Düsseldorf office leasing and investment market stable at previous year levels

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1 Düsseldorf Market Report Office Leasing and Investment Q Düsseldorf office leasing and investment market stable at previous year levels Lars Zenke Director Research Düsseldorf Office leasing Office space take-up in Düsseldorf (in sqm) The Düsseldorf office leasing market recorded 292,000 sqm in office take-up during the first nine months of 2016, picking up the thread of 2015 s favorable results. Although take-up was just 2% below the 2015 target, the number of leases signed (387) was up by slightly more than 4 %. Particularly noteworthy is the downward vacancy rate trend on the Düsseldorf office leasing market. Medium-scale leases drive results this year to date The small-space segment of up to 500 sqm accounted for 23 % of office take-up (66,900 sqm) with almost 250 leases signed for units of this size, reflecting a slight yoy increase. The space segment of between 501 sqm and 1,000 sqm experienced a steep increase in take-up by roughly one-third to a current 56,400 sqm. Commercial transaction volume in Düsseldorf (in billion ) Particularly noteworthy, however, is the take-up volume recorded in the first nine months of the year in the space segment of between 2,001 sqm and 5,000 sqm. This segment posted a yoy increase of roughly 25 % to a current 66,700 sqm.

2 Tenants focus on four submarkets In terms of spatial distribution, take-up was particularly strong in the Harbour Area submarket, which accounted for almost one-quarter of total take-up at 67,400 sqm. This development was driven by the lease signed by Uniper at the start of the year. The Düsseldorf-North submarket recorded 45,500 sqm in take-up while the Left Bank of the Rhine submarket posted just under 41,400 sqm. These two submarkets were followed closely in the ranks by the Düsseldorf city center with 40,000 sqm. Vacancy rate hits 10-year low Vacancy on the Düsseldorf market continues to drop in line with favorable take-up results. Strong demand for space combined with moderate new-build completion volumes is triggering further decreases in vacancy to a current 570,700 sqm, or 7.5 %. Sub-lets are not playing a significant role at the moment. Fast Facts Office Leasing Office space take-up Leasing take-up Prime rent Weighted average rent Vacancy rate (in %) 292,000 sqm 285,000 sqm /sqm /sqm Vacancy rate 7.5 % Office stock 7.67 million sqm Although the Left Bank of the Rhine (including Seestern) submarket continues to offer by far the largest amount of office space available for immediate tenancy in Düsseldorf, a considerable amount of excess space has been absorbed over the past 12 months. At the end of September 2016, 156,400 sqm were still vacant, accounting for just over 27 % of total vacancy in the city of Düsseldorf. PropertyIndex posts another steep drop The Colliers IMMAX PropertyIndex illustrates the supply and demand trend on the office market. It shows the relationship between supply over the coming 12 months and take-up over the previous 12 months. This relationship is currently 1.6 for Düsseldorf, down 20 % yoy. This is an excellent indication of the favorable take-up trend and drop in vacancy we have been seeing over the past few quarters. Prime and weighted average rents Completion of speculative developments could temporarily boost vacancy at end of year A total of 71,500 sqm of new space is scheduled for completion in 2016 with a current pre-lease rate of 60 %. This available space could impact the vacancy rate, leading to a temporary increase. 2 Market Report Q Office Leasing and Investment Colliers International

3 Rents up slightly due to demand Submarkets Düsseldorf Strong demand has caused rents to increase slightly over the past 12 months. Average rent has risen 3 % yoy to a current per sqm. Prime rent also went up 2 % to per sqm. This development can partially be attributed to the first lease signed for space at the Kö-Quartier project being developed by Hines. Summary and outlook Activity on the Düsseldorf office market remained lively in Q3 2016, almost hitting the 300,000-sqm mark in the first nine months of the year. If Q4 proves strong, we can realistically expect 2016 to match 2015 results of 391,000 sqm. Office Leasing Market Düsseldorf (Q3 2016) Markt overview Submarket Office space take-up (in sqm) Prime rent Weighted average rent Vacancy (incl. sub-lettings in sqm) (1) CBD 23, ,400 (2) City Center 40, ,800 (3) Harbour Area 67, ,900 (4) Kennedydamm 20, ,000 (5) Left Bank of the Rhine 41, ,400 (6) Düsseldorf-North 45, ,200 (7) Airport City 5, ,900 (8) Grafenberger Allee 29, ,200 (9) City Centre-East 8, ,700 (10) Düsseldorf-South 11, ,200 City of Düsseldorf 292, ,700 3 Market Report Q Office Leasing and Investment Colliers International

4 Investment Property and lots valued at 1.53 billion changed hands on the Düsseldorf commercial investment market (municipal area only) in the first three quarters of the year. An unusually strong Q3, alone accounting for roughly 860 million in transaction volume, proved a primary force behind these results, which were just 10 % shy of 2015 s record levels. More than 20 transactions in Q3 alone Although the first half of the year was characterized by limited supply, more than 20 deals were signed in Q3. Investors were particularly interested in project developments, hotel assets and downtown stock properties with development potential. Transactions involving office assets dominated activity on the market during the first nine months of the year, accounting for 61 % of total transaction volume. Five deals exceeding 50 million were signed for office assets. Hotel and retail assets followed in the ranks with a share of roughly 15 %. The hotel segment in particular registered a considerable increase in transaction volume thanks to highvolume deals. Fast Facts Investment Transaction volume 1.53 bn Largest purchaser group: Open-ended funds/ Special funds Largest vendor group: Developers Most important property type: Office 36.7 % 28.0 % 61.3 % Prime yield office 4.35 % Transaction volume by purchaser groups (in million ) International investor share with another steep increase After taking a breather during the first half of the year, international investors once again upped their share in transaction volume as expected to almost 50 %. They were mostly interested in high-volume deals. Four of the five major deals were purchased by international investors. In addition to numerous special funds, opportunity funds and private equity funds were particularly active. Prime yields for office assets had already dropped to 4.35 % by mid-year and remain at these levels. It is interesting to note that these yields are no longer exclusively reserved for the CBD but can now also be found in prime locations in the Kennedydamm and Harbour Area submarkets. Outlook Prime yields (in %) We can expect the Düsseldorf investment market to experience a strong Q4 with further yield compression as a result. Several new assets will be added to the market in October, once again boosting transaction volume to over 2 billion, assuming investors act fast. Nevertheless, it is unlikely that 2016 results will be able to match the all-time high recorded in 2015 of 2.55 billion. 4 Market Report Q Office Leasing and Investment Colliers International

5 554 offices in 66 countries on 6 continents USA: 153 Canada: 34 LATAM: 24 Asia/Pacific: 231 EMEA: billion in annual revenue 103 billion in transaction volume with more than 80,000 investment and leasing deals Author: Lars Zenke Director Research Düsseldorf lars.zenke@colliers.com Colliers International Düsseldorf GmbH Königsallee 60 C / Entrance Grünstraße D Düsseldorf million square meters under management 16,000 professionals About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,000 professionals operating from 554 offices in 66 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com, or follow us on LinkedIn. To see the latest news on Colliers International in Germany follow colliers.com Picture credits: Medienhafen Düsseldorf - Foto: hespasoft, Copyright 2016 Colliers International Düsseldorf GmbH This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to theaccuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s) All rights reserved