Real Estate - Bank Austria
The Austrian Real
an oasis of calm?
Publisher and media owner: UniCredit Bank Austria AG
Editor: Bank Austria Real Estate Consulting & Investment, Karla Schestauber, Tel. +43 (0)50505-54784
Dated: 27 June 2012
A joint publication of Bank Austria Real Estate, Bank Austria Economics & Market Analysis Austria and
Immobilien Rating GmbH (IRG).
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This publication is neither a marketing communication nor a ﬁnancial analysis. It contains information on general economic data and
real estate market data and related assessments of real estate market developments. Despite careful research and the use of reliable
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Past performance is not a guide to future performance. Please note that the value of an investment and the return on it may rise and fall,
and that every investment involves a degree of risk.
The information in this publication contains assessments of short-term market developments. We have obtained value data and other
information from sources which we deem reliable. Our information and assessments may change without notice.
2 | Real Estate Country Facts 07 / 2012
The Austrian real estate market:
an oasis of calm?
There is still no end in sight to the eurozone sovereign debt crisis. Europe’s
politicians are trying to avert disaster by
means of “ﬁrewalls” and public spending
cuts. Also steps aimed at stimulating
growth in the ailing European economy
will need to be taken soon.
Europe’s monetary policymakers are in
full-on crisis management mode. Headline interest rates are at all-time lows and the European Central
Bank (ECB) has already provided injections of liquidity by means of
two long-term reﬁnancing operations. In spite of this, the banking
sector is still under immense pressure, due to a combination of the
falling prices of bonds issued by crisis-hit governments, tighter
regulatory requirements and a challenging economic climate. All of
these factors have pushed up reﬁnancing costs, which must be
passed on to customers.
Despite implementing a series of austerity measures, Austria’s
economy is currently a relativ model of success, with low unemployment and GDP growth which is forecast to reach 0.8 % this
year. This has also given the country’s real estate market a shot in
the arm. Nevertheless, as in other countries, due to the eurozone
crisis the appetite for risk in Austria has fallen sharply. Commercial
property investors are mainly targeting core real estate – properties
in top-quality locations with tenants that have strong credit ratings.
Prime yields in the ofﬁce and retail segments have declined signiﬁcantly. Many investors are also pursuing a strategy of snapping up
distressed properties at bargain prices. Sales of commercial property were relatively ﬂat in the ﬁrst quarter of this year, but that was
primarily the result of limited supply, not weak demand.
Surveys reveal that investors and developers in Austria are up in
arms about the reluctance of banks to ﬁnance property transactions. However, closer inspection often shows that banks’ margins
are criticised as being excessive, even though total interest costs –
i.e. Euribor plus the bank margin – remain modest.
Private investors, many of whom do not require bank loans, are
crisis driven turning to investments in real estate, and this is driving
up residential property prices. The strong demand for investment
apartments and rental apartment buildings has cut yields signiﬁcantly, since such investors are more interested in safeguarding
their investments than maximising returns.
We remain hopeful that the steps taken to stem the eurozone crisis
will start to have an effect soon. But the longer the crisis inﬂuences
investor behaviour in the real estate sector, the greater the risk that
the Austrian property market – which is often labelled as relatively
“dull” – could experience one or the other crisis driven exaggeration.
Real Estate Country Facts 07 / 2012 | 3
Bumpy road to recovery for the Austrian economy
Economy still expanding, but slowly …
After the deep crisis of 2009, the Austrian economy posted a surprisingly rapid recovery up to mid-2011. GDP growth accelerated
from 2.3 % in 2010 as a whole to over 4 % in the ﬁrst half of 2011,
buoyed by strong exports, a moderate upturn in consumption and
robust investment activity driven by pent-up demand in the aftermath of the crisis. However, during the summer of 2011 the loss of
conﬁdence caused by the European sovereign debt crisis began to
dampen expectations. Capacity utilisation, which had almost returned to its long-term trend level in the spring, decreased towards
the end of the year. After a powerful surge that had seen capital
investment jump by almost 6 % year on year, Austrian companies’
investment conﬁdence was seriously eroded. Private consumption
rose gently but steadily throughout the year, for an average gain of
In the course of 2011 demand for Austrian exports weakened noticeably in line with fading global demand. Austria’s export-oriented
industrial sector lost momentum, and towards the end of the year it
entered a mild recession. Nevertheless, thanks to the strong upswing in 2010 and the early months of 2011, real full-year growth
in both exports and industrial production was high, at about 7 %,
and helped drive overall economic expansion. GDP rose by 3 % in
2011 – among the highest growth rates in the eurozone.
Improved business conﬁdence indicators such as orders, and employment trends show that after the stagnation of the second half of
2011, the economy returned to growth at the start of 2012. How-
ever, the nascent recovery remains very tentative. The requisite
support from exports has so far been modest and unstable, and
domestic demand has been dampened by the effects of stricter
public spending policies and nervousness about the euro crisis.
The stress factors affecting the European economy kept Austrian growth in the ﬁrst quarter of 2012 to 0.3 %.
… due to the adverse environment
Due to the current economic climate, the revival of the Austrian
economy is bound to be very slow, and it is constantly at risk of
being knocked off course by potholes along the way. Negative
signals from industry has depressed business sentiment from
the start of the second quarter of 2012. Industrial conﬁdence
has taken a signiﬁcant turn for the worse in almost all European countries. The mood in the Austrian manufacturing sector
has darkened signiﬁcantly since April due to the negative signals from the eurozone, and conﬁdence slid below the longterm average. However, the position is generally regarded as
relatively favourable for a European economy, and Austrian
consumers are among the most upbeat in the region. Consumer sentiment is relatively good. Employment has risen
sharply since the start of the year, and the drop in inﬂation has
resulted in real income growth. This has been reﬂected in the
latest retail sales ﬁgures. Following the Austrian economy’s
return to growth in the ﬁrst quarter of 2012, a 0.2 % quarteron-quarter increase in GDP is expected in the second quarter.
Private consumption will take up the running in the coming
months. Thanks to the stabilisation of the employment market
Austrian economic data
Economic growth (real, year on year)
Private consumption (real, year on year)
Investment (real, year on year)*
Exports (visible and invisible)
Imports (visible and invisible)
Inflation rate (CPI) (real, year on year)
Unemployment rate (national criteria)
Budget deficit (as % of GDP)
Public debt (as % of GDP)
*) Gross ﬁxed capital formation
Source: Bank Austria Economics & Market Analysis Austria
4 | Real Estate Country Facts 07 / 2012
and continued income growth, personal consumption will be the
main prop of economic activity. Investment remains subdued
due to the unfavourable international climate, and despite robust
growth, foreign trade will only make a minor growth contribution. However, the balance should shift back towards foreign
trade later in the year. While the upturn in private consumption
is set to continue, demand is likely to receive more of a lift from
exports in the latter part of the year. Nevertheless, in an international environment that is only gradually settling down, the outlook is unpredictable, and investment conﬁdence is on course to
remain very muted.
