The Frankfurt office district of Niederrad was going to be renamed Lyoner Viertel, after the main road in the area. However, there were better suggestions, so this name was quickly rejected. Anyway, Mark Gellert, spokesman for on-site head of planning Olaf Cunitz, told a local newspaper that it sounded too much like “a type of sausage” to German ears. Indeed, who would want to live in a sausage district? Or, for that matter, work, play sport or invest there? The area was already at a disadvantage because of the word “office” before “district”. But “Rothenham” is now intended to put everything right. This is the name selected by a special jury in April this year out of 370 proposals: it is derived from the estate of Rother Hamm, which is shown on historical maps on the site of the present-day office district. A new name is not just hollow words; it sets an agenda. After all, Niederrad is one of many satellite locations that have been struggling for years with vacancies and a poor image, and a new name erases memories of the past. Rothenham is intended to be a mixed-use quarter. Its anchor use as a site for offices will not be eliminated, but strengthened with complementary amenities and an upgrade of its existing facilities. Its transformation in terms of urban development is already visible in the first apartments and fitness studios.
Young professionals do not want to sit in an office ghetto – they seek variety and an urban atmosphere.
The transport infrastructure model was further improved when the car-sharing provider Car2go established five parking spots in the district alone, with vehicles distributed around the business area. Customers locate the nearest available vehicle online, via a smartphone app or simply out on the street and use it when needed. “Residents, workers and business travellers can quickly reach the airport or the city centre and just leave the car there,” says David Roitman, chairman of the Neues Niederrad local campaign group, established in 2014, and managing director of Access Tower Grundbesitz, singing the model’s praises. He is convinced of one thing: “We are on the right track towards a vibrant office quarter, where people will also be able to live and do their shopping.”
Experts see few alternatives to transforming single-use working districts into multi-use centres. “The pure office district model, where pavements fall silent at 5 pm and tumbleweed blows across the streets, is on its way out worldwide,” says Marcus Mornhart, Managing Director and Head of Office Agency for Germany at the international property consultants Savills. Changes in lifestyles and the world of work are responsible for this. “Companies are engaged in a ‘war for talent’. This means they have to take their employees’ preferences about the location of their workplace seriously. Young professionals do not want to sit in an office ghetto – they seek variety and an urban atmosphere,” he says. He adds that they are interested in employers that offer not only an attractive salary but also a particular urban environment and good accessibility, ideally without the need for their own car. “Hermetically sealed office locations and forced mobility are no longer acceptable as unattractive secondary aspects of a job,” the Austrian architect Georg Kogler also observes. In his view, urban development in the industrial age created dormitory towns, high office vacancy rates, long journeys, a lack of local supplies and lifeless public spaces. “What we need today are open structures and flexible spaces in cities and buildings,” says Kogler.
Mixing boosts a district’s value
For this reason, it is also important in urban planning terms to combine work and leisure uses when it comes to the development of new office districts. An exemplary success story in this respect can be seen in the Finnish capital Helsinki. Close to the Finnish parliament, former railway sidings have been removed and space has been created for four complexes of new buildings with a total of some 45,000 square metres of usable space for offices and around 35 luxury apartments. The two accountancy firms KPMG and EY, the energy group Alstom, the advertising company Alma Media and the timber and pulp producer UPM have opted for newly built space in this submarket known as Töölönlahti. This comes as no surprise, since the modern offices have not only the city centre and the railway station but also the museum of contemporary art and a park with a lake as neighbours. “Töölönlahti was the only area available for expansion in Helsinki’s central business district and was, accordingly, much sought after among users,” says Kubilay Oezbisikletci, a manager at Union Investment Real Estate GmbH who shared responsibility for the two acquisitions by the Hamburg-based investment management company. The UPM headquarters with 12,400 square metres of usable space has been part of the UniImmo: Deutschland portfolio since 2013. Then, in March this year, Union Investment acquired the new EY head office with around 11,000 square metres of space for the open-ended real estate fund UniImmo: Europa.
What we need today are open structures and flexible spaces in cities and buildings.
