Property Market: Bremen Still Producing Solid Results
Investing in BremenBremeninvest publishes "Property Market Report 2023"
Once a year, Bremeninvest calls on expert analysts to gather the information needed for its Property Market. They look back at the previous year and make forecasts for the year to come on the basis of the market data available for the first six months.
"In Bremen, we find the right conditions for coming through the crisis and being in a good position, despite the fact that we are faced with enormous challenges", said Andreas Heyer, Chair of the Management Board at Bremeninvest (Wirtschaftsförderung Bremen GmbH) as this year's report was released. "Here, there are a lot of local players who are bringing their sound judgement and detailed knowledge of the market to the developing of projects, ensuring solid results, even in these exceptionally difficult times."
Office building
One market that proved its resilience against the crisis in 2022 was for office buildings. After major rentals in 2021 resulted in record turnover of 145,000 square meters, the market was once again able to rely on its economic base last year. 95,000 square metres of rental space returned solid sales revenues which are moving in the direction of levels achieved in previous years. There has not been any discernible weakening of demand to date.
"In Bremen, we've been able to position ourselves to handle the significant increases in quality and sustainability by providing a broad palette of flexible modern spaces", reported Heyer. "In the first half of 2023, contracts generated a total take-up rate of 46,000 square metres."
Construction activity increased again, in marked comparison to 2021. The 62,000 square metres of new-build space constructed in 2022 exceeded the average for the previous five years by 37,100 square metres. This impressive amount was primarily due to a few construction projects that had been delayed in the previous year. If you then add in the amount of space created by renovation projects, a cool 100,000 square metres of high-quality office space will come onto the market by the end of the year.
However, as always, these forecasts are not set in stone. On-going crises, volatility in financing conditions and prices in the construction industry could all result in more delays and changes. The signs are that construction activity will see a noticeable slowdown after 2024.
Logistics facilities
There is enormous dynamism in the logistics facilities sector. At present, sites covering a total area of 3.3 million square metres are occupied and in operation in the city of Bremen, with another 133,760 square metres available. However, the take-up, 184,593 square metres, remains lower than in the previous year (218,100 square metres). Despite that, take-up in the new-build and renovation sectors has more than doubled in 2023 and risen to 110,000 square metres (previous year: 42,700 square metres). After an exceptional low point of 1.54 percent vacancy rate in the previous year, the vacancy rate is now at 4.03, making it slightly above the rate seen in 2021 (3.83 percent). However, this remains moderate. Across Germany, the standard market vacancy rate is between 3 and 5 percent.
Bremen as a retail location
Bremen's city centre is not unusual in facing fundamental changes to its structure. However, the inflation-driven decline in consumer spending has not so far triggered a mass closure of its shops. Consumer purchasing power in the retail sector increased to 4,076.1 million Euros (Report 2022: 3,988.2 million Euros), and retail revenues grew to 3,944.6 million Euros (Report 2022: 3,731.6 million Euros). Despite this, the market in Bremen is still experiencing considerable pressure, as it is throughout Germany. Rents in the city centre remained at the zenith seen last year of 112 Euros per square metre. Rents in other city districts also remained at their peak, but constant, at 18.5 Euros per square metre.
The City of Bremen is continuing to work together with a range of interested parties to develop strategies that will run alongside the on-going transformation of the city centre and enable "bricks and mortar" retailers to hold their own against online shops and out-of-town shopping centres in the future. As part of this initiative, Bremeninvest has, among other things, run competitions to reduce the number of empty premises and, in 2023 initiated a start-up financing programme for companies that want to move into the heart of the city.
A range of construction projects are also currently being developed with the intention of bringing life to the city centre. These projects include transforming the Balgequartier (Balge district, named after a branch of the River Weser) into the "Handlauf zur Weser" (handrail for the Weser), the integration of living space, the conversion of the Mitte car park into a multi-purpose building and the relocation of the University of Bremen's Law Department to the Domshof square.
Investment market
The European Central Bank's decision to increase interest rates at the beginning of 2022 created even greater turbulence. Although revenues were initially just as high as in the record year of 2021, they plunged from 245 to 69 million Euros in the second half of 2022. As a consequence, the overall result remained around 45 percent below that of the previous year.
Having said that, the volume of transactions recorded in the first half of 2023 (125.2 million Euros) does mean that the situation has improved again to some extent. Although results have remained depressed since 2016, it was possible to recoup some of the extreme losses experienced in the previous six months of 2022. According to the report, long-term stabilisation of interest rates will be the only means of guaranteeing planning security.
You can download the "Bremen Property Market Report 2023", filled with facts, data and figures here. Alternatively, call +49 421 9600 121 or send an e-mail to thorsten.tendahl@wfb-bremen.de to request a paper copy.
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