Unemployment rate (annual average, in %)
In light of the relatively good start to the year, the forecast of
0.8 % GDP growth now looks still more reliable. But the latest
industrial data and the new crisis upheavals point to a bumpier
road ahead for the Austrian economy. The prospects for a strong
rebound in the second half of 2012 have lessened markedly,
despite the indications of a pick-up in the employment market,
Source: Eurostat, Bank Austria Economics & Market Analysis Austria
Economic growth (real change of GDP, in %)
Austrian ﬁscal policy mildy dampening economic
The moderate pace of expansion is unlikely to generate any inﬂationary pressures soon. Neither do the ECB’s current monetary
policies appear to carry any short-term inﬂationary risks, as they
are exclusively aimed at maintaining market liquidity rather than
boosting the money supply to the real economy. With commodity
prices seen ﬂat over the next few months due to the lack of any
global demand pull, inﬂation is likely to hold at around the two
percent mark. In Austria the annual average inﬂation in 2012 rate
is expected to decline to 2.2 % from 3.3 % in 2011.
Source: Bank Austria Economics & Market Analysis Austria
which would bolster domestic demand. After losing steam because of the economic slowdown in the second half of 2011,
employment growth has now stabilised at a low level and unemployment is steady. Due to current anaemic economic growth,
the annual average unemployment rate is forecast to edge up to
7.0 % (according to the Austrian deﬁnition) in 2012 from 6.7 %
last year. According to EU deﬁnition, Austria’s current unemployment rate of 4.3 % is the lowest in the area.
Action taken in the spring to trim the ﬁscal deﬁcit from last year’s
2.6 % will not fully feed through until 2013, and even then it is
unlikely to have a major impact on the Austrian economy. According to our estimates it will cut growth by about one quarter of a
percentage point, and this should be more than offset by the
effect of the anticipated pick-up in global activity. However, while
the Austrian economy would beneﬁt from a global recovery, the
danger that the crisis of conﬁdence in the European Union will
drag on or even worsen presents a downside risk to our growth
scenario. The tightening of the ﬁscal reins across Europe, and the
recessions in some EU peripherals could weigh on the economic
environment to such an extent that the Austrian economy falls
short of its trend growth rate in 2013. Unless the European
climate improves, GDP growth is likely to be in the region of a
sluggish 1.5 %, and in the medium term growth rates in excess
of 2 % will be rare.
Real Estate Country Facts 07 / 2012 | 5
Average growth prospects for Vienna
In 2011 the Viennese economy posted a strong growth performance relative to the rest of the country, expanding at an estimated
rate of almost 3 %. This was still below the national average, but the
gap was much narrower than in 2010. Vienna gained from the
increased contribution of the service sector to overall growth. As a
purely urban economy, it was fortunate in having the largest tertiary
sector in Austria in relative terms. Meanwhile, for the ﬁrst time since
the outbreak of the crisis, growth was also supported by higher
manufacturing production. However, it was held back by the construction industry, which again contracted.
The outlook for the Viennese economy in 2012 is far less rosy.
Besides the international slowdown, stringent budget discipline at
federal and provincial level is retarding growth. The building industry
faces another very tough year due to tight public funding. Thanks to
its strong bias towards consumer goods, local industry has comparatively bright prospects, but Viennese manufacturers will not be
immune to the decline in export demand. The service sector is still
on the up, and will again be the main engine of growth for the
Viennese economy because of its size.
6 | Real Estate Country Facts 07 / 2012
Vienna’s share of Austrian added value (in %)
Change since 1995 in %-points
Source: Statistik Austria, Bank Austria Economics & Market Analysis Austria
Austrian living standards are relatively high
By international standards, residential space in Austria is high on
quality and also relatively cheap. But rising prices on the property
market may be an indication that this is about to change. Some
parts of the market, which in general has been fairly well balanced, could be on the verge of a tipping point due to the expected
slowdown in new construction and the ongoing rise in the number
of households. In the longer term, weakening demand could go
some way to solving this problem, as could housing policies
which will presumably still be implemented to counteract supply
Adequate supply of residential space thanks to
steady increases in construction
Over the past three decades an average of 45,000 – 50,000 apartments have been built in Austria every year. During the period, the
rate of construction work varied considerably, resulting in frequent
short-term bottlenecks in supply. Especially in the 1980s, demand
far exceeded availability as the decline in the number of residential
new builds and a rise in the number of apartments being knocked
together coincided with the arrival of the baby-boom generation and
the beginning of the trend towards single households. After the surge
in residential construction had subsided in the second half of the
1990s, the number of new apartments built per year did not reach
the 50,000 mark again until 2007, according to estimates from the
Austrian Federation of Limited-Proﬁt Housing Associations.
Living space per capita and the quality of the residential housing
stock in Austria has undoubtedly improved in the past few decades.
The average usable space per person has risen from 33 m² in 1990
to 43 m², and the proportion of non-category A apartments has
dropped from 39 % to 8 % of principal residences, with the number
of sub-standard apartments falling from 6 % to 1.5 % – or 60,000
out of a total of 3.7 million principal residences.
Affordable apartments …
The supply of residential housing in Austria is good by international
standards. However, the success of Austria’s housing policy is not so
much reﬂected in the size and quality of apartments, but in the fact
that housing is affordable for the majority of the population. Housing
costs including energy expenses account for 22 % of private households’ spending. This is below the EU-15 average of 24 %, and well
below the levels seen in northern Europe – in Denmark, for example,
housing accounts for some 30 % of total spending.
Surveys of European households reﬂect the ﬁndings on consumer
spending – irrespective of the legal form of residence – the proportion of Austrian residents who consider themselves overburdened by
housing expenses is among the lowest on the continent. The proportion of such people is highest – at 11 % – among tenants paying
market rates for their rental apartments, but this is well short of the
comparable European ﬁgure of 27 %.
… becoming the exception
An international comparison reveals that apartment and house
prices have increased only modestly in Austria. Over the past
decade, the nominal average national increase was 25 %, compared with 46 % in the eurozone. Only Germany and Ireland
recorded slower price rises than Austria, although in the case of
Ireland this was due to the bursting of the country’s property
bubble. The average price rises disguise steep increases in
some parts of the residential property market, in particular in
major conurbations and the luxury segment. In Vienna, real
estate prices climbed by 8 % in both 2010 and 2011, compared
with 5 % in the rest of Austria.
According to Oesterreichische Nationalbank and the Vienna University of Technology’s Centre of Regional Science, the rise in
prices gathered pace in the ﬁrst three months of 2012, reaching
10 % in Vienna and 11 % in the rest of Austria. This jump was
mainly attributable to stronger demand from private investors for
alternative forms of investment, in response to the uncertainty
surrounding the ﬁnancial markets. The real estate sector is
reporting sustained high demand for investment properties, so
apartment prices could continue to rise in 2012.
