Jul 17, 2009

Unexpected growth

It is not unusual to use approximations for the total area of a real estate asset. Different countries use different measurement rules, and different real estate professionals measure different things (built area, lettable area, usable area...). I do not recall having ever seen a building where everyone agrees on the total area (although it might look odd, but this is also true in some instance for the number of parking spaces). It is not unusal in that respect that following a remeasurement of a property, the total area grows or shrinks by plus or minus 2 to 3% (that is the reason why real estate companies always says that their portfolio represents "around" x sqm).

What is however rather unusual, is for a full real estate market to grow overnight by almost 20%. This is what happened lately to the City of Hanover (in Germany not in Virginia). "Untersuchung ergibt 800.000 qm zusätzlichen Büroflächenbestand", or "Study discovers additinal 800,000 sqm of office space", headlined the press release (available here for German readers). This is as far as I know the biggest undercover market growth reported to date, or somewhere between 80 and 160 "additional" office buildings.

The good news is that it seems that the occupancy rate of the "newly" discovered office space, is the same than the one for the "known" office space. Total vacancy in the surrounding is reported stable at 4,8% which is way below the average in Germany.

Who said that we need to improve transparency in the German market ?


1 comment:

  1. Interesting. I wouldn't have thought it was that difficult to determine the size of an asset's area (let alone the number of parking spaces). Regarding the city of Hannover: It would be interesting to know what methods they used to calculate the size of the real estate market. Is there any simple explanation for the huge difference?