Austria : Vienna office marketMarch 2017
- The office market is seeing demand and supply pick up
- High demand is encouraging change in the supply structure
- Greater demand from international buyers for Vienna’s office properties
High demand is encouraging change in the supply structure
Office take-up in 2016 was significantly higher than in 2014 and 2015 and totalled 300,000 m². This performance is due to three large transactions accounting for more than 50,000 m². Large transactions should continue to animate the market during the next couple of years as new development schemes will be available for letting. These new completions will not only increase the amount of high quality office spaces in Vienna, but will also put pressure on rental levels. Occupier relocations will also fuel second hand available space, but only partly. Indeed, these older office properties may not inflate the stock and the vacancy rate if the process of converting old office buildings into apartments continues along with high pre-letting share of new office space. The vacancy rate declined in 2016 to 5.8% and likely to continue falling during 2017 before picking up in 2018. The prime rent slightly rose to €318/m²/year which represents a 2% growth compared to 2015.
Greater demand from international buyers for Vienna’s office properties
The total investment volume in 2016 amounted €1.95 bn. Although the demand is still at a very high level, the transaction volume was significantly below prior-year figures. This result is due to some forward purchase deals and some closings postponed to 2017. The interest of international buyers increased and they accounted approximately for two thirds of the total volume in 2016. Offices counted for half of the commercial real estate investment volume. In this context of high demand, prime yields decreased further to reach 5.8%. The investment volume is expected to rise again in 2017 to reach approximately €3.5 bn.