Increasingly fragmented residential property
market due to higher costs
Housing construction subsidies in Austria have been reduced as
a result of budget cutbacks. Consequently, signiﬁcantly fewer
construction permits are likely to be issued in the next two years
– WIFO is forecasting a drop from 43,000 in 2011 to around
41,000 in 2013.
Austria’s residential property market is still well balanced in
comparison with other countries. However, the upward trend in
prices may be an indicator of supply bottlenecks which cannot
be quickly rectiﬁed. The low level of new construction and current demographic trends suggest that the shortfall in supply
could widen in the next few years, with major urban centres
worst affected. This in turn will serve to push up prices still
further in the private residential property market.
As a result lower-income groups will also ﬁnd themselves
squeezed out of the property market more quickly. Although the
residential property supply indicators point to a balanced market
for the population as a whole, they conceal the increasingly polarised demand currently found in some segments. The burden
on the incomes of households just under the poverty line is still
twice as high as in less vulnerable households – the median
ﬁgure of 28 % is only slightly lower than the EU-15 ﬁgure of
31 %. The situation facing such households has deteriorated in
recent years. Based on the EU deﬁnition, the proportion of “atrisk-of-poverty” households in Austria with unaffordable housing
Real Estate Country Facts 07 / 2012 | 7
costs rose from 51 % in 2008 to around 60 % in 2010. According to the deﬁnition, housing becomes unaffordable for such
households when housing costs account for more than 25 % of
total disposable income after deduction of social transfers
(source: EU Statistics on Income and Living Conditions [EU-SILC]
2010). Smoothing regional and segment-related imbalances is
probably the most pressing need currently facing the Austrian
residential property market.
Future demand at around 45,000 units per year
According to the Austrian Conference on Spatial Planning,
around half of the number of new builds required each year is
determined by changes in the number of households, one third
by the need to replace properties taken off the market due to
demolition, conversions or knocking together, and the remainder
by demand for holiday properties and the stock of vacant apartments. Assuming that the number of buildings and apartments
requiring renovation declines thanks to the high quality of the
building stock, and the demand for second homes is driven by
consumer desire rather than the urgent need for a place to live,
the number of newly established households will take on a
greater signiﬁcance when determining housing construction
Over the past two decades, forecasts for the size of the Austrian population and the number of households have been continually revised
upwards. The latest estimates suggest that there are currently 3.6 million households in the country, and the total is expected to reach the
four million mark by 2030. However, demographic forecasts indicate
that the demand for residential space will run out of steam in the next
20 years. The number of households is expected to grow by an average of 20,000 or 0.5 % a year until 2030 – this represents a slowdown compared with the past decade, when an average of 32,000
new households were set up in Austria each year, an annual rise of
0.8 %. Over the same period 47,000 new apartments were built each
year. The sharp rise in prices in the past two years suggests that the
level of new builds was not high enough. In the short term, the demand for new apartments will be somewhat higher in major conurbations, as the demand overhang of recent years is still to be reduced.
In the medium term, ﬁgures from the Research Institute for Housing,
Building and Planning indicate that the number of new apartments
required in Austria will stabilise at 45,000 per year. In the long run,
that ﬁgure may decline as the number of 25- to 44-year-olds – who
are most likely to set up new households – falls. That means it should
be possible to satisfy the need for residential new builds, provided that
Austria’s housing construction ﬁnance system, and in particular the
system of subsidies, is not severely affected.
Trend towards smaller households in Austria
Housing construction in Austria
Average annual change in number of households, 2010–2030 in %
Construction permits and completions, ‘000 apartments
1 – 2 person households
Households with more than 2 persons
Construction permits issued
Construction permits issued, latest figures
Source: Haushaltsprognose 2011, Statistics Austria; Bank Austria Economics and Market
8 | Real Estate Country Facts 07 / 2012
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
2005 – 2011 Estimated, 2011 – 2014 Forecast
Source: Statistics Austria, GBV, Euroconstruct; Bank Austria Economics
Strong demand for core real estate among investors
in commercial property
The Austrian commercial property market – small in
scale, but relatively stable performance
Austria’s commercial property market is beneﬁting from the relatively strong performance of the country’s economy. And although
fairly small by European standards, the market stands out for its
Investment in commercial property
Rest of Europe 71.6%
Investment in commercial property (EUR billion)
Source: IRG, CBRE
Some EUR 1.6 billion was invested in commercial property in
Austria last year, meaning that the country’s share of total investment in Europe dropped to 1.4 %. Investment declined to around
EUR 300 million in the ﬁrst quarter of 2012, bringing Austria’s
share of the European total down further, to 1.3 %. According to
CBRE, about 51 % of investment was accounted for by retail properties, with ofﬁce properties and hotels accounting for 22 % each.
Austrians were responsible for 59 % of investment, with the remainder attributable to German investors.
The eurozone debt crisis has dampened commercial property investors’ appetite for risk. This in turn is pushing up demand for core
real estate – in other words, properties in high-quality locations with
Source: IRG, CBRE
tenants that have strong credit ratings – which is seen as crisisproof. But despite this high level of interest, an undersupply of core
real estate has curbed investment activity. Due to strong demand
prime yields in the ofﬁce sector have declined to 5.2 %.
Prime ofﬁce yields
Investors appreciate the Austrian real estate market
In late 2011 Ernst & Young surveyed corporate and other investors
that had been active in the Austrian real estate market in recent
years, in order to obtain their assessment of the country’s investment property segment. More than half of those surveyed rated
Austria as an attractive location for property investors in Europe.
Investors also agreed that green building certiﬁcation will play a
more signiﬁcant part in property investments in future. However,
there was scepticism about whether the volume of investment will
rebound in 2012 and surpass last year’s level.
Real Estate Country Facts 07 / 2012 | 9
Assessment of the Austrian property investment market in 2012
Do not agree
Expectations of a recovery in real estate asset transaction volumes in 2012
Expectations of a growth in the size of transactions in 2012
International investors have returned to the property market
Trading in real estate portfolios will increase in 2012
The number of new developments will rise again in 2012
In future, green building standards will play a more significant role in real estate investments
Source: Ernst & Young
Stability – the deﬁning feature of the
The IPD Austria Annual Property Index has been tracking the performance of the ofﬁce, retail, industrial, residential and other real
estate segments since 2004. Total return reached 6.3 % in 2011, of
which income return accounted for 4.7 % and capital growth 1.6 %.
These results were above the European average.
The relative stability of the Austrian real estate market over the past
eight years is reﬂected in the income return ﬁgures, which have
remained close to the 5 % mark across all property categories.
In other words, Austria has lived up to its reputation as a stable
location for real estate investors.
Property investors and developers critical of banks’
alleged reluctance to lend
Recent surveys have shown that dissatisfaction with Austrian banks’
unwillingness to ﬁnance real estate transactions is on the rise.
