasing number of sentiment and early indicators were on an upward trend, signal-ling that the Austrian economy is recovering in tandem with the recovery in neighbouring countries. After a moderate Q1, the following months saw a slight increase in growth for the Aus-trian economy. As a result, year-on-year economic growth in HY1 was 0.4 percent. The stimulus for the moderate pace of growth has until now come from consumption, which regard-less of the still highly pessimistic underlying mood among Aus-trian households benefited from the rise in incomes, helped by low inflation. Price rises in HY1 averaged just 1 percent, lower

than the 1.7 percent figure for 2014. Nonetheless, inflation was again above the European average. As a result consumption was less sustained than in other European countries, so that the comparatively higher level of inflation in Austria shares some of the responsibility for the slow pace of growth in the Austrian economy.

Despite the low interest rates as a result of the ECB’s relaxed monetary policy, investment activity in Austria decreased slight-ly in HY1. The export economy has been showing signs of a slight upturn in demand since the start of the year, having been hit by problems in several sales markets. But the tailwind is picking up. Since April, the Bank Austria Purchasing Managers’ Index has been in the growth segment of over 50 points. Never-theless, because of the sharp rise in the supply of labour, most significantly caused by immigration, the unemployment rate has risen to an average of 5.8 percent.

… is gaining pace with the tailwind from EuropeThe Austrian economy will gain momentum over the coming months, pulled by the favourable recovery trend in Europe and solid growth in the USA. This is despite headwind caused by con-cerns about the economic situation in some emerging markets (especially in China), together with the ongoing Russia / Ukraine crisis and problems in the Middle East. One contributing factor is the easing of uncertainty caused by the crisis in Greece follow-ing the agreement on a further aid programme.

Investment activity and consumption, together with demand from abroad will also revive somewhat. Although the export

Overview of Austria’s economic data Forecast

2010 2011 2012 2013 2014 2015 2016Economic growth (real. year on year) 1.9 2.8 0.8 0.3 0.4 0.9 1.5

Private consumption (real. year on year) 1.0 1.3 0.6 0.1 0.0 0.4 0.9

Investment (real. year on year) 1 –2.1 6.7 1.3 –0.3 –0.2 0.2 3.0

Exports (visible and invisible) 13.8 6.0 1.7 0.8 2.1 0.6 2.6

Imports (visible and invisible) 12.0 6.2 1.1 0.0 1.3 0.0 2.6

Current account balance (in % of GDP) 3.3 1.6 1.5 0.9 0.8 1.1 1.1

Inflation rate (CPI) (real. year on year) 1.9 3.3 2.4 2.0 1.7 1.0 1.6

Unemployment rate (national criteria) 2 6.9 6.7 7.0 7.6 8.4 9.2 9.5

Employment (year on year. in %) 0.6 1.8 1.3 0.5 0.6 0.7 0.9

Public-sector balance (in % of GDP) –4.4 –2.4 –2.5 –1.5 –2.7 –1.7 –1.5

Public-sector debt (in % of GDP) 82.3 82.1 81.5 80.8 84.2 86.4 85.21) Gross fixed capital formation / 2) excluding maternity leave. military service and training programmesSource: Bank Austria Economics & Market Analysis Austria


cially as a result of a sharp rise in the supply of labour, most significantly caused by immigration from the EU area. Never-theless, at an average of 5.9 percent, the average annual un-employment rate in Austria will still be relatively low in 2015 by comparison with Europe.

Despite geopolitical pressures: More momentum in 2016With the sustained strengthening of the recovery in Europe, the prospects for a continuation of the economic upturn in Austria in 2016 are favourable. The impetus from abroad, borne by the industrial countries, will be a stable foundation for the domes-tic economy which is gaining momentum. However, the key support for the 1.5 percent rise in GDP is likely to be domestic demand. So for 2016 there are signs of a consumption-driven

tailwind. The wage and income tax reform, which was agreed in HY1 2015 and comes into effect at the beginning of 2016, will trigger an added growth effect by an estimated 0.4 per-centage points, because there is unlikely to be any complete reciprocal financing of the tariff reductions. But investments should also be able to gain more momentum in 2016, given the still loose monetary policy of the ECB. In an environment characterised by slightly faster global economic growth and therefore tending towards somewhat higher raw material prices, and influenced in Austria by the tax reform, inflation will turn out to be higher than in 2015 at an average of 1.6 percent.

All in all, apart from the positive forecasts regarding a solid economic situation in industrial countries and the consolida-tion of the recovery in Europe, the economic prospects for Aus-tria in 2016 are tempered by a number of risk factors, such as difficulties in various growth markets (China, for instance) and geopolitical uncertainties which will restrict the upward trend or could have a potentially serious impact on it. It is also ap-parent that the recovery from the recession caused by the fi-nancial crisis is making only arduous and very moderate pro-gress. Accordingly, one should expect growth rates under the 2 percent mark in subsequent years.

dynamic is currently still very restrained, export orders are picking up slightly. In addition, the price competitiveness gained thanks to the weaker euro will make a positive impres-sion. In the coming months, the Austrian economy will there-fore feel a somewhat stronger upwind. There should be a posi-tive trend in investments in the coming months following the boost to the economy provided by demand from abroad and low lending rates. In view of the bond purchase programme begun in March 2015, the ECB will not for the time being raise key interest rates, which currently stand at just 0.05 percent p.a.. However, capacity utilisation in the domestic economy, currently at just under 84 percent, is still well below the long-term average and certainly lower than in the Eurozone as a whole, for instance, and so for the time being there is no pros-pect of a strong revival in investment.

The slight economic upswing over the coming months should largely be driven by consumption. Although the mood among consumers in Austria is very pessimistic compared with other countries when it comes to assessing the general economic situation, Austrian households still regard their own economic situation as good. That provides scope for a continuation of the moderate growth in consumption, helped by low inflation, which in view of the latest drop in the oil price will not show any sign of upward movement into the autumn.

Over the year as a whole, the 0.9 percent rise in GDP in Austria will be higher year on year (2014: + 0.4 percent). However the growth dynamic remains below the European average (eco-nomic growth of 1.6 percent is expected for the Eurozone).

