High quality refurbishments becoming increasingly important for supply
In 2019, take-up amounted to 220,000 sqm with the lion’s share of lettings occurring in modern, newly built proper-ties in well-established office clusters. Rent levels remained stable with €306/sqm/year for prime office buildings in the city centre and €178/sqm/year for the market average. The vacancy rate continues to decrease, attaining 4.7% by Q4 2019, and will fall even further over the course of 2020. Deliveries in 2019 for the Viennese office market reached a record low of 45,000 sqm. There are major implications from this for the market in 2020. With very few development plots available in the established office lo-cations, prospective tenants will increasingly look toward high quality refurbishments. Out of the 177,000 sqm of office space due for completion in 2020, 31% are refurbishments. The alternative are newly built properties outside the office clusters, effectively in new submarkets. The structural shift in supply with newly built properties in non-traditional locations is an inevitable market response to provide tenants with offer in all price ranges and quality.
Offices are the main driver of record investment in 2019
2019 set a new record high in the Austrian real estate investment market with a volume of €6bn, an increase of almost 50% compared to the previous year. The office segment was once again the dominating sector with a market share of 31 per cent, closely followed by institutional residential investments. The outstanding result was mainly due to rising activity from international investors, especially from Asian countries such as Korea. Yields for prime office properties continued to decrease and currently stand at 3.25%. The outlook for 2020 is excellent. Low interest rates, stable economic and political development in Austria and the availability of high quality office properties for sale create an exciting investment environment for domestic and international investors.