Closer examination reveals that in particular the banks’ high reﬁ-
Total return on Austrian property
nancing costs, which are passed on to customers, are seen as
an obstacle to obtaining funds. Weaker bank ratings, changes in
the regulatory framework such as the Basel III standards, and
the continuing uncertainty in the eurozone have combined to
bring about an increase in bank risk in Europe. CDS spreads on
European banks are still above the highs seen during the 2008 /
09 ﬁnancial crisis. However, since the European Central Bank
(ECB) is keeping headline interest rates extremely low on account of the current crisis, the overall interest cost burden (i.e.
Euribor plus the bank margin) remains modest.
Uncertainty will persist unless a solution is found to the eurozone crisis. This means that banks’ reﬁnancing costs will remain
fairly high and investors will continue to focus on core properties. Decisive economic policies will need to be implemented in
order to bring the situation under control. But the longer the
crisis inﬂuences investor behaviour in the real estate sector, the
greater the risks that the relative stability of the Austrian market
Five-year CDS spreads on European banks
10 | Real Estate Country Facts 07 / 2012
Viennese ofﬁce property market:
new lettings remain subdued
Although the Viennese ofﬁce property market is still one of the most
stable in Europe, with comparatively low vacancy rates, there are
some clouds on the horizon. Yet again, new letting in the segment is
slow. According to CBRE, last year’s take-up reached the lowest level
since the onset of the global economic and ﬁnancial crisis in 2008.
At the same time construction of new space – which had declined
as a consequence of the crisis – will increase somewhat. It remains
to be seen whether this will have an impact on vacancy rates and
the overall development of the Viennese ofﬁce property market.
Other important factors include employment trends, changes in patterns and concepts for ofﬁce use, and other future developments in
working environments – all of which will play a signiﬁcant part in
shaping the ofﬁce property segment in the next years.
The stock of ofﬁce space in Vienna is currently approximately
10.5 million m². Compared with other major cities on the continent,
Vienna is close to the European average in terms of ofﬁce space per
capita, but way ahead of its fellow capital cities in Eastern Europe.
Modest rise in construction of new ofﬁce space
In 2011 the construction of new ofﬁce space in Vienna increased
slightly to 180,000 m² (2010: 165,000 m²). The ﬁgure is expected
to rise up to 240,000 m² in 2012, although it remains to be seen
how many projects will be completed by the end of this year, and
how many will be postponed until 2013.
Refurbishments, reconstructions and / or extensions will account for
almost half of the ofﬁce space that comes onto the Viennese market
this year. The share of refurbishments is likely to rise in the next few
years. A recent Jones Lang LaSalle study indicates that a large proportion of the ofﬁce space in Europe is old. Therefore, many experts
believe that in future, the real estate industry will concentrate on the
management, revitalisation, reuse and conversion of existing properties, resulting in a decline in the number of new construction projects.
New rentals down again in 2011
Last year saw another slight drop in the take-up of ofﬁce space –
according to CBRE, new rentals fell from around 275,000 m² in
2010 to some 260,000 m² in 2011. CBRE’s ﬁgures for the ﬁrst
quarter of 2012, when new lettings reached about 65,000 m², give
some grounds for optimism, although rentals for the year as a whole
are expected to remain in step with the modest levels seen in the
past few years. Large-scale take-up is currently the exception, and
relocations still account for a substantial proportion of new lettings.
Media Quarter Marx expansion and Space2Move:
the largest projects of 2011
The biggest ofﬁce project completed in Vienna in 2011 was the
30,000 m² extension at the Media Quarter Marx in Henneberggasse
in the city’s third district. The Space2Move project with 26,000 m² in
the 19th district was concluded at the end of last year. The largest ofﬁce building completed in 2011 and designated for own use was the
30,000 m² ÖBB Infrastruktur headquarters located at Praterstern.
New construction and take-up
Office space per capita, 2011
Office space in Vienna, 2001–2012e
New construction (m2)
Source: IRG, Jones Lang LaSalle, Colliers
Co Mu rt
Source: IRG, CBRE
Real Estate Country Facts 07 / 2012 | 11
Bahnhof Wien Mitte – 2012’s largest ofﬁce
A coming attraction and a new landmark for Vienna:
DC Tower 1
The Bahnhof Wien Mitte project will account for the single biggest
addition to Vienna’s stock of ofﬁce space in 2012. Besides a
62,000 m² ofﬁce complex, the new development at the Wien Mitte
station also features 28,000 m² of retail space. In the second district, Raiffeisen-Holding is currently developing an ofﬁce building on
Obere Donaustraße, as well as the Green Worx property. These two
sites will each include around 20,000 m² of ofﬁce space. VZ13 is
one of the largest renovation projects scheduled for completion this
year. The 15,000 m² of ofﬁce space, which complies with the green
building standard, will open in autumn 2012.
In addition to two new university developments – the 35,000 m²
Vienna University of Economics and Business campus at Messecarree
Süd and the 18,500 m² Rossau site for the University of Vienna –
the stand-out project due for completion in 2013 / 14 is DC Tower 1.
Designed by star French architect Dominique Perrault, this new
landmark is being built in Vienna’s Donaucity. At 220 metres it will
be Austria’s tallest building. The site will include 44,000 m² of ofﬁce
space, as well as a hotel. A second tower – DC Tower 2 – is in the
planning stage. Construction is not likely to begin until DC Tower 1
Projected ofﬁce space for 2012 (selection)
Total lettable office space (m²)
Bahnhof Wien Mitte office building
Raiffeisen-Holding office building
VZ13 / Haus an der Wien
Projected ofﬁce space for 2013 / 14 (selection)
Total lettable office space (m²)
DC Tower 1
Messecarree Süd / Vienna University
of Economics and Business
University of Vienna Rossau
Top rents for Viennese ofﬁces mostly unchanged
Top rental prices for office space in Vienna remained largely flat in
2011. The exception was the premium segment, where rents
slightly rose to EUR 24 / m² per month. However, rental costs can
be higher for exclusive premises in certain premium-quality properties, such as the top floors of office towers.
Demand remains high for space in the city centre and other central
office locations. Office space in these locations is being freed up
when businesses and government authorities relocate, often to
sites outside central Vienna. Renovation projects are also adding
to the stock of available space in the city center.
Relocations and upgrades still account for the majority of new
rentals, and demand for space in the mid-price segment has
remained robust. Effective use of floor space and low operating
costs are among the key decision-making criteria for prospective
tenants. Total monthly or annual costs now play a far more decisive role than the rental price alone.
Rise in ofﬁce vacancy rates on the cards
Vacancy rates in Vienna are still among the lowest in Europe. They
are on a par with the level in Warsaw, and slightly higher than those
in London’s West End and in Paris.
Ofﬁce vacancy rates in Vienna stood at 6 – 6.5 % in the ﬁnal quarter
of 2011, and could slightly rise througout 2012 due to still only modest demand. However, vacancy levels in older properties have increased signiﬁcantly. With modern ofﬁce space easily available at attractive prices, tenants for properties that do not meet the latest requirements are becoming increasingly hard to ﬁnd.