Given the drop in raw material prices at the end of last year, year-on-year inflation will rise later in the year because of the base effect, but demand will also play a role here. An average annual inflation rate of 1.0 percent should be expected for Austria in 2015. So while inflation is low, it is still considerably higher than in most Eurozone countries. On the labour market, too, there is an apparent divergence in the trend between Aus-tria and Europe as a whole: unemployment is rising because of the only moderate progress of economic recovery, and espe-

–1.0%

3.0%

1.0%

0.0%

2.0%

Source: Statistik Austria, Bank Austria Economics & Market Analysis Austria

Economic growth (real change of GDP in %)

2012 2013 2014 2015 2016

Eurozone ViennaAustria

forecast

–0.5

3.0

4.0

3.5

0.0

2.0

1.5

1.0

0.5

2.5

Source: Statistik Austria, Bank Austria Economics & Market Analysis Austria, UniCredit Research, Thomson Reuters

Inflation and interest rates

3M Euribor 10y Government bond yieldCPI

forecast

2012 2013 2014 2015 2016



Viennese economy follows onIn 2014, the Vienna recovery once again failed to show any signs of a strong upward trend. After two difficult years, a slight up-wind was perceptible in Viennese industry in the first few months of 2014, but thereafter the effects of the Ukraine crisis and the global slowdown in demand were felt. Lack of demand from home and abroad, especially in HY2, together with struc-tural pressures such as the exodus of companies into the areas around Vienna, prevented the production sector from contribut-ing to macroeconomic growth. Both in the setting up and post-completion of major projects, especially in civil engineering, a lack of follow-up orders partly caused by a lack of public funds led to a marked slump in construction in Vienna. The service sector alone remained as the traditional prop of the Viennese economy, helping to boost economic output by a marginal 0.1 percent in 2014. For another year, economic growth in Vienna therefore fell short of the momentum achieved by Austria as a whole, and was much too weak to be able to improve the labour market situation. By contrast, largely as the result of a high level of migration, the supply of labour rose sharply and the rate of unemployment soared to a new record level (11.6 %), in spite of a rise in employment.

After a very mixed year in 2014, the prospects for the Viennese economy in 2015 must be regarded as rather more favourable. Apart from the probably decisive stimuli created by demand from abroad, more buoyant investment activity later in the year will also drive an economic recovery in Vienna. Surveys indicate that companies in Vienna are planning to expand capacity by 2016 at the latest. Additionally, conditions for greater momen-tum for private consumption have also improved because of the low rate of inflation. Nevertheless, the outlook for growth in the Viennese economy for 2015 remains muted due to a series of factors. Industry in Vienna will be slow to react to the expected

revival in global demand because of the strong domestic bias, so that the sector will only be able to contribute a little – if at all – to overall growth in the current year. The construction industry, too, is facing another difficult year because of the shortage of funds from the public budget, which is also reflected in the cur-rently declining number of orders. The service sector remains the bearer of legitimate hopes for a greater dynamism in the Vien-nese economy. Overall, the Viennese economy will achieve mod-erate growth of around ½ percent after a sluggish start to 2015. With expected growth of slightly over 1 percent, Vienna’s eco-nomic recovery will continue to gather momentum more slowly than Austria as a whole.

Viennese economic data Average of

federal provinces(or Austria total)

2010 2011 2012 2013 2014s 2015p 2015pGDP per capita (EUR) 45,737 46,993 47,340 47,236 47,419 47,500 39,100

GDP per capita (as % of Austria) 130.0 127.7 125.8 124.2 122.7 121.3 100.0

GDP (real, year on year) 1.4 1.6 –0.1 –0.2 0.3 0.4 0.9

Unemployment rate (%) 8.8 9.2 9.5 10.2 11.6 13.5 9.2

Employment (year on year) –2.3 1.7 1.2 0.6 0.6 0.6 0.7

Exports (EUR mn) 17,420 17,889 18,338 18,641 18,988 19,150 130,100

Exports (as % of Austrian exports) 15.9 14.7 14.8 14.8 14.9 14.5 100.0

Exports (as % of GDP) 22.5 22.3 22.4 22.5 22.5 22.4 38.7

Public debt per capita (EUR) 1,811 2,357 2,518 2,643 2,747 2,800 3,350Source: Statistik Austria, Bank Austria Economics & Market Analysis Austria

1) Agriculture and forestry, mining, energy and water supply2) Hotels and restaurants3) Business-related services in the broad sense: transport, banking and insurance, real estate4) Public services, education and health, private servicesSource: Statistik Austria, Bank Austria Economics & Market Analysis Austria

0 15105 20 25 30 35

Trade

Tourism2

Construction

Primary sector1

Manufacturing

–1.0

–0.4

–4.1

0.1

0.2

–1.3

–3.6

–2.0

Vienna’s share ofAustrian added value(in %)

current Change since 1995 in %-points

Total

Business-related-services3

Other services4


The Austrian real estate market – small, but refined

2014 – Austrian real estate investment volume reached record highThe Austrian market for commercial real estate reported a record volume of transactions in 2014 and was therefore fully in line with the European trend. Depending on the source, up to EUR 3 billion (according to EHL) was invested last year, with around three-quar-ters of this total flowing into Vienna. Over 50% was purchased by international investors, about half of whom came from Germany. The highest demand was for retail real estate, which accounted for more than 40% of the total volume, followed by office accommo-dation at over 30%. Approximately 15% was also invested in ho-tels, with other types of real estate use making up the rest.

Investment activity slowed in HY1, against the European trendAccording to data from CBRE, investment activity in Austrian commercial real estate slowed slightly in HY1 2015 – against the European trend. After a very weak first quarter with invest-ment totalling roughly EUR 360 million, activity picked up in Q2 and rose to roughly EUR 590 million. The volume of investment in HY1 amounted to EUR 950 million, below the figure for the same period last year (HY1 2014: approx. EUR 1.3 billion). Ger-man investors accounted for around 50 %, with other foreign investors making up 9 %. Austrian investors were therefore left well behind.

In HY1 2015, demand was especially high for office accommoda-tion (42 %), followed by retail real estate (21 %), residential buildings (17 %), hotels (16 %) and logistics and other real es-tate. In contrast to the European market, logistics real estate plays no important part in Austria because most of it is owner-occupied and not traded.