A survey by the US Commercial Real Estate Development Association, NAIOP, shows that mixed districts – also known as LWP (live, work, play) environments – are extremely successful not only in major European cities. It found that, without exception, US firms prefer multifunctional locations. This means that, in the USA too, monostructural office sites in peripheral locations have been, and are still being, revived on a large scale by the introduction of complementary uses. Such efforts are appreciated by investors. For example, in June 2015 the Bixby Land Company managed to sell the San Jose office park in Silicon Valley, which was known for its high vacancy rates, to MCP Trimble Campus for $96 million. This deal was preceded by an extensive redevelopment and repositioning phase at the park, with around 23,000 square metres of rentable area. Façades, roofs, technical facilities and communal spaces – Bixby really turned the site upside down, increased the gaps between the buildings, established a gourmet restaurant and added catering space and water features. The new concept proved popular with companies looking for space: 90 days after completion of the reconstruction work and the addition of complementary facilities, the technology group Verizon signed a lease for 12,600 square metres of office space. They were followed early this year by the chip supplier ASML US, with 8,500 square metres.
On the rise again as back-office locations
Smaller office parks can be restructured with similar speed. Large sites on the outskirts of cities have been a problem for years. For instance, the Seestern satellite location in Düsseldorf, with 520,000 square metres of usable space spread over 30 buildings, has long been a headache on the local office-letting market. To those who look only at the figures, hardly anything has changed here since the establishment of the owners’ action group in 2010. By the middle of this year, the amount of excess space still stood at 240,000 square metres, according to the Colliers Düsseldorf real estate brokers. That is 30 percent of the total amount of vacant space in the North Rhine-Westphalian state capital.
buildings with 520,000 square metres of space are at Düsseldorf’s Seestern office location.
“Nevertheless, this submarket has always been among the top three for floor-space turnover in recent years,” says Ignaz Trombello, Managing Partner and Head of Investment Germany at Colliers in Düsseldorf. The location’s image has taken a turn for the better in the past few years, he notes.“Seestern has shed its reputation as a no-go area and has become a popular back-office location with moderate prices,” Trombello says, describing the change. The mistakes made in urban-development terms in past decades cannot be reversed in just five years, he adds. “The monostructure composed entirely of offices was among the major shortcomings of the original planning. This is now being remedied by a residential project and the construction of several hotels,” Alexander Fils, Chairman of the Committee for Planning and Urban Development for the City of Düsseldorf, says with satisfaction.
One person who does not think traditional office locations are at all obsolete is Peter Bigelmaier. The Managing Director of Colliers in Munich cities the districts developed by Dr. Vielberth Verwaltungsgesellschaft of Regensburg as examples of urban, multifunctional and “perfectly planned business parks”. Three such business parks are being operated by the Bavarian developer, investor and portfolio holder in the Munich district of Garching and in Regensburg and Nuremberg. They were all developed gradually and, in part, built speculatively, and they all began with letting in small units. It often took years before a large user was found. Today, however, there is no lack of big names: Ing-Diba, Canon, Osram, BMW, O2 Telefónica, Siemens and even Amazon are on the tenant list. The three Vielberth parks offer a total of 575,000 square metres of usable space for more than 20,000 workers – mainly offices, but complemented by conference, event and hotel space. There is also always a range of catering options with restaurants, cafes and bakeries, plus a food shop and often a travel agency, doctors’ surgeries or a day nursery.
euros: the maximum paid per square metre per month by tenants at Business Campus München.
In Garching, Business Campus München is now two-thirds complete and functioning like a miniature city. Here too, according to Bigelmaier, things did not start with the big brands. Many firms use this location to hive off their research and development departments. For example, BMW has based its e-car section here. “These buildings are no glass palaces, but functional properties with rents between €10.50 and €12.50 per square metre. That is the level you expect in the outskirts,” says Bigelmaier. By contrast, in central Munich office rents stand at €33.50. One argument in favour of this site, in addition to the concept, is its location: Business Campus München is halfway between the airport and the city centre and is connected to the underground and the motorway, and the TUM University of Technology is just around the corner. Hallbergmoos, which is plagued by high vacancy rates, is a Munich submarket that is not experiencing a similar resurgence. For years now, at least one-third of all the square metres of office space at this business park near the airport have lain unused. Here, the beneficial proximity to the airport is unable to offset the other, typical drawbacks of pure office districts: there is no infrastructure, such as supermarkets or utilities, and there is not even a local public transport connection. In this case, however, market experts consider the high vacancy rates and the negative image to be partly self-inflicted. For instance, they say, in addition to lacking a marketable name, it does not come under one single management body. “But that is expected to change now,” promises Bigelmaier of Colliers.