Office vacancy rates in Europe (%), Q4 2011
The recent trend of weak demand continued for office buildings
with low occupancy rates, old properties in need of renovation, as
well as for office space in average locations and outside the most
popular office sites. Rents for such properties are expected to
Am dap in
Mo i e w
on Vie aw
Source: IRG, CBRE, Colliers, C&W
12 | Real Estate Country Facts 07 / 2012
Prime yields stable in 2011
Prime yields in the Viennese ofﬁce sector remained ﬂat in 2011,
reaching 5 – 5.5 % at year-end. Demand was again strong for
premium core real estate, and this asset class will continue to be
the focus of investors’ attention this year.
Ofﬁce properties in need of renovation, ofﬁces outside the
sought-after areas in moderate or poor locations, and ofﬁce
buildings with low occupancy rates will remain subject to market
pressures in 2012. For these properties, a further decline in value
is possibly while yields on class B properties located outside central Vienna may increase.
Rents, yields and vacancy rates
in the Viennese office market, 2001–2012e
Prime rents per m2 (EUR)
Vacancy rate (%)
Prime yields (%)
Other important locations for ofﬁces can be found on the Handelskai /
Wiener Messe axis, and on the site of the former northern railway
station. The latter site is one of Vienna’s largest inner-city development zones, where in addition to a large number of apartments, ofﬁce, retail and service space is under construction.
The area between Erdberg, St. Marx and Gasometer is another key
ofﬁce location in Vienna. It boasts several new ofﬁce buildings such
as Marxbox, Marximum and the TownTown project, which is being
developed in stages. Units 8 – 10 at the TownTown site were completed last year, and a further extension, CB21, is planned.
The Wienerberg area of southern Vienna is a further attractive ofﬁce
location. Extensions to existing properties such as EURO PLAZA are
under consideration. Also at the Wienerberg complex, Microsoft’s
vision for the ofﬁce of the future has become a reality. A conventional ofﬁce building was upgraded with the aim of improving the
effectiveness of ﬂoor space use, cutting costs, reducing the carbon
footprint, boosting productivity, and promoting creativity and
knowledge-based work. Enhancing the company’s attractiveness as
an employer – by raising employee satisfaction and motivation, and
helping them achieve a better work-life balance – was another key
consideration behind the “Future Ofﬁce” project.
The ofﬁce of the future is a hot topic at present. Changes in employment patterns, which are closely related to the overall economic
climate, will have a decisive impact on the ofﬁce market in the coming years. Furdermore, ﬂexible working time arrangements and
home working will inﬂuence the amount of ofﬁce space needed. Ofﬁce planners pay close attention to details such as room redesign
and the amount of space per employee, adapting their proposals in
line with the latest trends and market conditions.
The ofﬁce of the future
Source: IRG, CBRE
Vienna’s ofﬁce hot-spots
Central Vienna and the neighbouring districts remain particularly
popular locations for ofﬁces. For many companies, a head ofﬁce
in the ﬁrst district is essential for prestige reasons, and ofﬁces
and commercial properties are a deﬁning feature of the district.
However, in recent years increasing numbers of former ofﬁce
properties have been converted for residential use, especially in
buildings dating back to the Gründerzeit era (mid to late 19th
century). Demand for apartments in such attractive old city-centre
buildings is particularly high among wealthy buyers and tenants.
In spite of the signiﬁcant costs involved, conversion can turn out
to be a worthwhile investment for the developer, especially in the
Adjacent to the ﬁrst district, many attractive locations for ofﬁces
can be found in the extended inner city, the area within the Gürtel
ring road. A number of major ofﬁce complexes are situated further away from central Vienna, such as Donaucity (VIENNA DC), a
site dominated by ofﬁce towers where Austria’s tallest ofﬁce block
– DC Tower 1 – is currently under construction.
Building life cycles are becoming an increasingly important consideration. When it comes to disposing of older properties, the question of whether demolition or conversion / renovation is the best
option can be a difﬁcult one to answer. If the owner of an old citycentre ofﬁce building decides that reuse is the best option, the preferred approach is redevelopment – extensive remodelling gives
rise to space that is equivalent in value to a completely new development. Green building standards and sustainability play a central
role in virtually every property-related decision.
From green to blue
Attitudes to sustainability are also changing, as green buildings are
beginning to give way to their blue counterparts. A more complex
and holistic view of sustainability is replacing a limited focus on
energy efﬁciency. Besides economic and environmental considerations, socio-cultural factors such as the need to pay special attention to human requirements are gaining in importance. Striking a
balance between the quality of life of building users and the efﬁcient
use of natural resources will be one of the major trends in tomorrow’s ofﬁce property market.
Real Estate Country Facts 07 / 2012 | 13
Vienna’s retail market –
a source of relative stability in uncertain times
Vienna: a mature retail market
Number of shopping centres by size
The Austrian capital had about 1.5 million m² of sales space at
the start of 2012. Of this amount, about 670,000 m² was accounted for by shopping centres, 470,000 m² by retail parks and
around 330,000 m² by Vienna’s shopping streets.
Gross lettable area (GLA)
Up to 20,000 m²
20,000 m² – 50,000 m²
Over 50,000 m²
Source: RegioPlan, Standort+Markt
Breakdown of individual segments by sales space
Shopping centre space in Europe
Lettable space per 1,000 inhabitants (m²)
Shopping centres 45%
Shopping streets 23%
Source: RegioPlan, Standort+Markt, EHL
h R aly
High concentration of shopping centres in Vienna
Approximately 40 % of all sales space in Austria is located in
Vienna and the surrounding area. At the start of 2012 Vienna had
29 shopping centres with a total lettable space of 850,000 m², of
which about 670,000 m² was dedicated sales space. These totals include Austria’s largest shopping centre, Shopping City Süd,
which is located to the south of the capital.
Vienna offers 496 m² of shopping centre space for every 1,000
inhabitants. In an international comparison Austria has the eighthhighest density with about 323 m² of lettable space per 1,000 inhabitants.
Vienna has three large-scale shopping centres with more than
50,000 m² of lettable space: SCS, Donau Zentrum and Millennium City. In total 16 shopping centres, or just over half of all
shopping centres in Vienna, have less than 20,000 m² of lettable
14 | Real Estate Country Facts 07 / 2012
Source: Cushman & Wakeﬁeld, March 2012
Top 5 shopping centres in Vienna and the surrounding area
Shopping City Süd
Gross lettable area (GLA)
Source: Regioplan, IRG
Vienna’s shopping centres are within 30 minutes’ travelling time for
some two million people. The extended catchment area comprises
large areas of Lower Austria, as well as parts of Slovakia.