Investment volume in commercial real estate in EUR billions

Europe CEE Germany Italy Austria

2005 163.4 6.6 20.0 5.1 1.72006 241.4 12.6 51.5 8.7 2.52007 257.3 15.1 57.5 10.4 2.72008 123.1 9.9 19.7 8.0 2.22009 75.1 2.6 10.4 5.0 1.32010 113.0 5.6 19.1 4.9 1.62011 120.4 11.3 22.8 4.3 1.62012 127.2 7.7 24.7 2.6 1.82013 165.6 10.9 30.5 4.8 1.72014 211.5 9.8 39.8 5.5 2.8Q1 2014 40.2 2.1 9.9 0.7 0.7Q2 2014 44.0 1.9 7.0 0.9 0.7Q3 2014 48.4 3.3 8.5 1.2 0.8Q4 2014 78.9 2.6 14.4 2.6 0.7Q1 2015 57.3 2.3 9.6 1.9 0.4Q2 2015 64.7 1.5 12.0 1.6 0.6Source: Immobilien Rating, CBRE

0.0

3.0

1.0

0.5

1.5

2.0

2.5

Source: CBRE

Austria – investment volume in commercial real estate in EUR billions

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: CBRE

Retail 21%

Hotel 16%

Residential 12%

Office 42%

Mixed use and other 4%

Austria – investment in commercial property(H1 2015)



Investment pipeline well filledThe outlook for HY2 2015 is good, with strong investor interest, whereby the modest improvement forecast in the economy is also likely to have a positive effect. If all major deals still in the pipeline are successfully concluded this year, the record level in 2014 could be topped again in 2015.

Real estate yields on the declineStrong demand has led to a further decline in the yields achiev-able from real estate. According to bareal, prime yields in the office sector slipped to about 4.5 % at mid-year, while yields on offices in good and average locations were still about 5 %. Prime yields for shopping centres, according to CBRE, were just under the 5 % mark, and those for retail parks just below 6 %.

With sustained demand, the yield compression is expected to continue – albeit to a lesser extent. Nevertheless, the spread between real estate yields and the historically extremely low yields on government bonds continues to be attractive. The me-dium-term attractiveness of real estate will, however, depend not least on the trend in long-term interest rates. Surveys of real estate investors in Europe reveal that many of them expect in-terest rates to remain low and see no real risk of any increase. They perceive the greatest risk, in relative terms, to be excessive real estate prices. The fact, however, that rising interest rates could potentially trigger a correction of “excessive” real estate prices suggests that the interest rate risk should not be ignored.

Interbank competition has increasedThere is no bottleneck in real estate financing in Austria. Banks are financing both investments and developments. Competitive pres-sure – especially in the small-volume sector up to EUR 10 million – has increased and credit structures have become more competitive, with competition in the market for housing developments for sell-off being particularly fierce.

Solid performance by the Austrian real estate market Every year, IPD examines a portfolio of office, retail, industrial /logistics, residential and other real estate, from which it calcu-lates an Austrian property index.

The total return from this portfolio in 2014 was 5.3 %, represent-ing a slight decline of 0.4 % compared to 2013. The change-in-capital growth of 0.4 %, and income return of 4.9 % contributed to the result.

Office prime yields 2nd quarter 2014

Prime yield in %

Chg. on quarterin bp

Chg. on yearin bp

Frankfurt 4.40 –10 –30Vienna 4.55 0 –10Milan 4.75 –25 –35Warsaw 6.00 0 0Prague 6.00 0 0Bratislava 7.00 0 0Budapest 7.25 0 –25Istanbul 6.50 0 –25Bucharest 7.50 –25 –50Zagreb 8.05 0 –25Moscow 9.75 0 125Belgrade 9.50 0 0Source: CBRE

Source: Immobilien Rating, Reuters Thompson, own calculation

Spread to goverment bond yieldsstill attractive

0.0

7.0

2.0

1.0

6.0

3.0

4.0

5.0

2007 2008 2009 2010 2011 2012 2013 2014 H1 15

Vienna office prime yields Spread to Austrian goverment bond yield (10Y)

IPD Austria annual property index

Source: IPD

Office 44%

Residential 24%

Industrial/Logistic 1%

Retail 22%

Other 9%


Above average performance from the retail sector in 2014Total return in 2014 in the retail segment was well above aver-age at 6.9 %, but significantly below average in the office seg-ment, at 4.4 %. According to IPD, the average annual total return from the portfolio tracked over three years was 5.8 %, 6.0 % over five years and 5.7 % over ten years. This demonstrates the rela-tive stability of the Austrian market, which although it does not provide double-digit total returns, does show relatively low vola-tility with a stable income return.

The data collected by IPD also confirms that real estate invest-ments provide good protection against inflation. In the last ten years, the total return in real terms remained positive – even in the crisis year of 2008, when inflation averaged 3.2 % according to the national Consumer Price Index (CPI).

IPD real total return

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0.0

Source: IPD, Statistik Austria, own calculations

Real total returnInflation (CPI)Total return

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Housing costs rise in Austria– rents cheap compared to other countriesA functioning housing market is always caught between free market forces and wide-ranging regulation, not only because housing is a basic human right, but because it is normally the biggest financial burden on private households. Austrian households spend more than one-fifth of their income on housing, on acquiring living space, maintaining it and on spe-cifically residential energy costs.

It is only possible to estimate on an individual basis the level above which housing costs have a lasting downward effect on people’s quality of life, or what constitutes “affordable” hous-ing. However, it is likely that in some segments of the Austrian housing market the limit for that was long ago exceeded, es-pecially in urban centres. Based on an EU-SILC definition, housing costs in “densely” populated areas of Austria account for 19 % of net household income, well above the figure of 11 % in “thinly” populated areas, while in Vienna an average household has to spend as much as 27 % of its income on housing.

Price changes in the housing market are followed carefully by the public, especially the substantial increases in real estate prices and rents in recent years. However, a comparison of the key price indicators and the development of housing costs leads to the conclusion that in the main, despite upheavals in individual market segments, the Austrian housing market is

well balanced in a long-term comparison as well as in an inter-national context.

Real estate prices in Austria undervalued by 1 % – but overvalued in Vienna by 19 %The steep price increase on the market for owner-occupied hous-es and apartments after 2004 was also a process of market re-balancing following a period of occasionally falling prices on the real estate markets in Austria and Vienna. Closer examination shows that the price rise was very heterogeneous, depending on the location, size and quality of the properties, but was mainly in line with the development of the key price-influencing factors. These include the development of the population and of the lev-el of prosperity, the condition of the housing subsidy and financ-ing landscape, the availability of ground and land, the popula-tion’s living requirements and the expected earnings on the real estate market, a group of factors from which the österreichische Nationalbank has put together a fundamentals indicator.

By comparison with the fundamentals indicator, prices on the domestic residential real estate market were undervalued in Q1 2015 by 1 %. The indicator flagged up a 19 % overvaluation of residential properties on the Viennese market, but since mid-2014 this has eased a little. In any case, there is no expectation of any significant price correction on the real estate market in Vienna.



