- 27 office locations outside of the top seven metropolises were analysed

- Demand for office space and the number of office workers are expected to grow significantly over the next five years

- High to very high growth potential for average rents

Berlin - 14 September 2017
Numerous medium-sized cities in Germany can expect an increase in the number of office workers and in turn growing demand for office space over the next few years. Due to their office market indicators, 27 of these B-rated locations can be identified as the most promising investment locations for office properties outside of the major metropolises. This is the outcome of the study 'German office market in 2017 - The 27 most promising medium-sized cities'. On behalf of TLG IMMOBILIEN AG, Wüest Partner Germany analysed each location in terms of its probable demand for office space over the next five years.

The analysis has shown that the medium-term increase in the number of office jobs will make itself felt not only in the top seven metropolises, but also in
numerous other locations. These developments are being driven mainly by rising employment rates in the office-intensive freelance / scientific / technical
services sectors as well as information and communication. Demand for around 48,000 additional office workers per year throughout Germany is forecast for both fields. Depending on the local sector structure and other factors, however, the effects of this trend will differ greatly from location to location.

Growth in office workers on the level of the metropolises
'The general conditions in each of the office locations analysed in the study will be attractive primarily due to the increase in demand for office space over the next five years', says Niclas Karoff, member of the Management Board of TLG IMMOBILIEN AG. 'The number of office workers is expected to grow by between 3.7 and 5.6%, which is by no means far behind the forecasts of between 4.5 and 5.9% for the major metropolises', continues Karoff. The strongest rates of growth in the number of office workers can be expected in Ulm (5.6%), Leipzig and Braunschweig (5.5% each) as well as Heidelberg (5.2%) and Ludwigshafen (5.0%).

Significantly more demand for space in the coming years
Working on the basis of the development of the office-intensive sectors and the number of office workers, Wüest Partner Germany has determined the level of demand for office space in each of the locations analysed in the study over the next five years. 'Investors and proprietors can expect attractive demand for office space in the 27 most promising office locations. Not only does the group of forerunners include the usual top B-rated locations such as Hanover (around 248,000 sqm), Leipzig (around 158,000 sqm) and Nuremberg (around 152,000 sqm), but also cities such as Bremen (around 132,000 sqm), Dortmund (around 107,000 sqm), Karlsruhe (around 105,000 sqm) and Mannheim (around 84,000 sqm), says Karsten Jungk, Managing Director and Partner at Wüest Partner Germany. Overall, the demand for office space in the cities analysed in the study will range from 41,000 to 248,000 sqm by 2021/22. All of the 27 office locations are experiencing positive population growth and a growing number of people in gainful employment. The low vacancy rates in these office markets are another common factor. For example, in 2016 the vacancy rates in Ludwigshafen (1.4%), Bielefeld, Bonn and Duisburg (2.4% each) and Braunschweig (2.6%) were lower than in Berlin which, with 2.9%, currently has the lowest office vacancy rate out of all of the metropolises.

Potential for rental growth and attractive yields
The average rents in the 27 most promising B-rated locations range from 5.13 EUR/sqm in Chemnitz to 11.50 EUR/sqm in Freiburg im Breisgau. In this regard, significant increases were recorded within the past five years in cities including Münster (24.1%) and Dresden and Leipzig (16.7% each). The average rents in Dresden, Leipzig, Ludwigshafen, Regensburg, Bielefeld and Karlsruhe are said to have exceptionally high potential for growth. However, cities such as Freiburg im Breisgau, Heidelberg and Bonn, where rents are already at a high level, still have high potential for rental growth. Even Duisburg, where the average rent is just 7.76 EUR/sqm, is expected to see an increase in the medium term.
Compared to the metropolises (3.4 to 4.0%), the yields in the medium-sized cities analysed in the study were higher in 2016, ranging from 4.8% in Bonn to 7.6% in Braunschweig. This means that the yields of the B-rated cities are between 1.4 and 3.7 pp higher than in the top seven locations.

Dynamism and solidity: growth criteria
Each of the selected medium-sized cities was assigned to a growth category as part of the study in order to provide investors with another criterion to factor into their decision-making process. The category 'solid growth' shows investors that the locations are distinguished by steady growth with no major fluctuations one way or the other in terms of their vacancy rates, average rents, top rents or yields. As a result, these locations are also suitable for investors who focus on reliability and are unwilling to assume risk. Duisburg, Hanover, Kiel and Nuremberg are just some of these locations, for example.

In contrast, the markets in cities categorised as having 'dynamic growth' experience larger fluctuations yet also record larger increases in rents or decreases in initial yields. These cities include Bremen, Dresden, Karlsruhe and Mannheim.

The study is available to download here:
www.tlg.eu > Media > Publications


About TLG IMMOBILIEN AG
TLG IMMOBILIEN AG is a listed leading commercial real estate company in Germany that has been synonymous with real estate expertise for over 25 years. TLG IMMOBILIEN AG generates stable rental income and exhibits low vacancy rates, very good building stock and profits from its local employees' excellent market knowledge. As an active portfolio manager, TLG IMMOBILIEN AG is specialised in commercial properties for office and retail use: it focuses on managing a high-quality portfolio mostly comprising office properties in Berlin, Frankfurt/Main, Dresden, Leipzig and Rostock. The company also has a regionally diversified portfolio of retail properties in highly frequented micro-locations. The portfolio also includes seven hotels in Berlin, Dresden, Leipzig and Rostock. TLG IMMOBILIEN AG's properties stand out not only due to their excellent locations but also because of their long-term rental or lease agreements.
As at 30 June 2017, the property value amounted to EUR 2.3 bn. As at the same reporting date, the EPRA net asset value per share amounted to EUR 18.95.

Contact TLG IMMOBILIEN AG
Christoph Wilhelm
Corporate Communications
Phone: +49 30 2470 6355
E-mail: [email protected]

Sven Annutsch
Investor Relations
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Wüest Partner Germany
Wüest Partner Germany was established in 2007 and has offices in Frankfurt/Main, Berlin and Hamburg. The business activities of Wüest Partner in Germany are centred on the valuation of property portfolios and individual properties. This includes pre-purchase and ongoing valuations using market value, collateral value and fair value calculations in line with German and international methods. Additionally, Wüest Partner focuses on analysing the property market and providing strategic advice on transactions and investments to businesses, investors and private asset managers.
Wüest Partner Germany is the German subsidiary of the corporate consultancy firm Wüest Partner AG which was established in 1985 and, with around 180 members of staff, is a leading independent consultant in the Swiss property market. Its independence is just one of the reasons why Wüest Partner is synonymous with uncompromising quality. Its focus on consulting services guarantees professional and impartial results.

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