The fully-let BahnhofCity West shopping centre opened in November
2011 with 17,000 m² of space. BahnhofCity West was the ﬁrst of
three large-scale railway station redevelopment projects to open its
doors to the public, giving it additional cachet. The availability of additional retail space at Vienna’s railway stations is in step with the
trend towards a return to city-centre shopping. Vienna’s Wien Mitte
station will open later this year with about 28,000 m². In 2013 /
2014 a further 20,000 m² is due to open at Vienna’s new Hauptbahnhof development.
As the Viennese market is saturated with retail space, each new
shopping centre development results in cut-throat competition. In this
environment it is the older shopping centres that have most to lose.
An analysis of the relative ages of the city’s shopping centres clearly
shows that a number of facilities require refurbishment or modernisation in order to remain competitive. Shopping centres without good
public transport links are having to redouble their efforts to appeal to
customers as they come up against intense competition from new,
inner-city shopping centres.
Austria’s ﬁfth-largest shopping centre, G3 Shoppingresort Gerasdorf, will open in 2012 with about 70,000 m² of space (shopping
centre and specialist retail park). Due to new planning restrictions in
Lower Austria, the new shopping centre will be the last to be built
on a greenﬁeld site for the time being.
There is an additional risk that with such similar tenant structures at
the various shopping centres, individual branches in the same chains
will end up poaching each other’s customers. Constant expansion by
many retailers has seen shopping centres take on a fairly uniform appearance. At the same time, the centres are facing the challenge of
offering new attractions to appeal to shoppers. While there are only
relatively few international retailers with brand concepts suited to
shopping centres, they tend to choose successful, well-established
shopping centres to enter new markets. This approach makes it
increasingly difﬁcult for shopping centre managers to acquire new
tenants. For the tenants themselves any decision regarding the selection of a new site is inﬂuenced by factors such as location, image and
customer frequency and footfall, as well as ﬁnancial considerations
such as operating costs. Long-term investment is required during
construction or refurbishment projects to keep energy costs down
and ensure that the shopping centre has a competitive edge.
Expected increases in space for the next few yearsE
G3 Shoppingresort Gerasdorf
opening 2012 / 2013
opening 2013 / 2014
Shopping Centres Greater Vienna
3 Stadion Center
4 La Stafa
6 Columbus Center
7 HUMA Einkaufspark
8 Zentrum Simmering
9 Gasometer City
11 BZ Meiselmarkt
12 Lugner City
13 Interspar EKZ Ottakring
15 Millennium City
16 Shopping Center Nord
17 EKS Floridsdorfer Spitz
18 Ekazent Grossfeldzentrum
19 Donau Zentrum
20 Kaufpark Alt-Erlaa
22 Gerngross City Center
25 EKZ Lutz - Floridsdorf
27 BahnhofCity West
29 Arcade Meidling
30 G3 Shoppingresort Gerasdorf
31 Wien Mitte
12 22 2 31
11 27 28 1
Existing SC, size (GLA m²)
> 50,000 m²
20,001 – 50,000 m²
< 20,000 m²
SC under construction,
size (GLA m²)
> 50,000 m²
20,001 – 50,000 m²
< 20,000 m²
Real Estate Country Facts 07 / 2012 | 15
Rental costs in inner-city shopping centres have remained stable
thanks to ease of access, practicality and a balanced retail mix.
Vacant units are difﬁcult to ﬁnd.
Shopping centre rents
Range in EUR / m² / month
Shops (according to size and location)
8 – 14
14 – 90
opened by Peek & Cloppenburg and US young fashion chain Forever 21, by knocking together numerous smaller units.
Scheduled to open in 2013, the “Goldenes Quart1er” will add
11,500 m² of luxury retail space to the Viennese market. Located
between Graben and Tuchlauben, this new development will be
home to luxury brands including Prada, Louis Vuitton, Armani and
Due to the increased availability of lettable space in city-centre
locations, rental prices in less successful shopping centres, particularly those with unfavourable transport links, are increasingly coming under pressure.
Prime yields for shopping centres were about 5.75 % at the start of
2012. Prime yields are not expected to change in the short term.
Sufﬁcient supply of retail parks
The majority of retail parks and retail park agglomerations are located on the outskirts of the city or in the outlying districts. According to Standort+Markt this segment of the market accounts for
about 470,000 m² of sales space in Vienna, and primarily offers
goods in the lower and mid-range price categories. Due to the lower
rents, retail parks attract a higher proportion of discounters: according to Standort+Markt, Hofer, Kik, dm, Takko and Vögele Mode are
the brands most commonly found at such sites.
Following rapid growth in this segment over the past ten years, the
market for retail parks is now saturated. Virtually no new projects
are planned. Instead, existing facilities will have to expand or modernise in order to remain competitive.
The largest retail park currently under construction is in Gerasdorf
on the north-eastern fringe of Vienna. A retail park with about
12,000 m² of sales space is scheduled for completion there in
autumn 2012, in addition to the 58,000 m² shopping centre project
Rental costs for retail park units range from EUR 6 – 14 / m² of sales
space per month.
Demand for premium retail locations in Vienna still
Vienna’s top shopping streets include Graben, Kärntner Straße and
Kohlmarkt (known locally as the luxury “Golden U”), and Mariahilfer
Straße. These prestigious locations are targeted by international retail chains looking to enter the Viennese market. Large units are in
particularly strong demand as locations for ﬂagship stores. But due
to the paucity of options, such locations are in short supply. It was
only possible to accommodate Vienna’s most recent ﬂagship stores,
16 | Real Estate Country Facts 07 / 2012
The average net rent for category 1A locations is EUR 160 / m² per
month. Rents for smaller units in Kärntner Straße, Graben and
Kohlmarkt can peak at about EUR 350 / m² per month.
International companies have greater ﬁnancial resources than
local Austrian retailers, and are prepared to pay larger compensation packages and higher rents to acquire prestige locations. As a
result, international chains are continuing to drive rental prices up,
making it difﬁcult for small and medium-sized retailers to survive.
This ongoing process has seen international chain stores proliferate in Vienna’s shopping streets.
A number of international companies still have plans to break into
the Viennese market. This ensures that demand for prestigious
locations continues to run high, and rental prices may also rise
accordingly. There are virtually no vacant premises available in
any of Vienna’s top shopping streets. Prime yields were about
4 – 4.5 % at the start of 2012.
The focus on 1A locations is continuing to ratchet up the pressure
on category B and C locations in the Austrian capital, such as Meidlinger Hauptstraße, Favoritenstraße and Landstraßer Hauptstraße.
Pressure in these locations is intensifying, with rental prices continuing to fall in light of the ample space available.
The Viennese market is well served with shopping centres. Inauguration of the G3 Shoppingresort Gerasdorf shopping centre and
the various retail spaces at the city railway stations will mark an
end to the growth in this segment for the time being. The availability of new space will increase the pressure on less successful
Over the next few years many retail parks will have to be refurbished, but there is little prospect of the sort of rapid growth in
space seen in recent years.