The growth differential between real estate prices and rents be-comes greater the more sub-sectors are included, mainly be-cause of the fact that the pricing of most rental housing in Aus-tria is subject to the Mietrechtsgesetz and not to the free mar-ket. Only a quarter of tenancy agreements are freely negotia-ble, and all others more or less strictly regulated.

Housing costs per square metre of rented living space, which are collected monthly as part of the microcensus, are a comprehen-sive albeit for many segments unrepresentative rental price indi-cator. The indicator maps both non-regulated and regulated rents and the adjustment of rents for existing stock and after deduction of operating costs is included in the item rents in the consumer price index. Measured against that, rents in Austria have risen by an average of 30 % since 2004 and in Vienna by 31 %, while prices for private houses and owner-occupied homes have increased by 62 % and in Vienna by as much as 107 %.

Rents rising faster than in the rest of western EuropeIn recent years, rents have been one of the drivers of inflation in Austria. From 2004 to 2014 consumer prices increased by 23 % in the harmonised, internationally comparable definition, there-of the item rents by 37 % (the difference in growth compared to housing costs is due mainly to different weightings in the vari-ous Länder). The rent increase in Austria has slightly gathered pace over recent years, from an average 2.7 % up to 2013, to around 4 % in 2014 and 5 % in the first seven months of 2015.

Overall, the increase in real estate prices since the 2012 peak has been steadily losing momentum. From 2004 to 2013 resi-dential properties in Austria have risen in price annually by 5.3 %, but in 2014 and in Q1 2015 by an annual average of just 3.5 %. In Vienna the 8.5 % annual price increase from 2004 to 2013 has slowed to 4.2 % in 2014 and 1.1 % at the beginning of 2015.

Moderate increase in rents compared to real estate pricesFor more than 40 % of Austrian households and three-quarters of households in Vienna, it is rents rather than home ownership costs that are the important living cost item. In principle, price changes on the owner-occupier market should be reflected in rental costs. In the long term at least, price-rent ratios will also balance out in comparable housing segments because excess demand and the accompanying rise in prices in the owner-occu-pier segment make rented housing seem more attractive.

An analysis by the oesterreichische Nationalbank confirms that in Austria as a whole, rental yields in the rental housing seg-ment that is not subject to regulation will remain stable. In Vi-enna, however, rental yields in the same segment have fallen over the last two decades, i.e. rents in the segment have con-tinuously risen less than purchase prices.

–6%

15%

9%

0%

3%

6%

12%

*) Data only available from 2001Source: Statistik Austria, TU Wien; Bank Austria Economics & Market Analysis Austria

Austria – expenses for housingand property prices per m² main lease apartments and condominiums; chg. yoy

–3%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

expenses for housing property prices*

–6%

15%

9%

0%

3%

6%

12%

Source: Statistik Austria, TU Wien; Bank Austria Economics & Market Analysis Austria

Vienna – expenses for housingand property prices per m² main lease apartments and condominiums; chg. yoy

–3%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

expenses for housing property prices


By contrast, the remarkably moderate development of rents in Germany is explained primarily by the fact that the country has remained untouched by a boom in average real estate prices and the development of the rented housing segment has been rela-tively stable. That was attributable to high rates of new con-struction in the past and the concentration of public funds for housing in the sector, which in turn expresses the higher-than-average proportion of tenancies; 57 % of German households live in rented accommodation, the highest proportion in Europe.

Housing cost burden still relatively lowUltimately, rents only account for a quarter of the housing costs incurred by private households. Running costs, maintenance and energy costs are not included, as is an estimate of the regular out-goings on owner-occupied housing within the framework of harmo-nised consumer price indices; a cost item which may be statistically relevant to half of Austrian households who live in their own home, if they are still having to repay outstanding housing loans.

Compared to other countries, the overall burden of housing costs on Austrian households has remained affordable. For comparison, price level indices are available which illustrate the purchasing power parities of goods and services at the EU level in standard exchange rates in relation to the EU average. On that basis, not only is hous-ing much cheaper in Austria than in other west European countries, it is also cheaper than in Germany. The slight housing cost advan-tage over Germany stems largely from the considerably cheaper energy costs in Austria; pure rental costs might also be lower in Germany if calculated on the basis of purchasing power parities.

The graph shows that in Europe, it is the Swiss, ahead of British and Danish households, who are most heavily burdened with housing costs. Housing costs in all south-eastern and east Euro-pean countries are still lower than in Austria.

Rents in Austria have also risen more rapidly than those in other west European countries, where in the past ten years the average increase in the Eurozone was 18% and in Germany as little as 12%. A crucial factor in the decoupling of rental trends in Austria from the west European average around 2009 could have been, for instance, adjustments to the higher level of real estate prices on the non-regulated rental housing market. In addition, the sup-ply shortage in the cheap rental segment is growing, not least because more subsidies have been used for housing renovations, which in turn has led to rental price adjustments. In the past five years the increase in rents in Austria has only been exceeded in a few east European countries (where considerable differences in housing conditions and survey methods distort the results).

0%

5%

4%

1%

2%

3%

Source: Eurostat; Bank Austria Economics & Market Analysis Austria

Strong increase of rents Source harmonised index of consumer prices, chg. yoy

04 05 06 07 08 09 10 11 12 13 151–7

14

thereof rentsInflation Austria

0

160

140

20

100

120


Price level difference in europe Price level index, EU15=100

Total housing expenses thereof energy

40

60

80

CH DKUK SW DE AustriaFR

90

140

130

100

110

120


International comparisonof housing rents Source harmonised index of consumer prices, 2005=100; (2004–2014)

04 05 06 07 08 09 10 11 12 13 151–7

14

Austria (+37 %) Eurozone (+18 %)Germany (+12 %)



Vienna office market scores with relative stabilityThe market for office accommodation in Vienna is one of Eu-rope’s low volatility markets, so it is very much in demand from both domestic and international investors. Compared to other European cities and metropolitan areas, Vienna has a relatively stable and very moderate level of vacancy rates.

The comparatively low level of new office space production is helping to maintain the stable situation on the Vienna office mar-ket. One contributing factor here is that projects conceived as purely office buildings are being partially or completely converted into housing because demand for housing space remains high.

At the same time, many old properties which have become va-cant are disappearing from the office market, because they are no longer able to compete with the supply of modern office space that is available. Where possible, such properties are be-ing converted, for example into housing or hotels, or are making way for a completely new building on the old site.

In Vienna, there is currently a stock of just under 11 million m² of office space. So compared with west European cities, Vienna is firmly established in the middle ground in terms of office space per head of population.

However, the Austrian capital has a clear advantage over eastern European capitals. Bratislava, the frontrunner in CEE, has just under half the space per inhabitant of Vienna.

