08 February 2022
Strong letting performance: Union Investment achieves much bigger reduction in vacancies than in previous year
• New lettings and renewals of around 1.3 million sq m in 2021
• Around half of lettings in Germany
• High occupancy rate of around 95 per cent maintained
Union Investment let significantly more commercial real estate space in 2021 than in previous years and was thus able to reduce the vacancy rate despite Covid-19 restrictions. A total of 275,921 sq m was newly let last year – a huge 45 per cent increase over the previous year and approximately 14 per cent more than in 2019, before the outbreak of the pandemic.
“This is an outstanding performance by everyone in our letting and asset management team, especially since lease extensions and follow-on leases, which continue to make up the majority of lettings, are still just as complex to negotiate in the current difficult and highly competitive market. We have been able to maintain the high occupancy rate of our actively managed real estate funds of approximately 95 per cent, based on rental income.”
Volker Noack, the member of the management board at Union Investment Real Estate GmbH with responsibility for asset management
Union Investment let or relet a total of approximately 1.3 million sq m of commercial real estate space in 2021, representing around 13 per cent of the space currently under management. From a fund perspective, this equates to annual net rent of EUR 320 million. Once again, most lettings last year were renewals, comprising 79 per cent of the total or approximately 1 million sq m.
Offices account for around one third of lettings
Office properties in well-connected locations with modern, flexible and sustainable space remain in demand. Of total lettings in 2021, 34 per cent relate to office properties and a further 34 per cent to retail. The remaining lettings are mainly split across hotels and logistics properties..
Almost half of lettings in Germany
At 46 per cent, properties in Germany account for a significant proportion of the new lettings and renewals. Union Investment’s letting successes last year included four offices totalling around 8,700 sq m of space in Hamburg’s EMPORIO Tower. Another major new letting in the office portfolio was agreed at The Plant Fürth, where a total of some 6,200 sq m was newly let at the 54,000 sq m campus. The complex consists of seven separate buildings and is located directly on the restored banks of the Pegnitz river, on the outskirts of Nuremberg. Union Investment also extended the lease with Edeka in Berlin’s ALEXA shopping centre by ten years, ahead of expiry. Although the original contract was not due to expire until the end of May 2022, the food retailer took early action to secure the space for the future. Edeka occupies 2,453 sq m of the 60,000 sq m of usable floor space in the shopping centre. Elsewhere, Landesbetrieb Bau und Immobilien Hessen leased a total of 16,450 sq m at the Hahnstraße 25 and 31–35 properties in Frankfurt-Niederrad. The lease has a term of 12 years. Both buildings will be used as additional space for some of Frankfurt’s courts.
Lettings in European markets outside Germany
Outside Germany, other European countries account for 43 per cent of new lettings and renewals of commercial space. From a fund perspective, this equates to annual net rent of EUR 164.3 million. The biggest lease extension in terms of space was in Solna, Stockholm. Energy company Vattenfall will continue to occupy the office building at Uarda 5 for another ten years. The building is located close to Mall of Scandinavia, Sweden’s largest shopping centre. Vattenfall extended the existing lease for 42,989 sq m ahead of expiry until December 2034.
Leases covering a total of 21,350 sq m were also extended in the Central Seine office building in Paris. The 14-storey building is centrally located in the 12th arrondissement, an attractive and fast-growing office submarket. The letting team also extended leases for around 11,500 sq m in Torre Diagonal Litoral in Barcelona, an office building with views of the Mediterranean.
Last year, Union Investment let or relet approximately 144,398 sq m of space (11 per cent of total lettings) in markets outside Europe, thus securing annual net rent of approximately EUR 43 million for the funds. At landmark building 140 Broadway in New York, the lease with the main tenant Brown Brothers Harriman for around 17,500 sq m of space was extended until the end of October 2039. In Houston, Union Investment extended the lease for 24,100 sq m at 1000 Main Street, a Class A property, with the main tenant Shell Oil until the end of June 2031. Additionally, Virgin Australia, one of Australia’s biggest airlines, is set to move into Southpoint Tower in South Bank Brisbane as a long-term tenant. The lease for 7,300 sq m runs until the end of August 2030. In Mexico City, meanwhile, leases covering around 13,170 sq m were extended at the Dos Patios office building.
For Union Investment Real Estate GmbH