Demand for retail space will remain high in shopping streets in 1A
locations such as Kärntner Straße, Graben, Kohlmarkt and Mariahilfer Straße. However, it will become increasingly difﬁcult to ﬁnd
tenants for vacant units in shopping streets in B and C locations.
Rental apartment buildings –
demand continues to soar
Rental apartment buildings as guard against
The old Austrian adage of “Grundbuch statt Sparbuch” (bricks and
mortar, not savings accounts) continues to hold true. Real estate
markets are still considered a safe haven for investors and a prudent guard against inﬂation. This is conﬁrmed by an analysis of the
average prices of rental apartment buildings* since 1995. The price
of these properties has almost doubled over the past decade. Inﬂation as measured by the harmonised index of consumer prices
(HICP) has risen by only 20 % in the same period.
were chieﬂy attributable to a signiﬁcant rise in the number of larger
transactions involving shares of rental apartment buildings. Sales of
this type increased from an average of around 10 % in the last four
years to about 25 % in 2011. Last year two shares in apartment
rental buildings on Fleischmarkt and Bauernmarkt, both in the ﬁrst
district, were sold to property developers in transactions worth a
combined total of about EUR 65 million. Around half of the total investment volume of EUR 277 million generated by sales of shares in
rental apartment buildings was accounted for by just 15 major
Rental apartment buildings price index,
average price / m2 HICP 1995–2011
2007–2011 | EUR million
Rental apartment buildings price index, ave. price/m2
Harmonised index of consumer prices (HICP)
Shares of rental apartment buildings
Second Gulf War
Source: Preisentwicklung der Wiener Zinshäuser, Vienna Chamber of Labour, 2008;
Statistics Austria; IRG calculations
Due to the relatively good economic situation and despite encouraging statements indicating that inﬂation will not accelerate in the
near future, demand for buildings constructed during the Gründerzeit era will remain high. Availability will become ever scarcer as
there is only a ﬁnite number of buildings in this category.
Demand still buoyant in 2011
The total volume of investment in rental apartment buildings (whole
buildings and parts of buildings) in 2011 was up 12.3 % year on
year, reaching a total of about EUR 1 billion. Increased volumes
*) Our deﬁnition of a rental apartment building (Wiener Zinshaus) is as follows: built between
1848 and 1914 (the Gründerzeit era) in historicist style (including neo-gothic, neo-renaissance
and neo-baroque), including articulated facades, high ceilings and stucco detailing. The buildings
are covered by the provisions of tenancy law and were built for the purpose of generating rental
income. The criteria apply to standard rental apartment buildings (categories A-C) and sub-standard buildings (category D). It should be noted that the deﬁnition applies exclusively to rental-only
apartment buildings, i.e. those without any privately-owned apartments (e.g. mixed-occupancy
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Rental apartment buildings
Source: IRG, Immounited
In terms of sales of entire rental apartment buildings, the total for
2011 declined by 6.8 % to about EUR 811 million, falling short of
the record EUR 1 billion set in 2009. This development is also
attributable to the fact that there is an ever increasing scarcity of
entire rental apartment buildings on the market. 2009 saw a large
number of ﬁre sales and an unprecedented shift by investors towards tangible assets.
The number of transactions was evenly divided between sales of
rental apartment buildings and shares of rental apartment buildings.
While sales of rental apartment buildings declined by almost 20 %
year on year to just 376 transactions in 2011, the number of transactions involving shares of rental apartment buildings almost doubled,
with 375 new entries made in the real estate registry during the year.
The average transaction volume per sale jumped by 17 % from about
EUR 1.84 million to EUR 2.15 million. The average for shares in rental
apartment buildings surged 36 % to about EUR 739 million.
Real Estate Country Facts 07 / 2012 | 17
Average transaction size by district (EUR million)
Number of transactions
2007 – 2011
Shares of rental apartment buildings
Rental apartment buildings
15. 6. 4.
Source: IRG, Immounited
2251 – 11651
70 % of sales inside the Gürtel outer ring road
Transaction size by district
Broken down by location, the ﬁrst district (Region 1) beneﬁted most
from buoyant demand during 2011. Total transactions for Region 1
rose by EUR 125 million to EUR 233 million in the period under
review (2010: EUR 108 million). Put another way, one in every ﬁve
euros invested in rental apartment buildings in the capital was
accounted for by transactions in the prestigious ﬁrst district. This
development was driven by a small number of major transactions,
each with a transaction volume in excess of EUR 10 million.
Transaction volumes for Region 1 advanced to some EUR 11.6 million per rental apartment building, up from EUR 8 million a year
earlier, reﬂecting the increased number of major investments in
the ﬁrst district. The ninth district in particular recorded a sharp
year-on-year jump in transactions during the period under review.
The average transaction size for this part of the city rose to more
than EUR 1.9 million in 2011.
The three largest single transactions were the disposal of a ﬁrst district property on Graben by UNIQA Personenversicherung AG for
EUR 34 million, and the sale of two rental apartment buildings on
Elisabethstraße by Luxury Liegenschaftsentwicklungs GmbH, a
Conwert company, for EUR 19 million each. The groups of investors
that purchased properties in the ﬁrst district in 2011 were primarily
comprised of insurance companies, private foundations and real estate-related enterprises.
2011 (EUR m)
2010 (EUR m)
Change 10 / 11
Key: Region 1: 1st district; Region 2: 2nd – 9th, 18th and 19th districts; Region 3: 10th – 17th
and 20th – 23rd districts
Source: Immounited Datenbank; IRG calculations
In 2011 Region 2 recorded a 6 % increase in transactions to about
EUR 560 million. Rather than being attributable to a greater number
of individual transactions, this rise reﬂected the higher prices in
central districts. Taken together, districts inside the Gürtel outer
ring road accounted for about 73 % of all sales of rental apartment
buildings. Transactions for Region 3 amounted to about
EUR 295 million in 2011, a year-on-year decline of about 11 %.
18 | Real Estate Country Facts 07 / 2012
2011 (EUR ’000)
2010 (EUR ’000)
10 / 11
10 / 11
Key: Region 1: 1st district; Region 2: 2nd – 9th, 18th and 19th districts; Region 3: 10th – 17th
and 20th – 23rd districts
Source: Immounited Datenbank; IRG calculations
A breakdown of transactions by region reveals that the average
transaction size has slipped slightly in Region 2 and Region 3.
On average, rental apartment buildings changed hands for around
EUR 292,000 less in Region 2 in 2011 than in 2010, and around
EUR 147,000 less in Region 3.
Demand from private investors still riding high
Private investors are still an important target group for the rental
apartment building market. In 2011 more than half of all transactions were made by private investors. Of the 751 sales of rental
apartment buildings completed last year, 385 were to private investors – a year-on-year increase of 8.1 %. However, their share of
the total in 2011 was down on the previous year by 3.1 percentage
points to 51.3 %, due to an high number of transactions by the real
estate sector during the period. As in 2010, the size of the average
transaction was roughly EUR 1 million. In terms of total value, their
share edged back to 33.4 %.