Vienna office market: Level of new building activity still low, but pipeline fills up

New-space production slightly down year on yearIn 2014, new production of office space in Vienna fell once again from 150,000m² in 2013 to around 140,000m². The volume of new buildings in 2015 is likely to be just under 130,000m² and could therefore reach a new low. However, numerous projects are being planned for the coming years, and some of them are already under construction, so from 2017 at the latest a sub-stantial rise in new-building activity is again expected. There is as yet no way of telling how this will impact on the develop-ment of vacancies.

In 2014 the proportion of new office space resulting from refur-bishments and conversions fell considerably year on year. Only a few inner-city spaces stem from refurbishments, and most of the completed projects were new-builds. This year, too, only a small percentage of the new-build spaces are conversions and additions or extensions.

Letting performance should clearly exceed last year’s by year endLast year the take-up of office space was about 210,000m², below the 2013 level. In HY1 2015 there were already around 110,000m² new lets. As HY2 is generally stronger than HY1, it is possible that by year-end letting activity in 2015 could exceed the level in 2014.

As before, new large-area lets in the 5,000m² and above sector are more the exception, and a large proportion of letting activity continues to be generated by relocations, consolidation of space and / or space optimisation.

Geneva

Zuric

h

Frankfu

rt

Copen

hagen

Munich

Milan

Hambu

rgPari

sVien

na

Bratisla

va

Warsaw

Prague

Budap

est Sofia

Moscow

Buchare

st

Zagre

bKiev

Belgrad

e

Istan

bul0

5

10

15

20

25

Source: Immobilien Rating

Offic

e sp

ace

in m

2

Office space in m2 per capita 2015

20012002

20032004

20052006

20072008

20092010

20112012

20132015p

20140

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

Source: Immobilien Rating, CBRE, EHL

New construction and take-upOffice space in Vienna 2001–2014p

Take-up in m2New construction in m2


ÖBB headquarters: At 46,000m² total floor space, the largest project in 2014The largest growth in new building space in 2014 was due to Aus-trian Railways Headquarters, located on the site of the new main railway station (Hauptbahnhof ) with a total of about 46,000m² of floor space, approximately 31,000m² of which for office space. Similarly-sized projects in terms of office space last year were GATE 2 in the vicinity of the Gasometers in the 3rd district and the 5th construction phase of the EURO PLAZA at Wienerberg. Some-what smaller, with approximately 11,500m² of office space, is the Silo project in Vienna 23, which was also completed in 2014. Erste Campus at the new main railway station nearing completionAnother corporate headquarters, for Erste Bank, is also under construction on the main railway station site. The building, com-prising total floor space of approximately 117,000m², will in future bring all the company’s employees together under one roof and will be constructed with consideration for new working concepts and office space structures.

Overall, some 90,000m² of modern office space is being created. This project is therefore by far this year’s largest new building project, followed by space2move, construction phase 2, with around 20,000m² of office space in Vienna’s 19th district which has already been completed.

UniCredit Bank Austria is also planning a new group head office on the site of the former north station (Nordahnhof ). By 2018 there should be several buildings providing modern office space on the Austria Campus, some of which will be used by the group itself, but there will be other areas that are earmarked for exter-nal letting. The site also includes plans for commercial space, a large canteen and a hotel.

Overall, a very extensive project pipeline is being planned for 2016 and the following years; some projects are already under construction, so if all construction projects are realised, allowance will have to be made for an increasing supply of space. These in-clude spectacular projects such as “The Icon” office tower, which Rene Benko aims to build on the site of the new main railway sta-tion and which should comprise over 70,000m² of office space. However, the exact proportion of office space has not yet been finally fixed for all projects, and where zoning allows may be re-vised downwards in favour of housing space, for example.

Slight rise in prime office rents in Vienna in 2014Rents for office space in Vienna remained largely stable in 2014 and also in HY1 2015, with only the top segment seeing occasional modest increases. Up to mid-year 2015, top rentals for Class A of-fice space in good locations reached about 25.75 EUR/m²/month.

Prime rents above this figure are also possible for special offices in individual top buildings such as the upper floors of office tow-ers or for extraordinarily prestigious offices. Rents in the pre-mium segment could rise slightly again by the end of 2015, but they will generally remain largely stable.

Space in the city centre and in central office locations is still in demand, but interest in properties in the medium price segment also remains high. Due to comparatively high availability of modern office space at affordable rents the demand can largely be satisfied. Space efficiency and the lowest possible operating costs are some of the most important criteria for tenants. It is no longer solely the rent which is decisive but the aggregate rental costs per employee which influence the decision for or against a location.

Offices with poor occupancy rates, unrenovated, old premises, as well as office space in below-average locations away from popu-lar office locations are continually under pressure. This negativetrend has persisted for some time, leading to a fall in rentalsand increasing vacancies. Space that has become vacant in thiscategory often does not go back onto the office market and, where economically viable and possible from a zoning point ofview, is allocated to a different use

Vacancy rate largely stable in the office sectorVienna still has a very low vacancy rate and is at the lower end of the scale when compared with other European cities. The rela-tively low level of new building activity in recent years has also contributed to this situation.

At mid-year 2015, the vacancy rate in the office sector in Vienna was roughly 6.5%, and could well remain largely unchanged be-cause of the continued moderate level of new production and also the increase in take-up expected by the year-end. Unsurprisingly, older spaces frequently show higher vacancy levels than centrally-located and sought-after office locations, although above-average vacancy rates are also seen in some office towers.

Office space expected in 2015 (selection)Office project Office space in m² Status

Erste Campus 90.000 under constructionspace2move, building phase 2

20.000 completed

Renngasse 5 4.200 completedSource: Immobilien Rating

Space expected in 2016 and after (selection)Office project Office space in m² Status

The Icon 74.000 plannedViertel Zwei, expansion “Viertel Zwei Plus”

22.500 under construction

“ORBI Tower”, Town Town (CB21)

21.600 under construction




Prime yields under pressurePrime yields in the office sector in Vienna fell in 2014, and there was another slight fall in the first half of this year, so that at the end of HY1 2015 prime yields reached a figure of about 4.5 %. No significant changes in yields are expected up to the year end. With consistent demand in the prime segment, however, further downwards pressure cannot be ruled out.

Further falls in value are, however, possible for office buildings that are in need of renovation and office properties in locations outside the sought-after office axis areas, as well as for office buildings without sufficient occupancy levels, and a rise in yields on Class B offices outside central locations cannot be excluded.

