As millennials continue to fuel urban population rises and migrants and refugees stream into Germany, Cologne’s population is projected to grow by 20% by the year 2040. This means a constant demand for housing and commercial real estate development. The city has seen a record first half this year in real estate take-up – gross leasing activity – which for the first time in 10 years has surpassed 200,000 square metres, hitting a record 202,000 sq m in the first six months of 2016. Despite the slowed pace of European growth, Cologne’s skyline is dotted with cranes and is set to continue to be for at least the next several years.
A massive contribution to this half year total is a 60,000 sq m lease signed by Swiss insurer Zurich Insurance Group for a brand new office district, to be occupied by a series of insurance companies. The development, called MesseCity Köln, will sit next to the river Rhine between German television broadcaster RTL, Koelnmesse exhibition centre, the city’s 20,000-capacity Lanxess arena and a railway station, and will allow for a further 60,000 sq m of development space for offices and hotels. It will be ready for occupancy by late 2018, accommodating 2700 people. Zurich Insurance is centralising the operations of its offices in Cologne and southern neighbour Bonn into this new development; this is in part due to Cologne’s larger size, along with its well-known status as the insurance services hub of Germany.
“Cologne is much more in focus for international investors; it is known for its university, strong media and insurance sectors, the iconic Dom Cathedral, and a growing population,” says Jens Hoppe, managing director at BNP Paribas Real Estate GmbH. “Around 33% of the total commercial investment in Cologne is from foreign investors.” FDI is most prominent in high-volume investments (projects over €50m to €100m), Mr Hoppe adds.
Zurich Insurance’s major development project represents a wider trend of insurance companies dominating this year’s take-up with more than 32% of all activity, according to BNP Paribas’ Cologne City Report 2016. Public administration followed at 16%, with consultancies at 13% of take-up and ICT at 8%. Media, retail and other services followed with 5% each.
This bustling market activity is also reflected in falling vacancy figures, the BNP Paribas report reveals. “Overall vacancy currently stands at 434,000 sq m, which is almost 14% below the prior-year level,” the report says. “The vacancy rate has fallen to 5.6%, giving Cologne third place among the Big Six locations” – Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg and Munich. Large, connected premises offering modern-quality vacant space are now found to be in short supply, resulting in a bottleneck that actually extends beyond central Cologne to the entire municipal area.
“We need the market to be offering enough comfortable office space to react to the future because we need more space for the people coming to work in Cologne, and to be prepared for the expansion of the inhabitants here,” Mr Hoppe stresses.
Another major real estate project is the Deutzer Hafen harbour, a new quarter set to accommodate 4500 residents split between residential, office and commercial space. Beginning development in 2019, the quarter will reach up to 300,000 sq m in size. Development plans are also in place for Cologne-Mülheim in the south, where it is predicted up to 10,000 people will live and work in the future.
“If you think about how much Cologne is growing in the coming years, this means that it is 100% necessary to create more living space for the city,” Mr Hoppe emphasises. “So no matter where the development happens, it will be of huge interest to investors.”