Number of transactions
Rental apartment building yields
high – low | 2001–2011
Source: Immounited database, IRG calculations
In early 2011 institutional investors and real estate companies
(such as real estate agents, developers and investors) were particularly active in the market. The number of transactions jumped
31 % on the previous year, taking the total to 238. In terms of
value, the increase was just 11 %, a 0.4 percentage point fall in
the group’s share of the overall transaction volume. However, this
group was still the largest, accounting for 39.1 % of transaction
volume in 2011.
This loss of share is not necessarily attributable to institutional
investors’ and real estate companies’ reluctance to invest in the
market in the face of increased prices for rental apartment buildings. Instead, this development reﬂects the fact that it is becoming increasingly difﬁcult for investors to identify and purchase
suitable properties inside the Gürtel. In 2011 the average transaction volume declined year on year – from EUR 2.1 million to
about EUR 1.8 million per transaction.
Demand from foundations remained virtually unchanged during
the year under review. With an average transaction size of about
EUR 2.7 million, this investor group accounted for 8.3 % of total
value in 2011. Developments in the ﬁnancial sector were particularly worthy of mention: while the number of transactions halved
to just 11, these major transactions (including investments by insurance companies) contributed to a moderate increase of 0.2
percentage points, taking this group’s share to 9.3 % of the total.
Yields still under pressure
Experts disagree on whether the sharp price increases of recent
years will continue. Even making predictions for the medium term
is fraught with difﬁculty. However, it is clear that prices for good
and average locations continued to rise sharply in 2011. Rental
apartment buildings inside the Gürtel are becoming increasingly
difﬁcult to ﬁnd, and as such, price increases are above average.
Source: Otto Zinhausbericht spring 2012, IRG
As a result, higher acquisition prices are putting pressure on
yields. At the moment the market is delivering yields of between
1.5 % and 6.7 %
The yields shown above are indicative of possible performance
over time. The values of most properties are affected by a variety
of factors such as location, condition, rental costs, vacancies,
upgrade and conversion potential, length of tenancies and
Yields and prices by district, spring 2012
Price range per m2
of usable space (EUR)
1.5 – 3.6
3,200 – 5,200
2.7 – 4.8
1,000 – 2,350
3rd / 4th
2.4 – 4.1
1,020 – 2,450
5th / 6th / 7th
2.7 – 4.3
980 – 2,400
8th / 9th
2.5 – 4.2
1,050 – 2,550
10th / 11th
4.5 – 6.4
450 – 1,150
12th / 14th / 23rd
4.2 – 5.8
520 – 1,300
3.8 – 6.1
550 – 1,350
16th / 17th
4.1 – 5.2
650 – 1,800
13th / 18th / 19th
3.1 – 4.5
1,000 – 2,200
4 – 5.9
490 – 1,250
21st / 22nd
4.7 – 6.3
400 – 1,000
Source: Otto Zinhausbericht spring 2012, IRG
There are no longer any rental apartment buildings to be found in
the ﬁrst district for less than EUR 3,200 / m², with prices peaking at
EUR 5,200 / m². Yields have dropped by twenty basis points to 1.5
% in the course of a year. Broken down by district, locations inside
Real Estate Country Facts 07 / 2012 | 19
the Gürtel – not including the ﬁrst district – generate yields of 2.5
– 4.8 %. Outside the Gürtel, 90 % of all transactions generate
yields of between 4 % and 6.4 %.
Yields losing importance in decision-making
There was no material change in investors’ principle considerations when purchasing property in 2011. Location continues to be
the leading concern. This is followed by the condition of the building and the apartments inside it. Private investors in particular are
less likely to commit to complex and expensive renovation projects. This type of investor is primarily concerned with ensuring a
secure rental income with a minimum of administrative work and
Importance of various criteria for private purchasers
of rental apartment buildings
Good condition of building
Good condition of apartments
Advanced age of tenants and any successors
to tenancy agreements
Small proportion of old open-ended
Development potential for
Cost of compensation for early
termination of rental agreements
High yields expected from subdivision
Key: 0 = not at all important, 5 = very important
Source: SRZ survey of potential and actual buyers on the Viennese rental apartment
building market, 2011
A survey of potential and actual private buyers of rental apartment
buildings revealed that the size of projected yields was deemed to
be “less important”. Development potential, such as prospective
increases in rents, and upgrading and conversion options, was
also a lower priority – although, of course, always welcome.
20 | Real Estate Country Facts 07 / 2012
These factors chieﬂy apply to rental apartment buildings in inner-city
locations and very good locations elsewhere with excellent infrastructure. Desirable inner-city locations require less development potential
to make them an attractive ﬁnancial proposition than equivalent properties outside the Gürtel, where development potential is likely to be
the primary focus.
Summary and outlook for 2012
The rental apartment building sector continued to be a pure seller’s
market in 2011. Looking solely at sales of entire rental apartment
buildings, the market slowed slightly during 2011, contracting by
2.5 % to EUR 848 million. But this was not due to a collapse in
prices. On the contrary, prices edged up by 1.2 % year on year and
remained consistently high throughout 2011. The contraction instead
reﬂects dwindling supply. Private owners are not required to publish
quarterly results and as a result are less susceptible to the pressure
to sell. In general, owners of rental apartment buildings are highly reluctant to part with them in the current climate. The bottleneck on the
market led to a sharp increase in sales of shares in rental apartment
buildings in 2011, and this segment now accounts for 25 % of the
total (rental apartment buildings and shares of rental apartment buildings taken together) of EUR 1,125 million.
More than half of all buyers are private investors. Their main motivation for making a purchase is the security and protection against
inﬂation that rental apartment buildings offer. Demand from private
foundations remained virtually unchanged in 2011. The ﬁnancial sector beneﬁted from a number of major transactions during the year.
It is interesting to note that increasing numbers of non-real-estaterelated companies are entering and investing in the rental apartment
building market. 16 % of the total volume was accounted for by buildings that cost less than EUR 1 million, and 30 % was attributable to
sales of buildings with a value of more than EUR 10 million.
Changes in real estate taxation are expected to stimulate the market
in 2012 and lead to an increased incidence of property “ﬂipping”.
Speculation tax on real estate was scrapped in April 2012, meaning
that vendors only have to pay capital gains tax of 25 % on property
disposals within 10 years instead of the previous rate of 50 %. There
were no signs that banks and insurance companies were clearing out
their property portfolios in the ﬁrst quarter of 2012. All in all, demand
for rental apartment buildings is not expected to diminish at all owing
to the dearth of attractive alternative investment opportunities. The
market is set to remain highly competitive.
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Tel: + 43 (0)50601-51904
Tel: + 43 (0)50505 – 41954
Tel: + 43 (0)50601-51863
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