Office axis in ViennaVienna’s most popular office locations are still the city centre and inner city districts. Demand remains high there. Offices and numerous commercial areas are a feature of the city, but over the decades residential use has been been increasingly scaled back. In recent years, however, because of high demand for large-area residences or even high-value luxury accommodation

in the city centre, there has again been increasing reallocation of former office space to residential use. Late nineteenth century buildings are particularly popular, because with generous resi-dential floors they meet the desire of financially strong clients for luxurious and spacious accommodation.

Within the Gürtel, too, there are numerous office establish-ments. The location of the expanded city centre is very attrac-tive, mainly because of its position and accessibility, even though new buildings are rarely constructed there.

In addition to the city centre, Donaucity (VIENNA DC) has devel-oped into one of the most important office locations. The area is dominated by several large office towers. Vienna’s largest office tower, DC Tower 1, was also constructed on the Donauplatte. It has enhanced this area again.

New office zones have also been developed in recent years in the Handelskai and Wiener Messe, and in the district around the former Nord- and Nordwestbahnhof. The area around Praterstern is also still one of the major city development zones in Vienna. The Austria Campus of Bank Austria will also be built there.

The Erdberg / St. Marx / Gasometer office location is characterised by new office buildings such as Marxbox, Marximum or the Town-Town project that is being extended in stages. The TownTown of-fice complex is to be further extended with the “ORBI Tower”.

A new, interesting and up-and-coming office location is currently evolving at Vienna’s new main railway station. As well as the new headquarters for Austrian Railways (ÖBB), which has already been completed, the new headquarters of Erste Bank is also cur-rently under construction on the site. In the so-called Quartier Belvedere, one of Vienna’s top urban development districts, a diverse mix of offices, housing, businesses and hotels, as well as restaurants, schools and health facilities is to be created around the new main railway station.

To the south of Vienna, another important office axis has been established on the Wienerberg. New office space was recently added in this area with phase 5 of EURO PLAZA and there are also plans to build further properties on the site.

The new Austria Campus – modern concepts for contemporary workingA project like Austria Campus is not one that’s built every day. Enough time and know-how must therefore be allowed, even at the planning stage, to meet the demands of the changed world of work and the corresponding changes in the patterns of use of office space in the design of the building.

As Microsoft has already done, and Erste Bank was also doing in the planning of the Erste Bank Campus, Bank Austria is to con-struct the new building not only according to principles of sus-tainability but also and primarily with a spatial design that is completely different to traditional office buildings. One of the factors to be considered is that in a conventional office building many workplaces are unoccupied in day-to-day operations, and a

20052006

20072008

20092010

20112012

2013

HY12015

20140

30

25

20

15

10

5

4.0

8.0

7.5

7.0

6.5

6.0

5.5

5.0

4.5

Source: Immobilien Rating, CBRE

Rents, yields and vacancy ratesin the Viennese office market 2005–HY12015

Prime rents per €/m2/month

Vacancy rate in %Prime yields in %

Sofia Kiev

Zagre

b

Moscow

Budap

est

Amsterda

mPrag

ue

Istan

bulLis

bon

Buchare

st

Warsaw

Belgrad

e

Bratisla

vaDub

linMad

rid

Brussel

s

Copen

hagen

Stockh

olmParisRom

eOslo

BerlinVien

na

Londo

n West

End0

5

10

15

20

30

25


Vaca

ncy

rate

s in

%

Office vacancy rates in Europe in % 2015


shared-desk solution can therefore make much more efficient use of the supply of available workplaces. This means that the employee actually has no fixed workplace and – depending on attendance and workload – uses either traditional office facili-ties, works from home or logs on from the various conference rooms and interactive zones in the world of work in an individual and flexible way. Work-life balance, working from home, indi-vidual structuring of everyday working and attendance: all these components are thought out in advance and will be incorporated in the design of the new Austria Campus.

But it is not only in the structuring of everyday working that the interaction and networking factor is emphasised; the entire concept of the Austria Campus is based on this principle. So as well as the space used by UniCredit Bank Austria for itself, office facilities will also be available for letting to external users, hotel accommodation will be created and the unusual, large-scale canteen at the heart of the spacious complex will not only be available to employees of the bank, but to all users of the site. What seems today to be unfamiliar and new will be quite normal in the future.



Vienna retailing – the top shopping temples are getting into shape for the future

Consumer sentiment in Austria remains positive, despite weak economic activity In the first five months of 2015, retail sales in Austria rose by 0.9% in real terms, according to the BA economic report1. The relatively low growth compared to the EU 28 will be offset by a high starting level and consistency of consumer spending, which stayed relatively stable even during the crisis years. According to current surveys by market researchers2 on consumer sentiment, the propensity to buy and the mood for spending among people in the country is positive, despite the prevailing uncertainties resulting from current crises (e.g. Russia-Ukraine, China). A fur-ther rise in optimism is expected in 2016 as a result of the com-ing tax reform, which should also be reflected in a rise in con-sumer spending.

High SC area density in Austria and restrictive granting of building permits are leading to slowed growth in new shopping centre space On 30.6.2015 there were some 127 shopping centres in Austria withleasable space of about 2.7 million m². This corresponds to year-on-year areal growth of around 2.4%.

Between 1.1.2014 and the end of HY1 2015 a total of just four new shopping centres (min. 10,000m² rentable area) were opened. These include the Mariandl in Krems (Lower Austria), Am Gar-nmarkt in Götzis (Vorarlberg) and the BahnhofCity and Citygate (both in Vienna). All other areal growth is the result of modernisa-tions and/or expansions of existing shopping centres. One excep-tion is the demolition and rebuilding of the Alpenstraße SC in Salz-burg, which was opened in HY1 2015.

The reason for this slower growth of new space is firstly the already high degree of saturation with shopping centres in Aus-tria. At the beginning of 2015, Austria was ranked among the top ten countries in Europe with a total of 327m² leasable area per 1,000 inhabitants, well above the EU average of around 269m² leasable space per 1,000 inhabitants.

Secondly, the Austrian Länder are becoming more and more restric-tive in granting building permits for new construction and expansion

projects. The aim is to stem the progressive erosion of local centres by retail concentrations on the outskirts of towns. It remains to be seen whether the intervention of regional planners in urban develop-ment in domestic retailing will bring about a fresh boost for city and town centres.

Since HY2 2014 Vienna has gained around 50,000m² of new shopping centre spaceIn mid-2015, Vienna and the surrounding region boasted roughly 1,750,000m² of sales area in the form of shopping centres (42.1%), retail park agglomerations (39.9%) and shopping streets ( 18.0%).

