CapitaLand Integrated Commercial Trust - Annual Report 2021

Frankfurt Office Market The effects of the COVID-19 pandemic had a firm grip on the economy in Frankfurt, especially in 2020. In contrast, 2021 was characterised by an economic recovery. This is reflected in the labour market, among other things. The unemployment rate in Frankfurt eased to 5.9% in November 2021, after rising to 7.1% in November 2020 from 4.8% in November 2019. The expected GDP growth of 2.9% in 2021 also indicates a clear recovery after a contraction of 5.6% in 2020. Frankfurt’s office leasing market recorded a recovery in 2021, with a take-up of 436,800 square metre (sq m), a y-o-y increase of 32.3%. The fourth quarter proved to be the strongest quarter with 187,500 sq m of office space take-up. Due to several large-volume deals, particularly in 4Q 2021, Eschborn and Office Location / Niederrad were the strongest micro-markets with the largest cumulative take-up of 57,400 sq m and 57,000 sq m respectively, corresponding to a take-up share of 13.1% and 13.0%, respectively. At 122,600 sq m (28.1% of total take-up), office space take-up in the CBD micro-market was slightly (3.7%) above the previous year. Thereof, 51,200 sq m (11.7%) can be attributed to the Banking District, while Frankfurt Airport recorded a take-up of 31,600 sq m (7.2%), half of which can be attributed to the Siemens owner-occupier deal of the first quarter. A total of 200,000 sq m of new or refurbished office space was completed in 2021. This included the Global Tower located in the Banking District with around 30,000 sq m of office space. The vacancy rate for the overall market increased by 1.1 percentage points y-o-y to 7.5%. For micro-markets, the Banking District recorded an increase in vacancy of 1.2 percentage points to 5.9% as compared to 4Q 2020, and Frankfurt Airport recorded a decrease in vacancy of 0.1 percentage points to 6.0%. Prime rent increased by 3.4% y-o-y to €45.50 psm/month, as a result of the recent sharp rise in construction prices and the continuing high demand for modern, high-quality office space. In contrast, the weighted average rent for the overall market decreased by 6.6% to €21.57 psm/month. Similarly, in the Banking District, weighted average rent fell by 12.3% to €35.40 psm/month. While prime rent in the Airport micro-market remained stable compared with the previous year at €27.00 psm/month, the weighted average rent decreased by 9.0% to €19.75 psm/month. With a 62.8% share of the office take-up in 2021, high-quality office space continued to receive high demand. This is also reflected in a high pre-letting rate. The pre-leasing rate for the 2022 project pipeline of 150,900 sq m is 56.1%. Overall, more than half (51.0%) of the new upcoming space (587,300 sq m) by the end of 2024 has been committed. In the CBD micro- markets, 42.3% of the 109,300 sq m in the project pipeline is leased office space. In the Frankfurt Airport micro-market, almost 79.5% of the 73,100 sq m in the project pipeline until 2024 is speculative office space, including “The Flow” (the former Europa-Center) with more than 32,000 sq m of office space. Frankfurt’s real estate investment market (including residential portfolios of 50 units or more) reached a transaction volume of €7.5 billion in 2021, around a 2.8% decline y-o-y from 2020. Commercial real estate accounted for around €5.5 billion, a 23.5% decrease y-o-y. Single transactions were the focus of investors’ attention, with a market share of 75.6%, a slight decrease of 1.6 percentage points. The share of foreign investors declined significantly to 14.2%, a contraction of 42.2 percentage points, not because of a lack of interest but rather as a consequence of the COVID-19-related travel restrictions which prolonged sales processes. Prime yields for centrally located office properties decreased by 0.2 percentage points to 2.7%. Frankfurt, Germany Annual Report 2021 113 Independent Market Review