With growth of around 1.0% in 2020, the lowest phase of the current economic cycle will be reached. With only a moderate upward trend in Germany and lower growth rates in the CEE countries, the regional conditions for the Austrian economy remain difficult. On the basis of low secondary market yields, property investments remain attractive despite a further decline in yields.
A new record year was established for the Austrian investment market with a total volume of around €5.9 bn. Fifteen major transactions accounted for almost half of the volume. Most of them were completed by international investors.
Strong demand and pressure from investors ensured that prime yields continued to fall in 2019.
The low level of completions on the Vienna office market contributed to a fall in the leasing performance in 2019 of approx. 13%. Although the situation will ease in the future, the supply will remain limited. The vacancy rate has declined again, but will stabilise by 2021. The level of prime rent has been corrected slightly downwards. In contrast, rents in good locations outside the CBD are showing dynamic rental growth.
With nearly 20,000 new residential units, a new completion record will be set in Vienna in 2020. The high supply in the current and coming year is dampening expectations for the development of rents for newly constructed apartments. The volume of institutional housing investment in 2019 will exceed the record level of the previous year at roughly EUR1.3 bn.
Slightly declining returns are expected for 2020.
The completion rate for new retail space in Austria continues to remain at a low level. The number of new entries by international retailers declined noticeably in 2019, while the expansion dynamics in the food, entertainment, F&B, sports and discount sectors have remained high. An opportunity for placemaking is increasingly being used, defined as the integration of publicly accessible open spaces in property developments.
Industrial & Logistics
Austrian online trade will grow by approx. 22% by 2023. The demand for storage space close to city centres will therefore continue to rise in the near future. In 2019, a total of about 250,000 sqm of space was taken up. A large part of this was used for e-commerce and parcel delivery services. The trend towards speculative developments will continue to increase. This in turn brings more investable products onto the market.
With around 17.6 m overnight stays in Vienna, a new record was set in 2019. The investment volume also hit a new high of around EUR 940 m. By 2022, a further 5,450 hotel rooms will be completed, generating further potential investment products. New hotspots are developing in districts outside the city centre and, given their surroundings, provide an independent infrastructure that is attractive to tourists.