Norway

Luxem

bourg

Sloven

ia

Netherl

ands

Switz

erlan

dAust

ria

Croatia

EU28-av

erage

France

Poland

Italy

German

y

Slovak

ia

Czech Rep

ublic

Roman

ia

Hunga

ryRuss

iaTu

rkey

Bulgari

a0

900

600

500

400

300

200

100

700

800

Source: C&W European SC Development Report January 2015

Shopping centre space in EuropeLeasable area in m² per 1,000 inhabitants

Importance of individual segments in Viennaas measured by sales space

Shopping centres 42.1%

Retail park agglomerations 39.9%

Shopping streets 18.0%

Source: Standort+Markt, EHL, Immobilien Rating

1) Bank Austria – Austria Economy July 20152) GFK Consumer Sentiment Austria Q2 2015


However, there will be no new projects under construction in the near future. One exception is the demolition and rebuilding of the Huma shopping park (planned opening 2016/2017) which will be consid-ered in more detail below.

The SCN Shopping Center Nord with a leasable area of around 32,000m² is soon to be renovated, according to information from the new owners, Tristan Capital Partners. No information is avail-able about any areal expansion plans being circulated.

Around 14 shopping centres, i.e. slightly less than half of all the shop-ping centres in Vienna, are smaller centres with less than 20,000m² of leasable space.

Six shopping centres in the Austrian capital have a leasable area of over 45,000m². These include the two mega-shopping centres SCS Shopping City Süd and the DZ Donauzentrum, (with well over 100,000m²), followed at some distance by the G3 Shopping Resort Gerasdorf and the Millennium City.

A newcomer in this size category since October 2014 is the Auhof Center, which has been modernised and expanded by 11,000m² to about 48,000m² of leasable space. Key innovations include a higher percentage of fashion shops with new crowd-pullers (e.g. BIK BOK, Dressmann), new and bigger catering areas, a completely renovated cinema and optimised (indoor) parking facilities.

Number of shopping centres according to size categories

Number Gross leasable area (GLA) in m²

14 Up to 20,00011 20,000 – 45,0006 more than 45,000

Source: Immobilien Rating, RegioPlan, Standort+Markt

Since the spring of 2013 (full opening of Wien Mitte - The Mall ) the Vienna shopping centre market has reported modest areal growth after a fairly long period of inactivity.

The drivers for this development were the newly-opened shopping centre at the new Vienna main railway station (Hauptbahnhof), Bahn-hofCity (23,000m² leasable area) and the Citygate in Floridsdorf (17,500m² leasable area), plus the expansion of the Auhof Center to the west of Vienna with about 11,000m².

Each of the first two new shopping centres named above have a re-gional character because of their average size, are located in the midst of an urban development area with large-scale residential dis-tricts and are very well let. While the Citygate – a combined property with residential tower and shopping centre (approx. 50 shops) – on Wagramerstraße already has a very good footfall from its local area, the ÖBB BahnhofCity at the new Vienna main railway station is still experiencing initial start-up problems.

One of the reasons for this differing trend is the fact that Citygate is already embedded in a fully developed retail district which in-cludes large housing areas, while the development around the new Vienna main railway station is as yet far from complete. Even the railway station itself is not yet fully operational – there is still potential for future customer footfall. One of the challenges posed by the integration of a shopping centre in a railway station is to find a mix of tenants that will attract both rail travellers /com-muters who want to purchase goods for everyday use and travel items, and other consumers who will visit the shopping centre for extended shopping sessions.

Sharp rise in areal density of shopping centres in Vienna – no new shopping centre projects cur-rently under constructionAs of HY1 2015, Vienna had 31 shopping centres with a leasable area of approximately 982,000m². SC density per 1,000 inhabit-ants was about 546m² and has risen sharply compared to HY1 2014 (528m² per 1,000 inhabitants) as a result of the growth in area of around 50,000m².

Shopping centre openings and/or expansions 2014/2015Shopping centre Gross leasable area

(GLA) in m² Opening

ÖBB BahnhofCity ~ 23,000 Q4 2014Auhof Center, construction phase III

~ 11,000 Q4 2014

Citygate Shopping Mall ~ 17,500 Q1 2015Source: Immobilien Rating, Standort+Markt, RegioPlan

Shopping centre projects currently under constructionShopping centre Gross leasable area

(GLA) in m²Planned opening

Huma shopping park building phase I, II (demolition and rebuilding)

~ 50,000 2016/2017

Shopping Center Nord (relaunch)

~ 32,000 n.m.

Source: Immobilien Rating, Standort+Markt, RegioPlan



Rebuilding work began as early as December 2014 on the Huma Einkaufspark, which is well established but has seen better days. By 2016/2017, what was a single-storey shopping centre with a retail park look, should become a modern shopping temple, expanded to 50,000m² with about 90 shops plus catering and services on two floors. Only a few anchor tenants are currently still represented in the old shopping park; completion of the new Huma Einkaufspark is scheduled for 2017 with 2 phases of construction. The first phase will open in 2016.

The top shopping centres are getting themselves into shape for the digital consumer society – pressure comes from online retailingIt is worth noting that all six of Vienna’s largest shopping centres have carried out radical modernisations, expansions or relaunches in the past five years, or have been completely rebuilt. However, this trend is not only limited to the largest centres, but reflects the market as a whole. The driving force behind this trend is the online business and the influence of the new digital consumer society.

According to RegioPlan, sales revenue in the online sector rose in 2014 by about 15% to some EUR 6.4 billion and achieved a 10.4% market share. With online sales growing, pressure is also steadily in-creasing on the floor space productivity of shopping centres. In 2014 gross turnover per m² of leasable space was EUR 3,450/m², down by EUR 50/m² year on year. This is primarily affecting retailers of books, electronics, shoes and clothing.

With regard to demand for floor space there is a widening gap be-tween 1A shopping centres and B and C locations. The trend among tenants is towards more flexible areal concepts. This will therefore lead in future not only to reductions in rented areas but also, in indi-vidual cases among the top locations, to expansions and the estab-lishment of flagship stores. Current examples are the shop extension by Media Markt in “The Mall – Wien Mitte” and the opening of Aus-tria’s largest Zara Shop in the Auhof Center. It is certainly becoming more difficult for the B and C locations, where in the medium term it might come to reductions in floor space and/or to closures as part of the process of site optimisation in the store network.

A similar picture is also emerging for rental prices. The shopping cen-tres which are performing well, indicate a stable to slightly upward trend for rental prices (especially for smaller shop floor areas below 250m²), for the others it might mean more negotiations with centre managements over rent reductions.

As of HY1 2015 shopping centre rents in Vienna, depending on the size of the shop, were between 8 and 110 EUR/m²/month. The prime yield in the shopping centre sector in mid-2015 had fallen to approx. 4.75%. Due to the high demands made by investors in the retail sec-tor and the shortage of top properties, there may be another drop by the end of the year.

Retail parks – fewer expansions in certain branch-es – spotlight falls on profitabilityUp to HY1 2015 the importance of retail parks (RP) and retail park ag-glomerations (RPA) continued to grow, albeit with less impetus in respect of floor space growth rates: profitability considerations are playing an increasingly key role as opposed to simply winning market share.

The reason for this trend is firstly the already high areal density in RPA in Austria of 592m² per 1,000 inhabitants. Secondly there is the rising intensity of competition from online retailing which is also be-coming an ever more important issue for the structure of RPA.

According to Standort+Markt, floor space productivity in the retail park agglomerations in 2014 was around EUR 2,340/m², slightly below the figure for 2010. In overall terms, demand for rental space in RP in good and very good locations can be classified as good, and that therefore led to stable or slightly increasing rental prices for smaller shop floor space in 1A locations. As of HY1 2015 the bandwidth for rents in retail parks fluctuated between 6 and 15 EUR/m²/month.

In total some 5.1 million m² of sales area in RPA was available for shoppers in Austria at the beginning of 2015. This represents a growth of 6.7% compared to 2013. In Vienna the rate of increase in 2015 over the same period was about 5.4% on a level of approx. 727,000m² of sales space (incl. the Vösendorf-NÖ RPA) with an RPA density of 403m² per 1,000 inhabitants.

Shopping centre rents Range in EUR/m²/Month

Anchor tenant 8–15Shops (Depending on their size and

location)15–110


Top 6 shopping centres in Vienna and the surrounding areaName Gross leasable area (GLA) in m²

SCS Shopping City Süd 173,000Donau Zentrum 130,000G3 Gerasdorf (shopping centre only) 58,000Millennium City (incl. entertainment) 51,000Huma Einkaufspark** 50,000Auhof Center* 48,000*) after completion of building phase III, end 2014 **) after rebuilding and opening 2016/2017Source: RegioPlan, Immobilien Rating


Year on year there has been no change in the ranking of the five larg-est RPA in Vienna and the surrounding area in terms of floor space. By far the most spacious retail park zone is around the SCS Shopping City Süd. The next ranked RPA are the Stadlau and the Rautenweg Ost & West, sited around the new Citygate shopping centre. Both are situ-ated out of town along the Wiener Nordrand S2 expressway (exten-sion of the A23 Südosttangente).

In 2014 three new RPA came onto the market in Vienna with a total of approx. 38,200m². The largest of these is the Sandleitengasse RPA with approx. 27,400m² of sales area, situated around the Interspar Ottakring shopping centre to the west of Vienna.

Two other new areas were developed near the Simmeringer Haide junction, close to the Huma Einkaufspark in the east and in the vi-cinity of the Donaufelder/Angyaföldstraße in the north of Vienna.

Top 5 specialist retail centre agglomera-tions in Vienna and the surrounding area

Name Sales space of the RPA in m²

Vösendorf Nord/Brunn am Gebirge 220.300Rautenweg West & Ost – Vienna 1210/1220 95.000Stadlau – Vienna 1220 96.100Brünner Straße Vienna 1210 56.800Hadikgasse – Vienna 1130/1140 37.200Source: Standort+Markt, Immobilien Rating

The business model of retail parks is mostly based on the low to me-dium price segment with discount-oriented shops – and food retailers – dominating the market. Because of the similarly price-orientated online business, these static distribution formats are disproportion-ately affected by competition, and here again sectors with a high pro-portion of online retailing, such as clothing and footwear.

As a result, the expansions of textile stores typically encountered in RP (KiK, Charles Vögele, Takko, New Yorker) have been halted for the time being in the last two years, according to RegioPlan. In addition, the footwear discounters have come under serious pressure from Za-lando & Co and major fashion chains (now carrying cheap footwear as accessories) and are in many cases subject to consolidation (e.g. Leder&Schuh has only recently split from its entire low-cost line Jello and Shoe4you for profitability reasons).

The big retail park sites with a wide range of products are hardly af-fected by these new challenges. But in Austria there are many small-er and medium-sized RP which range in size from 3,000 to 8,000m², where one will normally find at least one food supermarket, a chem-ist’s shop and several discounters from the clothing and footwear sector.

If the latter sectors experience economic problems with goods that meet a medium-term need, and if no equivalent new tenants are found, the small and medium-sized RP might find themselves threat-ened with a loss of importance and the prospect of becoming local suppliers with a correspondingly smaller catchment area.


Bank Austria

International Real Estate FinanceAnton HöllerTel: + 43 (0)50505 – [email protected]

Waltraud KönigTel: + 43 (0)50505 – [email protected]

Subsidised Real EstateGünter NeuwirthTel: + 43 (0)50505 – [email protected]

Günter MoserTel: + 43 (0)50505 – [email protected]

Commercial Real EstateWerner ZimmelTel: + 43 (0)50505 – [email protected]

Karl MayerhoferTel: + 43 (0)50505 – [email protected]

Bank Austria

Real Estate ResearchKarla SchestauberTel: + 43 (0)50505 – [email protected]

Economics & Market AnalysisWalter PudschedlTel: + 43 (0)50505 – [email protected]

Günter WolfTel: + 43 (0)50505 – [email protected]

Immobilien Rating GmbH (IRG)

Market ResearchAlexander StögbauerTel: + 43 (0)50601 – [email protected]

Helmut SchneiderTel: + 43 (0)50601 – [email protected]

Contacts:

Authors:



Center West GrazInvestment Financing

Shopping Centre Graz/Austria

Lender: UniCredit Bank Austria AG

Goldegg GardensDevelopment & Investment Financing

Residential and Retail Vienna/Austria


TriennaDevelopment Financing

Residential Vienna/Austria


QBC Quartier Belvedere Central – Stage 1Construction and Development Financing

Mixed Used (Office, Residential, Hotel, Serviced Apartments)

Vienna/Austria Lender: UniCredit Bank Austria AG

Portfolio FinancingAustria

Lenders: UniCredit Bank Austria AG and

Deutsche Pfandbriefbank AG

Fachmarktzentrum Vösendorf Nordring 2–10

Investment Financing Vösendorf/Austria


Vösendorf Nordring 2–10 Vermietungs GmbH

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